When it comes time to sell or buy an airplane, value is in the eye of the beholder.

The first set of eyes appraising the aircraft are the seller’s. The seller bases his/her asking price on their knowledge of every single aspect of care and maintenance they have invested in the plane during ownership. A second set of “beholder eyes” valuing an airplane’s worth is that of a potential lender.  A lender’s valuation perspective is most typically more fiscally conservative than that of the seller. It’s the result of a prescribed formula and errs to the side of caution. For example, only 50% credit is usually accorded for the retail value of the installed avionics, and installation labor is not given any considered value at all. Finally, the buyer’s eye is going to be tightly aligned to his/her wallet and as such is usually the most conservative for obvious reasons.

An airplane’s ultimate valuation, though, is the price for which it changes hands at closing. And that’s determined by the eyes of the market, making it the true value of the airplane (at that point in time).

The influence of market forces on airplane values cannot be underestimated. For instance, AOPA Aviation Finance (“AAF”) had a buyer who was very interested in a specific Cardinal RG. His lender performed its valuation of it, a figure which came up $20K lower than the seller’s asking price. Despite our best efforts, using standard aircraft digest valuation tools, when AAF entered the data into the formula it just didn’t justify the seller’s price. When the data was relayed to the buyer, he wanted us to intervene on his behalf with the seller and explain how we came to the number. We therefore agreed and explained to the seller how we derived at our valuation and that it is a formulaic process per our lender’s requirements, but also understand the markets and data are not always 100% efficient. The seller countered with his own very real-world evidence of value.

He pointed out that Cessna manufactured a limited number of Cardinal RG’s, which created a strong cult following status in the piston airplane world. He pointed out that few Cardinal RG’s on the market had a panel update equivalent to his. Last but not least, he pointed out that he’d already had five inquiries in the first week the airplane had been advertised. 

We were at an impasse. The valuations derived by both parties were justified on their individual merits, but individual merits weren’t going to get the deal done. While the lender agreed in theory that the airplane could have more real-world value inherent than the theoretical value it had derived, regulations, lending rules and the fiscally conservative nature of the institution were prohibiting the lender from making an exception without additional support. We suggested that the lender engage the services of a third-party appraiser to break the impasse.

At AOPA, we know that engaging an objective third-party appraiser is often times the best and only way to get people together to come to a mutual understanding. A third-party appraiser is a highly qualified entity or individual, well-trained in the job of deriving appropriate value from the lender’s numbers, the seller’s perception, and the reality of the market forces at play. Most importantly, their expertise is acceptable to lenders. They’ve got the ability to sign off in a way that’s credible to lenders.

Nine times out of ten, the appraiser will agree that the aircraft is in fact worth more than where the lender valued it. Subsequently, nine times out of ten, the lender will accept that higher valuation. We were able to secure the financing based upon the third-party appraiser’s valuation and got the deal done.

Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263) or click here to request a quote. 

Adam Meredith
Adam Meredith
President of AOPA Aviation Finance Company
Adam Meredith, the longtime president of AOPA Aviation Finance Co., died after a long battle with cancer in December 2023. He is remembered for his passion for helping fellow pilots, leading a team devoted to putting flight training and aircraft ownership within everyone’s reach.
Topics: AOPA Aviation Finance Co, AOPA Products and Services, Ownership

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