Eastern Railroad Discussion > Locomotive Lease Prices

When you read about shortlines, you frequently hear that shortlines are leasing their locomotives.

How much are they leasing them for, and on what terms? Is it similar to when Class I's swap power by the horsepower-hour, or is it more like an automobile with x per year and a mileage allowance?

abyler wrote:

> How much are they leasing them for, and on what terms?

Each deal is different. They can lease junkers for as little as $75 a day, up to something like $250 a day. The terms are often something like if it breaks, you fix it. More expensive leases will include insurance for main engine breakup or alternator failure for the first few months. Cheaper ones will have no coverage.

> Is it similar to when Class I's swap power by the horsepower-hour,

No. Just a rate per day. Short lines typically don't have locomotives that anyone would want to swap with.

> or is it more like an automobile with x per
> year and a mileage allowance?

There is no mileage allowance, since there typically is no way to accurately measure mileage.

Hey,
The outfit that i work/worked for (since there were 2 of em) had the LMX B39-8s.The lease on these if I remember correctly was $120 per day.4 of what we use are at the above mentioned rate but we are only charged when the units are actually used not when there just sitting like a paperweight.Not to bad in my opinion.And theses are excellent runners and pullers. Cya B.

The TSBY leases most of its units from the State of Michigan. This is not a good example, but they lease the units from the State for 5 dollars per day. It might be a bit higher, but the state owns all the tracks too, so it makes sense for them to lease everything out. That would mean, the TSBY (leasing 385,389,390,391,392,393,394) means they pay about 13,000 for most of the units they use. Much cheaper than most shortlines have to pay. They do have to do all work on the units though.

Here are some actual prices from a note I received a couple weeks ago from a large locomotive lessor. Assumes 3-5 year lease.

SD40-2 $75/day
GP-9 $60/day
GP-11 $105/day
GP38-2 $125/day
SW-1500 $100/day
SW-1200 $90/day

Rick

Thanks for the information. Very interesting. It actually doesn't seem that expensive to lease a locomotive, which kind of surprises me. I guess since they are old models, they've long since been paid for though.

Locomotive leasing isn't that expensive if you are just looking for horsepower hours.

It gets more expensive as you look for really good units or upgrading the units. Even a paint job is expensive. You should be aware that the cost of leasing or purchasing a locomotive is quite small when compared with other major railroad costs. For example, Employees, MOW&S, Fuel and other costs are all far greater than locomotive costs.

Rick

abyler wrote:

> It actually doesn't seem that expensive to lease a locomotive,
> which kind of surprises me. I guess since they are old models,
> they've long since been paid for though.

Exactly, and you get what you pay for. If you want a new locomotive with maintenance included, you are looking at something like $1,000 or more a day. This gives you the highest reliability, availability, horsepower, and tractive effort, along with the best fuel economy and lowest maintenance cost, the maintenance cost being rolled into a lower lease rate.

If you are willing to settle for less than that, you can get a cheaper locomotive. Railroads balance out these costs all the time.

Looking at fuel economy as an example, a class one might run a locomotive up to 175,000 miles in a year. In doing so, it would consume something like $1,200 of fuel a day. Since newer locomotives are about 25% more fuel efficient than older ones, the difference in fuel cost between old locomotives with the same total horsepower as now ones can add up to about $300 a day. Thus, the railroad can afford to pay more for a lease, while saving money in the fuel the locomotive uses.

In comparison, a short line might only operate 15,000 miles a year in less demanding service. The $20 a day it might save with a new locomotive just isn't enough to justify paying the higher lease rate. Thus, they will settle for the older technology and be happy.

The same sorts of economic tradeoffs are made with maintenance cost, reliability, tractive effort, and so on.

<<
In comparison, a short line might only operate 15,000 miles a year in less demanding service. The $20 a day it might save with a new locomotive just isn't enough to justify paying the higher lease rate. Thus, they will settle for the older technology and be happy.
>>

True, but also, don't forget that there are very few new four axle units even available on the market today. Motive Power/EMD GP15s and GP20s are the only ones I can think of that are even available new. Many short lines require four axle power due to light capacity (263,000lbs) bridges and track. So the new power really isn't even an option. More likely to see GP-38s and GP-40s (some rebuilt to GP38-3)and B series GEs (that are amazingly cheap right now) in the future of the more prosperous short lines.

Rick

locoengineer wrote:

> SD40-2 $75/day
> GP-9 $60/day
> GP-11 $105/day
> GP38-2 $125/day
> SW-1500 $100/day
> SW-1200 $90/day

Th1s seems to concur with the statement made on this forum a few weeks ago, that there is a glut of SD40-2s out there. It's quite a turnaround from a few years ago, when MPI and Alstom were rebuilding them as fast as they could.

True there are a lot of spare SD40-2s and even more SD50s that are parked all over the place.

Many of the Class 1s are shedding these units rapidly as new power becomes available. UP is auctioning units in HUGE numbers as their 1,000 unit SD70 order gets on the property. They are dumping as much of the old SP stuff and MP SD40-2s with no DB ASAP. CSX and NS have both parked their SD50s. Lease fleets also have shifted their emphasis to a greater number of 4 axle units. HELM and LLPX are two big examples.

A few years ago ('97-'98) a junker SD40-2 was leasing for $375/day. What a difference a couple of years makes.

Rick

Where did you find those lease figures?  Do you know what the figures would be for today's market?