Per Diem

A per diem is a set reimbursement rate that a railroad company pays to use another company’s freight cars. This fee is intended to cover the costs associated with maintaining and operating the freight cars. The per diem rate is typically negotiated between the two companies involved and may be adjusted based on factors such as the length of time the cars are used, or the number of miles they travel. In some cases, the per diem may also be applied to other types of equipment, such as locomotives.

A Per Diem includes:

  • The monthly rental charges for a car.
  • The variable costs of operating the car such as repairs, inspections, and insurance.
  • A portion of the fixed costs of owning the car such as depreciation, interest on investments, and taxes.

The purpose of a Per Diem is to:

  • reimburse the lessor for the monthly cost of owning and operating the freight cars.
  • provide an incentive for the lessor to maintain their equipment in good working order.
  • provide a way for the lessee to budget for their shipping costs.

When negotiating a Per Diem rate, both parties will consider:

  • The length of time the cars will be used.
  • The number of miles the cars will travel.
  • The type of freight being shipped.
  • The value of the goods being shipped.
  • The availability of other transportation options.

The Per Diem rate is usually expressed in dollars per car per day. For example, if a company pays a per diem of $100 for using another company’s freight cars, and they use 10 cars for 10 days, the total cost would be $10,000. ($100 x 10 cars x 10 days = $10,000).

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