Trainwatcher, let me help you out. Along the lines of what others have already said: That PRR car you have is unpainted, molded plastic color. Decals don't adhere well to anything other than a gloss finish surface.
So here's what I've done with similar projects where I want to add to, or alter an existing paint scheme of a car like yours. Matter of fact, I've also worked on the very same cars from that PRR set.
First, I drill out the trucks and remove the wiring. (I always reattach trucks with a truss screw and lock nut to rid myself of the inherent truck wobble that is there with the rivet method used by Lionel.) You could just remove the wheel sets and wiring. But this is so I can wash the entire car body with dishwashing detergent and water to remove anything that would interfere with proper spray gloss adhesion.
If you leave the trucks attached, then after washing, place it in front of a air fan, so that you minimize rusting of any metal parts like the truck rivet, coupler screw, or the knuckle rivet pin.
Next as mentioned by CBQER, I spray the entire car with rattle can Krylon spray gloss. This also will help reduce the unpainted plastic appearance of the car. I do other things too like paint the molded in diaphragms with black paint. On those Pennsy cars, I've added gold stipes above and below the windows. But the spray gloss will also give a good surface for decals.
You could avoid the spray gloss technique above by using a bottle of Microscale gloss coating, applying this exactly where you will be applying the decals. But this is brushed on, so doing a gloss spray instead should give you a more uniform surface to work on, and takes the guess work out of figuring out where exactly decals will be located on the car.
I don't know what brand decals you used. Some types like Champ have a thick film surface which is hard to hide, so I prefer other brands. See my 027 repaint thread... somewhere there in that thread, I have a listing of current decal makers. Solvaset fluid is pretty strong: I use that for uneven surfaces where I want the decal to "snuggle" in, like a woodside reefer. I start off with the regular blue bottle Microscale decal fluid. Before I use Solvaset, I use the stronger Microscale fluid that comes in the red print bottle.
Also, while you need to soak the decals in water long enough to get them to slide off the paper backing, you don't want to oversoak them as you'll risk removing the glue backing of the decal itself. Use lukewarm temperature water. Do a test with a portion of decals from the sheet that you do not plan on using on the finished car.
Also, older decals like the Champ (that haven't been made in years) in addition to the thicker film base, sometimes don't adhere as well, or disintegrate during application. The current Microscale decals film base is real thin - and requires some practice to get used to - but helps hide the decal cut lines as the film base is thinner.
As others have indicated, I use a razor blade and straight edge (along with high power glasses for my eyes) to cut the decals as close to the printing as possible without cutting into the printing.
Once you are happy with the results of your additional decaling, then you can spray the whole car with Krylon flat clear coat. I like the Krylon over the Testor's Dull Cote as it is non-yellowing. You could use satin I suppose, though I never have. Though for silver painted passenger cars, I use a final gloss spray instead of flat, to mimic a polished aluminum appearance.
