How Is Aircraft Valuation Done?
How does one know what the worth of an airplane is?
The worth of an airplane is the amount that someone is paying for it. However, when you are applying for a loan, it is not affected by the price you pay for an aircraft. If you are buying a business aircraft and you apply for financing, then the bank will probably call accredited aircraft appraisers for the valuation.
There are many factors involved in apprising a business aircraft which the banks or the buyers don’t want. Appraisers are an independent party. They appraise the real value of the aircraft and not what somebody else wants it to be.
The kind of value the client is looking for is first determined by the appraiser. The orderly liquidation value, the fair market value, the scarp value, or the forced liquidation value are some of the types of values that clients, who are either insurance companies or banks, look for. The bank policy usually determines what type of value they ask for.
Even if two jets are of the same year and model, the usually don’t have the same appraised value. It will depend on the condition of the jets. If one has an engine program and the other has none or if one is on the ground but the other is flying, the value of the aircraft is affected. The paint job on both aircrafts will affect their value. So if there are 2 aircrafts of the same year and model, you should not expect them to have the same value but there are many factors that an appraiser considers to give its final value.
it is also important for appraisers to examine logbooks and paperwork. These files contain incidents in the aircraft’s life that can affect its structural integrity which an appraiser looks for. An example would be a heavy landing that can damage the aircraft structurally. The aircraft’s valuation is also affected by its maintenance records which the appraiser inspects. In theory, aircrafts that have no paperwork or logbook will not be given any value. This is why it is important to keep records for the aircraft.
There are only a few people who can truly appraise an aircraft’s value. Taking valuation courses is important to be an accredited appraiser and be able to be a member of the American Society of Appraisers. Although most aircraft appraisers are from the aviation industry, there are also some who belong to the finance industry. Aircraft owners should understand the appraisal process even though it is a skill that is specialized. Understanding aircraft appraisal can help better manage the process.