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Understanding Equipment Appraisal Values: What’s Right for Your Situation?

Posted May 7th, 2025 in Machinery & Equipment

Understanding Equipment Appraisal Values: What’s Right for Your Situation?

Many business owners only have a rough idea of what their machinery or equipment is truly worth. Yet, an accurate and credible valuation can be essential for a variety of scenarios — whether you're buying or selling equipment, seeking insurance coverage, applying for financing, settling legal matters, or managing assets.

At Lynx Machinery & Equipment Appraisals, we provide AIC Accredited Appraisals grounded in recognized industry methodologies. Our reports are accepted by lenders, courts, accountants, insurers, and financial institutions throughout Toronto and the Greater Toronto Area (GTA). And crucially, we help clients identify the right type of value for their situation.

Why Purpose Matters

The first step in any equipment appraisal is understanding why the valuation is being performed. The intended use will determine which type of value is most appropriate — and each one can differ significantly. Equipment can legitimately hold multiple, distinct values, depending on context.

Below is a breakdown of the most common types of values used in professional appraisals:

Common Equipment Appraisal Values

Fair Market Value (FMV)
The price at which an asset would sell between a willing buyer and seller, in an open and competitive market, with no pressure to act and both parties having full knowledge of the facts.
Used for: Business sales, mergers, financial reporting, tax planning, estate settlement.

Orderly Liquidation Value (OLV)
The estimated amount obtainable if the asset is sold under a forced-but-organized sale process, allowing for reasonable marketing time.
Used for: Insolvency planning, restructuring, asset-based lending.

Forced Liquidation Value (FLV)
Represents the likely selling price at a rapid auction or fire sale, with minimal time to market.
Used for: Bankruptcy, foreclosure, repossessions.

Replacement Cost New (RCN)
The cost to replace the equipment with a new item of similar utility using today’s prices and technology, without deducting for depreciation unless otherwise specified.
Used for: Insurance claims, capital budgeting, asset tracking.

Actual Cash Value (ACV)
RCN minus depreciation based on the asset’s age, usage, and remaining life.
Used for: Insurance purposes, internal evaluations.

Reproduction Cost New
The cost to create an exact replica of the item using modern materials and standards.
Used for: Historical or highly customized equipment evaluations.

Fair Market Value – Installed
FMV plus installation and setup costs necessary to place the asset into working condition.

Fair Market Value in Continued Use
FMV – Installed, plus the value attributable to the asset’s role in generating ongoing income.

How We Determine Value

Once the purpose and appropriate value type are identified, one or more of the following appraisal methodologies may be used:

  • Sales Comparison Approach
    Uses data from recent sales of comparable equipment, adjusted for differences in make, model, condition, age, and utility.
    Sources include dealers, manufacturers, online listings, and auctions.
  • Cost Approach
    Estimates the cost to replace the asset new, then deducts depreciation to reflect its current condition and remaining life.
    Often used when no active market exists, such as for custom or highly specialized equipment.

Income Approach
Evaluates the income-generating potential of the asset, particularly when the equipment plays a critical role in producing measurable revenue.
Used for income-producing equipment or business valuations.
 

Choosing the Right Value: Real-World Scenarios

  • Buying or selling used machinery? Fair Market Value or OLV may apply, depending on whether it’s a strategic transaction or a wind-down.
  • Insuring your assets? Replacement Cost New or Actual Cash Value is commonly used based on the insurer’s requirements.
  • Securing a loan? Lenders may prefer OLV or FLV to determine collateral strength.
  • Settling legal or tax matters? FMV is often required for estate, divorce, or tax purposes.
Let’s Talk — We’ll Guide You
At Lynx Appraisals, we don’t just deliver a number. We provide clear, defensible, and purpose-driven equipment valuations that stand up to scrutiny. Whether you're in Toronto, the GTA, or across Ontario, our certified appraisers will ensure your valuation reflects the right market context and value definition — every time.

Need clarity on the value of your equipment?
Get in touch. We’ll help you identify the right valuation approach — and provide a detailed, professional report you can rely on.