AOPA Aviation Finance is often asked how aircraft are valued, who does the valuation and how the valuation affects how much a lender will finance.
An aircraft is appraised like a home, car or boat might be, starting with the year, make, and model. Then the total number of hours on its airframe, abbreviated as TTAF, and the time since the last major overhaul of its engine(s)known as TSMOH, are compared to an industry average for that year, make, and model. The most common type of use for the aircraft (training, personal travel, etc.) is considered when evaluating average times.
For example, a 1999 Cessna 172 might have 5,000 hours TTAF. Sounds high, but this aircraft is often used for flight training, so those numbers may not adversely affect its value. In contrast, the valuation on a 1999 Mooney Ovation with similar TTAF might be negatively affected since that type of aircraft tends to be flown less frequently. Whatever the aircraft, though, all lenders get very nervous when an airplane’s TTAF approaches 10,000 hours. Loans on aircraft above 10,000 hours are difficult to come by.
Similarly, the higher the TSMOH on engines, or put another way, the closer they are to the recommended overhaul time, the lower the valuation will be when compared to similar aircraft in the local market. This brings up another data point used in valuations—prices of comparable aircraft recently sold in the local market. Popular models tend to garner higher valuations (think Cessna Skyhawk vs. Piper Tomahawk).
A third important aspect of aircraft valuation is the type of avionics package installed. Two aircraft of the same make and model—one with a conventional panel and the other with a full glass cockpit may have a significant difference in value.
Another determinant of value is the overall condition of the aircraft. The term “Condition” includes an evaluation of the interior and exterior of the aircraft. A typical valuation begins with the assumption that the aircraft is in good condition. If there has been recent work done on the interior or a recent paint job, some value may be added by these upgrades. The biggest impact on the value of paint and interior work is how recently it was done. If the work was done within a few weeks of the valuation, the amount added to the value is likely to be much greater than if the paint or interior is a few years old.
And just who does these aircraft valuations? As part of our process, AOPA Aviation Finance will complete a valuation on the aircraft included with a finance application. Lenders will also complete a valuation on the aircraft to confirm the lending value. These valuations are based on data provided by third-party valuation services and are often referred to as book values. Another option is a third-party appraisal, performed by a certified appraiser acceptable to the lender. Third-party appraisals will cost extra, and not all lenders will accept all appraisals. If you are looking for a third-party appraisal, it’s best to verify with the lender before spending the money.
Sellers, please note: You may have invested blood, sweat, and tears along with thousands of dollars improving or restoring your aircraft to better-than-new condition. The monumental effort in planning and executing a successful upgrade or restoration is not necessarily what adds value to the aircraft. When considering an aircraft for financing, lenders are primarily focused on the current times, equipment, and condition of the aircraft, not the journey they got the aircraft to where it is.
And remember, lenders will finance up to a maximum of 85% of the book/appraised value, or 85% of the purchase, whichever is less.
Do you have a question about aircraft financing? Our team has the answer for you! Submit your questions here. Great terms. Helpful and responsive reps. Those are the reasons to turn to AOPA Aviation Finance when buying an airplane. If you need a dependable financing source with people on your side, call 800.62.PLANE (75263) or click here to request a quote.
