Buying Railcars, then leasing them to railways.

[Anonymous]

Hello,

I was just curious about what it takes to buy a railcar or railcars and lease them out to railways.

Do you purchse the railcars brand new from a railcar manufacturer then lease them out?
What kinds of prices do you pay for new railcars?
Do people buy used cars and lease them out?
Do a lot of people do this?
How do you get paid for the use of your car?
Is this a fairly common thing that's done by individual people who just own one or two cars?

Any info or webpage links would be helpful, I was just reading about this somewhere and it peaked my curiosity.

[Anonymous]

Let me add a few more questions to this topic, please. [:)]

How about insurance?

How about needed repairs?

What about keeping track of the car (s) and knowing where they are?

[Big_Boy_4005]

I'm not sure of the numbers, but owning railroad equipment takes big bucks. A single car has to be over 100K, so if you had a few million, you could own a small fleet. I would imagine that it is something like the apartment rental business, and vacancies kill. Time is money. If you win the lottery, buy railroad stock, it's easier. [swg]

Do you think you are ready to compete with the likes of GATX, and others?

[Anonymous]

QUOTE:
Do you think you are ready to compete with the likes of GATX, and others?

Now you're generating more questions!!

Is it really competitive out there for this kind of thing, or generally is there a real big demand where leased railcars are quickly absorbed?

Is there a standard rate, or do the leasing companies compete with one another?

[Big_Boy_4005]

Don' t forget that that the railroads own a fair amount of equipment too, and sometimes that sits idle waiting for loads.

If you really wanted to break into the business, maybe the way to go would be to find a regular shipper, and contract with them to use your cars. The problem might be that your economy of scale may result in the railroad being able to provide that same service for less, and there goes your business.

[Anonymous]

Can anyone else shed some light?

What are some of the major railcar manufacturers?

[Big_Boy_4005]

Sorry if I was a little down on your business concept there. I have had my own "model railroad" business which failed in the past. I lost about a half million dollars in the process. I have also owned apartment buildings in real life, and understand the problems there. Combine a general knowledge of railroads with that business experience, and you get, THE DEVIL'S ADVOCATE, me.

If I had said these things to George M. Pullman, I would have been dead wrong. But that was a different time. I still say if you want to own railroads, BUY STOCK, not rolling stock, shares of the company itself. Rolling stock comes with them.

I too would would like to hear from some other members on this, so I'll shut up for now.[swg]

[Dough]

I wi***hat I could remember the months, but you need to look over the Trains magazines for the past month. I remember two months that have articles that may interest you. One of them mentioned the numbers of cars and the general shift to leasing rather than owning buy many of the class ones. The second brought up the point of cars above the old 100 ton standard. Many cars have become obsolete over night.

Also the freight car industry is VERY cyclical. Their are always ups and downs. For example after record breaking years most of the major car producers have had to idle some of their plants. Now business is starting to pick up again.

Personally I wouldn't come near the railcar business. Their is way to many swings to the extremes.[;)]

[Anonymous]

QUOTE: Originally posted by Big_Boy_4005

Sorry if I was a little down on your business concept there. I have had my own "model railroad" business which failed in the past. I lost about a half million dollars in the process. I have also owned apartment buildings in real life, and understand the problems there. Combine a general knowledge of railroads with that business experience, and you get, THE DEVIL'S ADVOCATE, me.

No offence taken, this isn't a business concept of mine, I have no money to invest in stocks or rolling stock for that matter, and have no intentions of doing so.

I am just curious as to how the business works, I know there are people out there doing it and I was wondering how they did it.

Just doing a little research purely out of personal interest.

From the posts above I can see it's not an ideal money maker business to be in, but I am not so much interested in the IFs as much as the HOWs.

Thanks.

[Big_Boy_4005]

I am much relieved to hear that.[;)] Research for modeling perhaps?

I wish I knew all of the details myself. I kind of have a basic grasp, and I know that at one time in the past cars needed to be returned to their home road, but I'm not sure when that practice ended.

Grain hoppers have a seasonal flow, and I believe that the BNSF and CP round them up and store and dispatch them from a couple of central locations.

Lumber cars have to be returned empty to the mills, because there is no load for them in "Chicago" for example.

Coal trains, same thing, loads one way, empties back for refills.

I did manage to find one of the articles that Dough was referring to, Trains Jan 2004 page 58. This article will answer many of your questions.

