Lesson 5: Choosing a Railcar Lease: Pros and Cons of Lease Types

Istock 000020120023 Small

As with all business decisions, pros and cons must be carefully weighed in order to mitigate financial, operational, and market risks. What may be considered a positive attribute of leasing by a lessor may be viewed as negative by lessees, or vice versa. The tables below identify pros and cons of leasing as perceived by lessees versus lessors.

Railcar Leasing: Lessee Perspective
Railcar Leasing: Lessor Perspective

Overall, the largest con for a lessor is the risk associated with allowing someone else (the lessee) access to its equipment, both exposing itself to potential damage to equipment by the lessee, as well as the risk that the lessee does not pay the lease rate. Generating revenue for the asset is the primary objective for lessors. Alternatively, the greatest con of leasing from a lesseeā€™s perspective is the expense associated with leasing, while the greatest advantage is the flexibility afforded by leasing.