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2. Select the engine you wish your active engines to be replaced with
3. Click button labeled "Replace Locomotives" (dollar sign with lines behind it, panel on the right hand side)
4. Select which engines you wish to replace based on either age, usability, route properties or a combination of them all.
You can however replace trains by age and by usability (type)
Ex. Replace all 2 year old express engines
Note the old engines are sold off for scrap when you replace them which brings down the cost a lot. There is no loss of credits from replacing an EMD with a new EMD except for the loss over time, which is generally not a lot.
So if it's because you have already upgraded some engines but not all just go ahead and upgrade all of them anyway.
The models are scrolled through using the arrows on either side of the 'locomotive' field. However, while you still only have one model of train in your fleet, you will only see one model to replace. After you have changed some of them individually through the individual route management screen (click on the dollar sign in the top right hand corner), then you will have more than one model to scroll through in your engine shed.
I've never felt the need to replace based on age. I just use maintenance sheds on all stations to keep my trains running without replacing them between new models becoming available.
It has so I expect it still does, without verifying, so please try it yourself!
Like gfe90604 I tend to use Maintenance Sheds and typically by the time engines are aging enough to replace, a better model is available anyway. Still replace by age is a nice feature for the cases when you get a great early Engine with nothing better for a long time :)