[Anonymous]

Seems to me, one of the better bets would be to go with boxcars.

Most other specially designed cars seem to be limited in where they can go and obviously what they can carry.

QUOTE:
I know that at one time in the past cars needed to be returned to their home road, but I'm not sure when that practice ended.

Assuming that your boxcar could go anywhere in the North American Boxcar pool, I suppose it would be more likely to be in revenue service more often, no dead-heading to it's destinations.

I'm gonna have to take a look at that article you mentioned big boy - I just gotta find the issue [:)]

[CSSHEGEWISCH]

Investing in free-running boxcar fleets was quite the rage in the mid to late 1970's, with per diem payments being the major source of income. Unequipped boxcars carried the reporting marks of various short lines and were free runners under the car service rules in effect. I'm not sure of all the particulars but the whole concept went bust after a couple of years.

[Big_Boy_4005]

I would have to agree that box cars would be one of the better bets. However, according to the article, entitled Risky Business, box cars and reefers are mostly owned by the railroads.

I took the time to crunch the numbers from the article. There they had listed by car type the ownership numbers for all the the major North American railroads, and then the numbers for private ownership. The percentage I have listed is the privately owned percentage of the total in service in 2003.

• Covered Hoppers 57.1%
• Tank Cars 99.5%
• Gondolas 34.4%
• Box Cars 9.7%
• Flat Cars 23.0%
• Open Hoppers 38.4%
• Refrigerated 9.0%

News flash: railroads DON'T own tank cars.[swg]

[Anonymous]

Would an open hopper be the same thing as a coal car?

That's really interesting about the Tank Cars.

I suppose they are a real specialty item, after all they can only haul certain commodities that most of the time aren't interchangeable (sugar products to propane kind of thing).

[Anonymous]

I would tend to agree with the guys who think you'd have to be nuts to do this. I too have owned rental property and seeing it unoccupoed is an aging experience. My fantasy is to own my own business car or other splendid accommodation-on-wheels and attach it to trains (for a fee, I suppose) and ride around the country in the grandest of style. Anybody have any idea how this works?

[Anonymous]

I can't promise anything here, but if you go to the Tennesee Central RR museum site, there is a list of private passenger equipment. There is also a list of privately owned locomotives (mostly E8s, and private owner cabooses)
These cars are used by the owners - mostly for business, once in a while on vacation trips.
I suggest contacting the museum and see if they will put you in contact with the owners.
Again, I am only offering a suggestion, nothing more, on a possible source of info. JOHN.

[Anonymous]

Excuse me, the address for the TC museum is:

www.tcry.org

They are a gold mine of info. JOHN

[Big_Boy_4005]

Open hoppers are mostly for coal (better than 60%) Non-metallic minerals 19%, Metallic ores and other round out the list.

[M636C]

One big company in this business is Chicago Freight Car Leasing, who have an Australian subsidiary which is the big player in this country anyway. They have a website that might be worth checking (for both the US and Australian operations).

In Australia they also lease locomotives, and the details and pictures were on their Australian website last time I checked. Just put their name in a browser!

A number of small operators failed due to high insurance costs, and suddenly, we realised that CFCL had always owned their locomotives and cars. But you need large amounts of money to do this!

Peter

[Anonymous]

I read in a magazine that VIA Rail will allow private rail-car owners to attach their car to the end of their trains; for a fee of course. Unfortunately I can't remember which magazine it was in. I believe it cost $8000 to have your car on the train from Vancouver to Montreal. That included power connection and any necessary switching. If anyone is interested, I can try to find the article.

[Anonymous]

Re: owning a private coach , business car or other rolling stock see aaprco.com. This site has links to a number of sellers of railcars.

[tree68]

It seems to me that locomotives also fall under the lease category. I'm not talking about Precision or any of the well know "leasing" companies. What' I'm thinking of involves the locos being owned by "Trusts", who then lease the loco to the railroad. As far as RR ops go, it's the RRs loco, painted and all. Aside from that, somebody with more info than me will have to elaborate. It's also possible that the same is true of some cars.

[Big_Boy_4005]

Getting back to Macguy's original question about freight cars. The article in the January issue of Trains that we have been picking at also includes a section entitled Who Builds What. This lists the major freight car manufacturers, and what kinds of cars they produce.

Remember I said GATX before, well here's another one with a twist. ACFX!!!

