Lesson 6: A Review of Railcar Leasing

Storage Facility Covered With Snow

Railcar leases, rental agreements between two parties allowing the lessee to use equipment owned by the lessor, are critical for companies shipping product by rail. Demand for leasing railcars is created by a shipper’s need to move product. While the motivation behind leasing a railcar is simple, the process of finding the right lease may be complex.

The product being shipped dictates which type of railcar a shipper must pursue to lease. Because leases are multi-year agreements, shippers must evaluate the market outlook. The choice between an operating lease or finance lease is of significant consequence, and once that decision is made, the lessee must also choose between a full-service lease or a net lease. These decisions are influenced by a variety of factors, including equipment demand and freight demand. All these factors must be weighed carefully in order to minimize risk.

Leasing is a necessary part of shipping by rail.