I learned about it when a grocery store in our town closed instead of paying the ever-rising rent.
The building sat empty (still is) for over five years. All that time, the out-of-state owners had to pay taxes, upkeep, etc., on the building.
I finally asked someone in town how that landlord is able to justify owning an empty building like that. It was explained to me having to do with taxes, depreciation, etc., but I didn’t understand it.
If this is part of our tax code, then it’s stupid.
Consumers vote with their dollars whom they want to see stay in business. If there is sufficient demand for a particular product, somebody will around to sell it. If a company ceases because the proprietor chose to retire, it probably means there wasn’t enough demand for that company’s products to make it worthwhile for somebody else to buy out the business.
It can be disappointing when a company whose products you like goes out of business but new companies are starting up to fill the void. Even if it is a new product line, somebody will meet the demand. On the other hand if it is a product that is no longer in demand, there’s no reason to expect somebody else to produce it. I remember someone lamenting that Bowser was no longer going to produce loco kits. Apparently most modelers prefer RTR locos.
I think we may be entering a new phase of the hobby. HO engines are more expensive then computers now. 3D printers are coming down also. What if some programmer would make 3D programs for sale and we could print as many cars as we want after purchasing the program? Will it work for engines?No. Would it work for everything else? Probably. Modular building walls could allow any size building. Detail parts could be had. While car bodies could be printed. This could be the future.
Typical lease terms and typical financing terms (mortgages) are five years.
The typical general business cycle since WWII has been five years.
Property owners, their lenders and tenants can get out of sync with the cycle of expansion and recession in the economy.
When that happens you can get situations where both rent is too high and vacant premises.
In my town I’ve seen triple net rent rates for the same space in ordinary Class B or C buildings (older and long paid out premises) go from $5 per foot up to $30 per foot and back down to $5 in 30 years which is about 5 business cycles. Being an oil town explains
HO scale locomotives have become a luxury purchase. Back in the day, when I was buying multiple Kato N scale locomotives to populate my dream house layout, these were luxury purchases, but only because I was buying 6-10 at a time.
Even then, the purchase was less tha half of my mortgage, not even a car payment, and not a full weeks pay even though I was a 21 year old blue color worker.
Now, an HO steam locomotive or two diesels easily exceeds a car payment and is getting into mortgage payment territory.
A locomotive is absolutely something that needs to be budgeted for a lot of households. The hobby is changing.
I have no doubt this will be the future. In fact I’m surprised it is not the present. Maybe the cost of 3D printers hasn’t come down enough to make selling software to print rolling stock and structures a lucrative proposition, but I don’t see how that isn’t going to eventually happen.
What will that do to the LHS if that becomes the reality. There will still be products that can’t be made on a 3D printer and with rolling stock you still need trucks, wheels, and couplers. I can’t see plastic versions of those replacing metal. Will 3D products hasten the end of the LHS, which are already fighting an uphill battle against e-tailers? Who knows, but it could take a bite out of their revenue.
Years ago here in the U.K. a locomotive was produced. If the owner wanted a different number on it he would do it himself.
Now when a locomotive is produced there are eight or nine varients. Different numbers, liveries etc. Then, there is sound etc. etc… A store has to have them all, yet it is just one locomotive.
It was only about 15 years ago that I bought three Hudsons with DCC and sound from Trainworld for about $130 apiece. Granted, this wasn’t MSRP but those would probably retail for over $500 each today. I can’t remember the last time I saw a loco with factory DCC and sound with a MSRP under $500. I looked at Rapido’s Ten Wheeler and even that is well north of $500. Modern locos are so much more sophisticated than just 20 years ago but that comes with a cost. You observed a loco now costs more than computers. Maybe the cost of them will eventually come down just as it did for computers but I don’t think that will happen soon. I’m glad my loco roster is pretty well filled out. I can’t see paying current prices for a new one.
Given the more or less consistent difference between diesel and steam models I infer it costs a lot more to assemble a steam locomotive. Labour cost to assemble a steam locomotive might be triple that for a diesel.
Also, I infer a marked reduction in total demand for steam locomotives in general. Lower volume would also increase parts costs.
Finally, steam locomotives are inherently more susceptible to damage or faulty assembly. Another increase in cost.
As for comparison to mortgage or car payments I am sceptical about that. Cars and houses are now financed differently to the way these were purchased years ago. Real interest rates are now negative and have been for quite a long time now (real meaning before the markup by the lender which hasn’t changed much nominally but is a much higher proportion of the cost of borrowing). Interest rates years ago were much, much higher than they are today and positive even after inflation is allowed for. Cars have quadrupled in nominal price since the 1980’s and houses? Well you can do that math. After inflation neither cars nor houses have changed much in real price and generally speaking wages are higher even when inflation corrected.
Model locomotives are comparatively cheap now. If you compare the sticker price on a Lifelike DCC ready model to the current Walthers pricing for a similar model you’d see immediately how much cheaper they are today, after inflation is backed out. I know. I have some NIB with original retail pricing stickers still there. One even had a 15 year old plus visa receipt verifying the price paid. Used prices for NIB old but good locomotives haven’t changed a whole lot nominally. Of course they are a bargain once you back out inflation, especially if they really are DCC ready like Lifelike were.
