Hi everyone I was crossing the 27th street Viaduct the other day and when. I went over the CP’s mitchell yard. And I saw a engine down there in primer grey which meant to me it was a leased loco. So my question is how do railroads determine when they need a locomotive. For a train or for yard work and who does the railroad contact for something like this are there companies out there that buy old engines from railroads like. CP,UP and others paint them and put their markings on them so they know. Who’s is who’s when it comes to returning them after a period of time. Like the last couple of times going over the viaduct I’ve seen a grey one and on another day. I saw a red one also I have seen a few of them at the UP’s yard on the south side of milwaukee. That looked like an old UP engine but it had the markings LLCX on and the loco number 2205 but any who this is something I have wondered for a while. So if any one has info on this please feel free to add on.
There are quite a few companies that exist today rebuilding, rehabilitating, and reselling and leasing older locomotives to other railroads. These companies will take older, servicable power, do some work on it to get it back into good shape, and lease it back to a railroad. As long as the repairs to the locomotive don’t cost more then the company can get from leasing the unit, the company doing the leasing makes money. If the locomotive suffers a failure, performns poorly, or just isn’t needed anymore, or gets damaged while being used, the railroad can simply return it when the lease is up. It becomes the leasing companys problem to fix or store the unit. If the leasing company thinks it can fix the locomotive once again, and lease it out for more then they spent to fix it, into the shops it goes. It may seem like a roundabout way of doing things, but it saves the railroad from having to conduct large repairs on its locmotives all the time, instead just returning the unit to the leasing company, and leasing a new, working one instead.
THere are also some new models under lease, not just older and rebuilt units.
One reason to lease a locomotive is amount of capitol outlay…the same reason some people lease their cars, instead of outright purchase. Instead of ponying up $1.5Million today, or “borrowing” the money at X%, they lease the units for a fixed amount for a fixed period.
Accountants can tell you all the different reasons it can be advantagous for tax purposes…and no one solution is right for every railroad. In fact, the most advantageous answer this year may be the most expensive answer next year.
And capital may not be the only reason to lease, especially a new unit…if I were trying to decide if a new design would work for my application (AC vs DC, for instance…) I might want to lease a few units for a year or two to see how they work out, before commiting to buying.
Another good reason to lease an engine is powe shortage (e.g. Grain shipping railroads, aka BNSF, UP KCS,etc) may need extra engines to fulfill there needs for a short time as they find themselves short of power. So they lease X engines for say 3 months at Y dollars from LMS or one of the other leasing companies. Another alternitive is to lease power from another railroad and pay back by leasing units to the other road when they need them.
And it helps CEFX use those SD90’s we see through here quite a bit.
It is easier to use up and throw away power than it is to buy a brand new engine and maintain it 100%.
Cheaper too.
I think there is a time approaching where railroads cease to bother with buying engines and maintaining them. They would prefer to write a check to a third party and let them worry about the choo choos.
There is a big Jenks shop here in Little Rock. Acres of Locomotive shop fun.
Imagine for a moment that UP Leased engines and got out of the shops. All the UP needs to do is feed, water and sand the engines leaving everything else to the third party with just a simple monthly check.
Not sure how the whole “trust” thing goes as it applies to locomotives, but haven’t the railroads been leasing locomotives (from the trust companies) for years?
The difference is that the leasing trusts don’t have shop facilities.
Sort of like your house. If your roof springs a leak, you don’t call your mortgage company. You call a roofer.
Now if you had leased your manufactured house from Joe’s Modulars, and you could return your modular to Joe and exchange it for another, and Joe would fix the leaky roof and then re-lease it to someone else…
Chuck