Railcar Leasing & Sales
We offer a significant number of lease options that allow our client's both financial and operational flexibility. Typically, our leases take the following forms:
Full Service Operating Lease
The lessor performs all maintenance from the wheels down. The lessee maintains everything from the wheels up. The lessee's payment to the lessor includes all maintenance, taxes, and insurance. The client expenses the monthly lease payment. The lessor owns the railcar
Net Operating Lease
The client is responsible for all costs associated with the operation of the railcar including taxes and insurance. The client expenses the monthly lease payment. The lessor owns the railcar.
Capital Lease
The risks and rewards of railcar ownership are transferred to the lessee over of the lease term. Often, the lease contains a fixed price purchase option at lease end. Leases are typically categorized as capital leases when the lease term is equal to 75% or more of the estimated economic life of the asset, or the present value of the lease payments is equal to or exceeds 90% of the fair market value.
Sale Leaseback
The lessor buys the railcars from the customer and then leases them back to the client. The sale leaseback immediately increases the client's cash flow and also frees up capital for other investments. Caution should be exercised as the structure may generate a tax liability up front while any book gain has to be deferred over the lease term. Sale-leaseback structures can be attractive when the asset requires significant upgrades or modifications.
Synthetic Lease
A synthetic lease is treated as a financing or loan for tax purposes. For book value, it is a lease. This structure is often a good alternative when a sale/leaseback will not work.
Per-Diem
A per-diem lease is based on the car hire accounting conventions observed by the North American Rail System. Under this system, railroads reimburse one another for time and miles while another railroad's car is on its line. The car typically earns the majority of its "lease payment" while the car is "off-line" on railroads other than the leasing railroad.
Leases vary greatly depending on the situation, providing varying rates on- and off-line. They also provide varying levels of assurances for the leasing railroad, from no assurance (other than the lessor's right to "pull" the cars and redeploy them elsewhere), to a fully guaranteed revenue stream.