Oh boy not another “this hobby is getting too expensive” threads.
My argument to the “inflation is the only reason why things are expensive, things are actually comparatively cheap” is to compare the ONE loco that has consistentely been produced over the span of 13 years and counting (2008-2021+) with virtually ZERO upgrades, the BLI I1sa. This engine gives a good idea as to whether prices are being unfairly raised or not. Made in the PCM era with QSI sound, then in paragon 2, paragon 3, and now in paragon 4. Assuming electronics cost roughly the same to produce/buy from QSI, I can confirm the tooling and paint is identical throughout the eras. Therefore, the ONLY thing that has changed over the years is the price.
In 2008, the PCM I1sa MSRP was $399.*
In 2010, the paragon 2 I1sa MSRP was $399.
In 2016, the paragon 3 I1sa MSRP was $449.
In 2021, the paragon 4 I1sa MSRP was $499.
Otherwise though, the price has increased $50 every 5-6 years. Bringing all prices to 2021 inflated prices,
2008 $399 is now $509.
2010 $399 is now $503
2016 $450 is now $515
2021 $499 is now…$499.
These prices are a bit unfair due to the rapid inflation which occured in 2021, but it still tells a story.
Make of the data for what you will, I think it concludes that atleast BLI is being pretty fair with MSRP prices. Although I still find $500 for a plastic loco is too much…but that because Im cheap
Charles
*Some possible reasons why the PCM to paragon 2 didnt increase in price could be due to only having a 2 year gap, and also BLI’s paragon 2 costs less to make than buying decoders from QSI.
The primary driving force for any consumer product is supply and demand. If the price of new locos seems high, it is because manufacturers know that we the consumer will pay the higher prices in sufficient numbers for them to maximize their profits. Why would they sell a loco for $400 if they know there are plenty of people willing to pay $600. If they ask too high a price, at some point the consumer will balk and they won’t be able sell enough to be profitable. There is an optimum price point for any consumer product and the manufacturers have determined that high end, sound equipped locos, with all the latest features can be sold in the $500-600 range so that is what they are charging us.
I liken it to the cost of golf clubs. Each year manufacturers come out with new club designs. Last I looked, a top of the line new driver sells in the $500-600 range. Meanwhile, the price of the previous years models declines. That driver that today sells for $500-600 will be available in two years for around $300-400 and will be just as good as it is today. If you’re really cheap like me, you go out on ebay and buy a used driver about 5-6 years old for around $100. Clubs haven’t improved that much in 5 years to make it worthwhile paying the premium price for the newest models.
Manufacturers of locos don’t come out with new models every year so there isn’t the depreciation that there is with golf clubs. In fact with the pre-order system that is prevelant today, it can be several years from the time a product is announced until it actually becomes available. There are enough of us that want these newer locos badly enough to pay the premium prices. As for me, I’ll shop on ebay and find bargains there, even if they don’t have the latest bells and whistles.
The only driving force behind consumer prices is demand for industries like model railroading with elastic supply, I.e. no real constraints on production materials or labour.
Supply constraints only affect prices when the ability to supply is inelastic due to material or labour constraints.
Sure the actual selling price is determined by supply and demand but supply is unlimited for practical purposes. The upper limit on price is set only by the buyer as I’ve said before.
For pork bellies or gold sure both “curves” are involved in setting the price but not for model locomotives. Anyone can build one of those. Supply is constrained only by the fact that most model railroaders seem to be cheapskates…
ndbprr
I think we may be entering a new phase of the hobby. HO engines are more expensive then computers now.
100% true.
HO scale locomotives have become a luxury purchase. Back in the day, when I was buying multiple Kato N scale locomotives to populate my dream house layout, these were luxury purchases, but only because I was buying 6-10 at a time.
Even then, the purchase was less tha half of my mortgage, not even a car payment, and not a full weeks pay even though I was a 21 year old blue color worker.
Now, an HO steam locomotive or two diesels easily exceeds a car payment and is getting into mortgage payment territory.
A locomotive is absolutely something that needs to be budgeted for a lot of households. The hobby is changing.
-Kevin
It was only about 15 years ago that I bought three Hudsons with DCC and sound from Trainworld for about $130 apiece. Granted, this wasn’t MSRP but those would probably retail for over $500 each today. I can’t remember the last time I saw a loco with factory DCC and sound with a MSRP under $500. I looked at Rapido’s Ten Wheeler and even that is well north of $500. Modern locos are so much more sophisticated than just 20 years ago but that comes with a cost. You observed a loco now costs more than computers. Maybe the cost of them will eventually come down just as it did for computers but I don’t think that will happen soon. I’m glad my loco roster is pretty well filled
Not only is depreciation taken, it is required. Used to be the 19 year rule but that has changed (you used to have to take the full value of the non land value of what you bought evenly over 19 years whether you wanted to or not, then you get to add it back on when you sell).
Don’t read too much into comments that guy made. Depreciation is simply a noncash expense that the government allows to reduce the building’s taxable income, so that the owner (a shell partnership usually) pays fewer INCOME taxes.
