Rail Swap

[Anonymous]

Jim-

Trying not to get too dry, but here's a summary that has taken me a few years to puzzle through.

The market for railroad equipment is a very small market. It is really a spot market in many respects. For example, the locomotive market and freight rail car markets tend to be more stable than perhaps the passenger rail car market.

In the passenger car market there are Amtrak and the commuter agencies or state agencies in the market for new equipment. In the secondary used market there are some smaller agencies and tourist and excursion operators and a small number of individual owners. Also, there are few standards in terms of available equipment and prices run a wide range. Although there is some effect of supply and demand the lack of stable financing for acquisition tends to further fragment the market.

The locomotive market has many additional participants with the Class 1 freight railroads purchasing new and used locomotives and active leasing companies in both the new and used locomotive markets. Class 2 and 3 railroads are mainly active in the used locomotive market.

The freight rail car market is largely driven by the Class 1s (including TTX), the major leasing companies and in the area of tank cars particularly the major customers. To a lesser degree smaller railroads, leasing companies and customers may also own cars or participate in co operative pools.

Prices in these markets, even on large pruchases tend to be negotiated by the deal and there are no firm prices for locomotives or cars. I tend to figure prices occasionally by talking to several people I know who work for large railroads, leasing companies or broker equipment. Everyone I know has a slightly different way of figuring what they are willing to pay, but the simplest answer is it is based upon individual negotiation.

Of course as you correctly point out brokers or other intermediaries do add costs, but they can also add significant value and many act as wholesalers. Rebuilders such as NRE, Western Rail, Boise, and others also wholesale locomotives.

The market does fluctuate. To give you some idea, about five years ago a GP10 in running condition would run between about $85,000 and $120,000 depending upon condition. Now I can probably get running GP10s between $35,000 and $75,000 depending upon condition. Under the right conditions I could probably do better and of course different locomotive types have different costs. I became aware of several B23-7s a short while ago in running condition at a very low price, yet they are much newer than the GP10s. So, there are many factors including age, condition, horsepower, availability, size of the market, availability of financing and other factors that drive even this one small part of the market.

I hope that helps explain it a bit. If you have specific questioons I'll do my best.

LC

[Anonymous]

QUOTE: Originally posted by Limitedclear

Here's a link to RailSwap a classified site listing all sorts of real equipment for sale or trade and wanted ads. It gives a bit better idea of some of the railroad equipment available out there for those who are interested.

www.railswap.org

LC

LC [8D]

Do you consider their prices average or high? It seems like most brokers list high. So how do we get a reasonable price range on railroad equipment?

[Anonymous]

Here's a link to RailSwap a classified site listing all sorts of real equipment for sale or trade and wanted ads. It gives a bit better idea of some of the railroad equipment available out there for those who are interested.

www.railswap.org

LC