2016: What is Berkshire’s competitive advantage in its leasing businesses?

JONATHAN BRANDT: Leasing has quietly become an important contributor to Berkshire’s earnings with its several leasing units logging about $1 billion in combined annual pre-tax income.

Could you talk about Berkshire’s competitive advantages in its varying leasing businesses including containers, cranes, furniture, tank cars, and rail cars?

Are there other leasing businesses you’d be interested in entering, for instance, airplanes or commercial auto fleets? Plane leasing companies, in particular, seem to sell for reasonable prices and are often available.

WARREN BUFFETT: Yeah. Well, we’ve got a very good truck leasing business in XTRA, and we’ve got a good, primarily tank car leasing, business at Union Tank Car and Procor. And we expanded by a billion dollars when we bought the GE fleet recently.

Leasing, generally, isn’t something that will — we have to bring something to the party.

At XTRA , that’s much more than just handing people a trailer and taking a check every month. There’s important service advantages brought to that.

But pure leasing — leasing of new cars, which is a huge business — the math is not that attractive for us.

The banks have an advantage over us because their cost of funds is so low now. It’s not quite as low as it looks, but I think Wells Fargo, I think the last figure was, you know, down around 10 basis points.

And when somebody has, you know, maybe a trillion dollars or so, and they’re paying 10 basis points for it, I don’t feel very competitive at Berkshire in that situation.

So, pure money-type leasing is not an attractive business for us when we’ve got other people with a lower cost of funds. I mean, they’ve got the edge.

And we have got — railcar leasing involves a lot more than just a financial transaction. I mean, we repair — we’ve got huge activity in the repair field, and those cars require servicing, and the same way in our trailer business.

But you will not see us get in — aircraft leasing doesn’t interest me in the least. We’ve looked at that a lot of times, at various aircraft leasing companies offered to us. And that’s a scary business. And some people have done well in it by, in recent years, by using short-term money to finance longer-term assets which have big residual risks, and that just isn’t for us.

Charlie?

CHARLIE MUNGER: I think you’ve said it pretty well. We’re well located now but we — I don’t agree that we have huge opportunities.