When you decide to finance or refinance a piece of equipment you may be required to have it valued as part of the terms of the loan.

Formal valuations are not required in every instance. For example, if you’re buying from a dealership or a registered equipment sales company, their invoices are seen to be fair market value, so a valuation is not necessary.

However, if you’re buying privately or refinancing an existing loan, a valuation is usually needed.

Funders differ in their requirements – banks usually want formal valuations, whereas some finance companies have internal valuation options. Either way, it’s often dependent on the loan-to-value ratio (LVR) of the asset (how much of the machine’s value are you borrowing); the age of the gear – or more importantly, how many kilometres has it done or hours it has worked; and the type and location of the asset.

Some funders will also specify the valuation is to be undertaken by an approved valuer.

If your financier does require a formal valuation, the equipment will need to be inspected. They will look at the age and condition of the asset, its serial number and model, and check its hours or kilometres (whichever is appropriate), and so on, to help determine an accurate market value for it.

If you are looking to buy or refinance an older machine, talk through the process and its requirements with your business partner at Finance New Zealand.