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Wad

Found this handwave in Publicola:

Entrepreneurs would figure out ways to make buses cheaper ... , and transit agencies would figure out ways to build buses more cheaply in the United States.

If Nordahl says making affordable buses were this simple, then they would be made this way now.

Nothing needs to be figured out.

Simplicity requires subtraction, not addition.

I can think of two things to subtract in order to get lower-cost, higher quality buses.

First, repeal Buy America provisions. Second, move equipment shopping from buying to leasing.

Buy America reinforces an outmoded market. America's transit disinvestment in the late 20th century has consequently meant America's transit-building expertise was lost. As it is now, the U.S. bus transit market is dominated by two companies from Canada and one from Hungary. They each maintain assembly plants in the U.S. because of Buy America laws, which in effect make the bus builders operate two factories when one can do the job.

The Japanese carmakers show how to do the process. A lot of Japanese cars sold in the U.S. are built in the U.S. How? The carmakers reversed the process. They didn't build factories initially, but waited for a market to develop. They instead saw that the U.S. had the ingredients to make a car. The Japanese went to American parts-makers for sourcing, went to banks for financial and regulatory help, and existing dealers for salesmanship and marketing. The factories came last.

The second, leasing, may or may not necessarily save money. It does, however, move public transit agencies in line with private sector buying habits. Airlines don't buy planes. Trucking companies seldom buy tractors. Heck, even Greyhound doesn't own the buses it runs.

Major assets like these are leased. Either the equipment-maker carries the financing, or there's a third-party owner that will own the vehicles, and in many cases provide the maintenance package as well.

The present system is a monopsony. The FTA dictates the purchasing standard if transit agencies want to buy a bus. The one big pitfall is that if an agency is stuck with a bad bus, it must bear it for at least 12 years.

Leasing may not be cheaper for new buses, but it would greatly reduce costs for secondhand buses, especially for smaller agencies. It would also move depreciation costs off the public ledger.

Tom West

"Airlines don't buy planes"
Then when do I see headlines saying that an airline has bought some planes? (e.g. http://news.bbc.co.uk/2/hi/business/7015621.stm)

Leasing only makes sense if the owner has a usable asset at the end of the lease for someone else to buy or lease. Cars are typically sold after a lease, becase they haven't reached the end of their life. Houses are re-leased (well, "rented") to someone else when a lease expires, because their life isn't really finite.

Buses have a finite life, like cars. That means either someone buys them at some point, or the total value of the lease is the cost to buy in the first place!

The only case I can think of where transit vehicles are leased is in Great Britain (trains), and that's for tax reasons. (Rail vehicles can be off-set against corporate profits, which only works when your profits are greater than the cost of a new train... which means you're a bank, not a transit operator).

Wad

@Tom, ever hear of Steven Udvar-Hazy?

http://articles.latimes.com/2010/jul/20/business/la-fi-aircraft-leasing-20100720

He's the world's largest owner of planes. He buys direct from Boeing and Airbus and then leases them out to airlines worldwide.

When airlines "buy" planes, chances are that they are acquiring them through a lease arrangement rather than taking possession of them as assets.

All vehicles, and all assets, for that matter have a finite life. In the U.S., buses have a target useful life of 12 years. That's an FTA standard, and buses can run well beyond that.

When an agency retires an old fleet, they go to a secondary auction market or some are kept to cannibalize for parts. The secondary market usually attracts churches or Mexican carriers.

Leasing would make sense for transit buses just as it would for planes for the same reason: Buying a single vehicle is expensive, and buying a whole fleet of them is stratospheric.

Dexter Wong

Well, on bus leasing, the San Francisco Municipal Railway (Muni) did lease over 300 Mack C-49 coaches in the 1950s to get around the need to pass a city bond issue for purchasing new vehicles. When Mack stopped building buses in 1960, Muni continued to lease the buses until the 1970s when the San Francisco Municipal Railway Improvement Corporation (formed specifically to fund purchases of new equipment) purchased 390 GMC buses. Most old buses were returned to Mack, which sold the best ones to Latin American operators. A few were bought by Muni for further service (like 2359 which was cut down from 40 feet to 30 for Coit Tower service).

TransitPlannerMunich

The costs for purchasing a bus are normally less than 10% of the total operation costs of a bus in a transit company. So it does not really matter if you spend some extra money buying a really nice bus to attract customers.

jack whisner

http://crosscut.com/2012/04/23/transportation/22245/A-desire-named-streetcar/ The Sound Transit boardmembers demanded a streetcar; they wanted urban bling more than cost-effective access.

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