It seems that big time money guy Carl Icahn owns ACF Industries which makes a number of different styles of freight cars, but mainly specialized tank cars, and those very distinctive centerflow hoppers.

The twist is that they don't just sell them to the railroads, they lease them too. Talk about having all the bases covered.[swg]

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH

Investing in free-running boxcar fleets was quite the rage in the mid to late 1970's, with per diem payments being the major source of income. Unequipped boxcars carried the reporting marks of various short lines and were free runners under the car service rules in effect. I'm not sure of all the particulars but the whole concept went bust after a couple of years.

It was a comment just like that one that someone sasid to me that got me curious about this whole thing in the first place.

They said something about how it was the trend and dendists and what no were going out and buying a railcar or two then leasing them out.

I guess it just doesn't happen any more where a person or two would just own a couple of their own cars and lease them out, it's all the big leasing companies now.

Anyone know how they track their cars from location to location?
Is there a centralized website somewhere where they loginto? AAR website somewhere or something?

[Big_Boy_4005]

Tisk tisk, the railroads must have been doing it a different way for a long time, since they have been operating way longer than computers and the internet have been around. Certainly into the 70's it was done with paperwork. When did the first optical car scanners come along? Remember those red and blue stripes on those black plates?

[Anonymous]

QUOTE: Originally posted by Big_Boy_4005

Tisk tisk, the railroads must have been doing it a different way for a long time, since they have been operating way longer than computers and the internet have been around. Certainly into the 70's it was done with paperwork. When did the first optical car scanners come along? Remember those red and blue stripes on those black plates?

Surely it's not still done long hand, must be computerized by now.

I think in the old days there was more point to point stuff, not much travel all around the place like the North American box car pools do it now.

[CSSHEGEWISCH]

I looked at the CFCLA website for Australian operations, and it is interesting. Most of the lcomotive specs look like they were drawn verbatim from John Cleverdon's Locopage. http://locopage.railpage.org.au/

[Big_Boy_4005]

QUOTE: Originally posted by macguy

QUOTE: Originally posted by Big_Boy_4005

Tisk tisk, the railroads must have been doing it a different way for a long time, since they have been operating way longer than computers and the internet have been around. Certainly into the 70's it was done with paperwork. When did the first optical car scanners come along? Remember those red and blue stripes on those black plates?

Surely it's not still done long hand, must be computerized by now.

I think in the old days there was more point to point stuff, not much travel all around the place like the North American box car pools do it now.

Oh, I couldn't imagine any other way today, but I did give myself a 30 or so year cushion.[;)]
If anyone knows for sure, please speak up.[:)]

[Anonymous]

QUOTE: Originally posted by macguy

Hello,

I was just curious about what it takes to buy a railcar or railcars and lease them out to railways.

A large sum of money and a knowledgable, well connected staff.

Do you purchse the railcars brand new from a railcar manufacturer then lease them out?

This is one way, but given the high cost of new railcars this is quite rare. Some larger leasing companies like CIT have used this route. Not recommended for beginners.

What kinds of prices do you pay for new railcars?

Varies significantly depending upon the type of railcar and number ordered and incentives offered by the builder.

Do people buy used cars and lease them out?

Yes.

Do a lot of people do this?

A fair number. Most have leasing companies, but there are a few individuals. A lot of Doctors and dentists lost a LOT of money buying up railcars in the 70s when loose rules could bring large earnings. This market dried up when the rules tightened.

How do you get paid for the use of your car?

Car owners are paid by each railroad a daily/mileage fee known as "car hire" and formerly known as "per diem"

Is this a fairly common thing that's done by individual people who just own one or two cars?

No.

Any info or webpage links would be helpful, I was just reading about this somewhere and it peaked (piqued?)my curiosity.

LC

[Anonymous]

QUOTE: Originally posted by jhhtrainsplanes

Let me add a few more questions to this topic, please. [:)]

How about insurance?

Policies are available through RR insurance brokers.

How about needed repairs?

The car owner pays for the repairs performed by RRs under the AAR Car Service rules. Private car owners are required to pay railroads for such repairs. They can have work done by private cars shops as well.

What about keeping track of the car (s) and knowing where they are?

It depends on the car type and use. Cars can be restricted by service or station. If they are unrestricted they are known as "free runners" This is often the case with standard boxcars such as RBOX cars. Cars can be traced by their UMLER information (AAR computer) through most major railroad websites.

LC