Fees - How are leasing charging split over a contract?

[tbtc]

How are the leasing fees divided over the expected life of a coach/ unit/ train?

For example, let's say that TPE/ XC decided they wanted to add some additional carriages to their short 170s (to bring them up to the same length as their 185s/ 220s/ 221s), so they decide to add a dozen "middle" coaches to the current LM order for 172s. So far, so hypothetical.

Anyhow, lets say that these coaches are meant to last twenty years - for argument's sake. So the ROSCO need 5% a year (plus a huge extra amount for their profits - but let's not go there!)

The "value" of the coaches would obviously lower over the contract - you'd expect to pay less to hire fifteen year old units than brand new ones. However, would TPE/ XC be paying a "fixed" fee at the start of the contract for the building of them, or would this be smoothed over the life of the contract?

Are the costs heavily front loaded? Are TOCs expected to pay a lot more for introducing new units? Or are the costs spread over the "expected" length of a unit's life?

Any examples?

 

[starrymarkb]

Well to be slightly pedantic you'll have issues with adding 172 coaches due to the different drivetrains. A 172 is going to have a ZF mechanical gearbox while 170s have the Voith Hydraulic Torque Converter.

 

[DaveNewcastle]

The technical term used in accountancy for this is "amortisation".
You can look up the term in Google for examples and formulas (Don't be surprised by the american spelling with a Zed instead of S).
This allows the value of a new asset to be spread over time. There are several variables you can put into an amortisation calculation to affect the way a value is eroded with time and how any profit or loss from leasing is allocated over that time.

There are even some pre-set amortisation formulas built into Microsoft Excel.

I don't have actual examples for train leasing but the value will certainly be depreciated over the life of the asset.