Buy Railcars to lease out? - Trains Magazine
Andrew Walker
Updated on April 07, 2026
AAR standard life for railcars is 40 years, I've been told, unless rebuilt or a waiver is granted. So right there is a possible "material misrepresentation" . . .
At least 1 member here did own a boxcar, as I understand it. But I'll let him speak from his own experience, if he chooses to disclose anything in that regard . . .
If you had to borrow or use the $114,000 of your own money, at nominal 6% interest rate over 30 years(as a minimum Internal Return On Investment Rate) the payments would be about $6.00 per $1,000 per month, or about $684 a month, leaving about $16 a month for their management fees, repair and maintenance costs, insurance, taxes, etc. Even with a lower interest rate, that's not much left over to compensate you for the various risks involved.
Why and how do you think you - as solo owner of a lone car - or even them and their 'managed fleet' can successfully compete against and survive against the giant railcar leasing outfits that are mostly affiliated with banks and have fleets of thousands of cars ?
As mentioned by others above, a lot of this got started in the 1970's. Short version is that car ownership was especially attractive to people with high taxable incomes as a 'shelter' from US Income Tax because of the Investment Tax Credit and faster depreciation of the car's value to offset that income, especially when they borrowed ("leveraged") a lot of the money to buy the car - get all the benefits without having to put up all the money. Also, many railroads back then didn't have much capital of their own to buy cars, nor the taxable net income in large enough consistent amounts to be able to use those tax benefits themselves. Several books and lengthy articles have been written from time to time - one of the best from the late 1970's is Railroad Equipment Obligations by Michael Downey Rice (a lawyer who specialized in same), and privately published by the then Salomon Brothers investment bank. But "the rules changed" starting in the 1980's, and it wasn't so lucrative anymore - in fact, there have been lots of cars of all kinds stored as surplus over the past 2 -3 years, earning no income . . .
What's the name and website of that outfit, by the way ?
- Paul North.
"This Fascinating Railroad Business" (title of 1943 book by Robert Selph Henry of the AAR)
