Hey, All,
I was wondering how someone can get into rail car leasing? What kind of insurance is involved? Is it even profitable?

Thanks.

First of all, what are you talking about? You mean like when dentists were buying boxcars and arranged with some car company to place a shortline's reporting marks on them?

Or do you mean a private passenger car for charter service?

Like I buy a gondola or a box car and lease it out. However, I'm not a railroad. Just a private enterprise.

I suggest that you would make more money working for Uber than owning one freight car and trying to lease it out. And it would be easier to do also. In order to be interchanged freight cars have a 50 year life now and require rotating end cap roller bearings. When they need maintenance you can't drive them down to the local Walmart or Firestone store to get it done. Brake parts and wheels don't last forever and they are expensive to replace and when they fail or wear out away from their home shop the charges can be huge. An industry that still uses gons or box cars needs many more than one car and they aren't going to even know that your car is available. And you would probably need some kind of insurance that would cost a fortune if you can even buy it.

Railcar leasing, like a lot of businesses only works on the economy of scale. Many of your fixed costs are going to be the same whether you own one car or a thousand, and hardly anybody is looking for one or a handful of cars anyway. If I'm a grain elevator and I want to lease a couple of 100 car sets of covered hoppers, I want to deal with ONE guy, not several. With the notorious slow cycle times on freight cars, even if you find a guy that loads one boxcar a week, (highly unlikely), it would probably take 3-4 cars just to cover the demand. I don't think you could make enough money on just a few cars to even cover the attorney's and accountant's charges. There's a reason that major players in the railcar leasing game have been banks, railcar manufacturers, major industrial firms like Nucor, and companies like GE Capital. I doubt without a fleet of several hundred cars you could get anyone to even talk to you, let alone use you.

Back during the box car mania of the 1970s a company tried individual car ownership. They leased a very small Virginia short line and marketed cars to investors. Each investor got a model of his car and the profits from that car. The administration costs ate up most if not all the income. I can't remember if the whole thing collapsed before the lease market. The investors lost everything. You might be able to make some money leasing cars as storage space.




















they got contro

See here for a history of the Virginia Central Ry and its leasing woes: http://vcr.golden.im/images/NRBarticle.pdf

Another negative, many types of railcars are surplus and have to be parked somewhere. The latest figure I read was about 20% of the national rail car fleet was parked and that was before the change in management at CSX which resulted in about a third of its fleet being stored along with 1/7 of its locomotives.

Google Panhandle Logistics Center to see what commercial rail car storage looks like. Note that many of these cars are chemical loads which are a sub-category. Space for 10,000 cars on what appears to have been farm ground.

The current surplus, in the every dark cloud has a silver lining category, does make money for folks with inactive track. I write as one who has been there and done that. Daily rental rates for empty non-chemical cars range from about $2.50 to $7.00 per car depending on where and how long the car is plus and an in and out switch charge.

One final consideration, the major Class I's perfectly legally, voted their numbers of owned cars in favor of reducing the national hourly rental rates below the cost of capital. Bottom line, the only economic case for owning a rail car is if you are the shipper and can recover the car's capital cost and maintenance in the sale price of the product transported.

Well, said, Alex from one who knows from experience.

exprail

Do some research, and then take the money you'd have spent on the railcar and buy stock in GATX or whoever you think is the best bet. Far more likely to see a return on your investment.