Understanding Aircraft Valuation
How can the value of an aircraft be appraised?
The amount that you are paying for an aircraft is it worth. However, when you are applying for a loan, it is not affected by the price you pay for an aircraft. Banks usually call accredited aircraft appraisers for the valuation of an aircraft if you are applying for financing to buy a business aircraft.
Appraising a business aircraft involves many factors which the buyer or the bank does not want. However, appraisers are not influenced by the buyer or the bank since they are an independent third party. They appraise the real value of the aircraft and not what somebody else wants it to be.
One of the first things that the appraiser needs to determine is the kind of value that the client wants. There are many types of values that clients, who are usually the bank or an insurance company, can look for including orderly liquidation value, the fair market value, the scrap value, or the forced liquidation value. The bank policy usually determines what type of value they ask for.
If there are jets of the same year and model, you cannot expect them to have the same value. It will depend on the condition of the jets. If an aircraft has an engine program and the other has none or if one aircraft is grounded by the other is being flown, then these conditions greatly affect its value. The value of the aircraft can even be affected by its paint job. 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.
There are paperwork and logbooks that appraisers inspect. In these files, the appraiser will look for incidents that can affect the aircraft’s structural integrity. An example would be a heavy landing that can damage the aircraft structurally. They will also inspect maintenance records since this can also affect the aircraft’s valuation. In theory, aircrafts that have no paperwork or logbook will not be given any value. And this is why records are very important when it comes to aircraft appraisal.
A true appraisal of an aircraft’s value can only be done by a few people. Those who want to be a member of the American Society of Appraisers can take valuation courses to be an accredited one. Aircraft appraisers usually have an aviation background but there are some who belong to the finance industry. The appraisal process is a specialized skill but every aircraft owners should understand the appraisal process. They can better manage the process if they know what is involved in an appraisal.