And then there is a LOSS CARRYBACK rule that allows said partnership to recover (get a refund) of previous taxes paid provided certain rules are met.
A building could sit vacant for a while as these carrybacks get paid, but stuff like heat, REAL ESTATE taxes, insurance, etc takes positive cash flow to pay. And refunds of previoulsy paid income taxes don’t usually carry the other monthly expenses very long.
So if there is no tenant, there is no cash flow, and the property is a cash drain on th
Likely that is because of a couple factors. A lot more computers are sold so they can be sold for less per unit. And, computer assembly is much more automated.
OTOH, far fewer HO engines are made and there is a lot of labor/time assembling each one with all the detail parts. Cost will be higher per unit.
Anyway, it looks like a lot of the posts are back to the old “consarnit! the hobby is getting way too expensive” yet again.
And to be sure, prices are going up even faster now than before. I bought a couple of boxes of 25 pices of Atlas code 100 flex track for $98 and change each. In the last few months, the same vendor is selling those boxes now for $148 and change, so a $50 sudden jump in price. If would have waited, I’d have paid an extra $100 for those same two boxes of flex track. I also noticed Peco #8 turnouts jumped $10 each in price, from $29.98 to $39.98. Fun fun!
And to rub salt into the track supply wound, MicroEngineering is going up for sale. If someone does buy it and take over production, we will be down to Atlas, Peco and Walthers primarily. Good for them perhaps.
It would seem that an earlier era of model railroad manufacturers was prepared to think in terms of a longer time frame to amortize the costs of tooling design, instruction sheet artwork and text, product packaging, and the other expenses of production. It is getting pretty evident that the current thinking is very different – hence the short production runs, pre-orders, and all the other features we live with. Two differences between then and now (already discussed or at least alluded to earlier in this thread): what we think of as model railroad manufacturers are really no such thing. They are importers, true they are importing to their order much as the brass locomotive importers did back in the day. Since they no longer really control the means of production, they cannot rely on this factory still producing that tooling like they could when they owned and controlled everything.
The other thing that has really changed is the whole notion of inventory and warehousing. This is why Walthers for example no longer carries many of the smaller speciality lines of parts and detail items. Way back they were more inclined to assume they’d make their money some day. So once again, increasingly at least certain products are more a “once and done.”
In some important ways note that we modelers have benefitted from this change. Back in the day, we lived with the inaccuracies and downright fabrications in the Athearn, Mantua, and Varney lines for years and years because we loved the low prices. And that had a negative impact on the availability of better and more accurate models which regardless of distribution and manufacturing philosophy were going to have to cost more. Indeed Linn Westcott over and over in his editorials in Model Railroader said that the intense desire of model railroaders for cheap prices was holding back the hobby – but even MR in the Westcott era would often snicker in “Trade Topics”
Manufacturers follow demand, period. I’m not surprised by the high cost of new locos given the extensive availability of used or old new items available at lower prices. Athearn is a bit of an exception with their Roundhouse line, although it is based on older tooling. And new locos have a lot more technology than those sold 50 years ago.
I haven’t done the math, but I really don’t think there are less manufacturers today than in the 60s. The Internet has opened up the market and allows more “niche” manufacturing. In the early 90s, modeling narrow gauge was unthinkable in my neck of the woods. Now, with the Internet, I can access good used equipment, I can buy equipment from smaller manufacturing operations like Funaro and Camerlengo, and bonus, I can “make” my own rolling stock with 3D prints sold online.
Model railroad manufacturers hire the factories rather than owning them but I’d be surprised if they didn’t buy and own the tooling for their particular models. Mind you, it appears to me that there’s a bunch of borrowing or renting of tooling going on these days. Plus, why wouldn’t you lease out your tooling once you’d sold your run?
Finally, since tooling is made CADCAM nowadays it might be very tricky to retain effective ownership if the computer files reside in a Chinese computer for very long…
Well, yeah they do lease out tooling to other companies in the industry. Tooling is expensive, and any path to pay off the cost is vital. While model companies do not own the factory, they certainly own tooling and will loan it to other model companies when possible. From what I understand, most of the model railroad manufacturers are actually on pretty cordial terms with each other and willing to collaborate on tooling when possible.
Also don’t expect manufacturing to really switch to more domestic supply lines either, model railroading is such a thin in the margins industry already that paying for domestic labor costs and hiring is almost impossible. Yes, its frustrating when a container of models gets stuck in a ship for weeks, ends up trapped in a railyard waiting to offload for a few more weeks, then gets stolen at the border and goes missing for a few days until the police find it (if you follow Rapido’s social media you know exactly what I am talking about). But unless automation can suddenly slash costs, models can hardly be manufactured domestically in bulk anymore unless we suddenly all decide we are willing to pay much much much more to cover the overhead that would bring. The people who can pull it off are rare (like Kadee), and the horror stories of people trying to produce domestically without any planning for it (think like… Value Trains USA) show that it is despite the boon of cutting out trans-Pacific shipping, is more of a hassle than its worth.
As for some of these operations listed as having shut down earlier, its probably imp
