Equipment appraisals for lessors and lessees.
A lease appraisal from Lukes & Lukes is an independent, USPAP-compliant opinion of value prepared for a decision the lease document already defines: an end-of-term purchase option, a residual, a return condition, an early buyout, or collateral coming back after a default. We appraise to the definition of value the lease itself sets, on the effective date it names, for the parties it names.
Which value applies
The lease defines the value, not the market convention.
Most equipment leases that end in a purchase option define the value to be determined in their own words, and that definition governs the assignment. Some specify fair market value in place and in use, valuing the assets installed and operating where they sit. Some assume the equipment comes out, which is a different premise and a materially different total on anything installed.
So the first document in a lease file is the lease, including its schedules and amendments, because the operative language often sits in a schedule rather than the body. We read it before the inspection is scheduled, confirm the premise and the effective date in the engagement, and apply any condition the clause directs as a stated assumption rather than a silent one.
- Fair Market Value (FMV): the usual premise for an end-of-term purchase option, read as the lease defines it
- FMV in place and in use: installed and operating, including the freight, rigging and installation behind it
- FMV removed: the assets assumed out of the building, which is what a return or redeployment assumes
- Residual value: the forward-looking estimate a lessor books at origination or reviews mid-term
- Orderly and forced liquidation value: for equipment recovered after a default
- Stated assumptions: where the clause directs an assumed condition, it is labeled as a hypothetical condition, not buried
What we are asked for
The moments a lease needs a value.
- End-of-term purchase option: the option price under a fair market value clause, set by appraisal rather than negotiation
- Appraisal procedure and third appraiser: where each side appointed an appraiser and the clause calls for a third
- Residual setting and portfolio review: the forward estimate at origination, and the mid-term look at whether it still holds
- Return condition and end-of-lease disputes: what the equipment is worth as returned against the standard the lease required
- Early buyout and lease restructure: a value as of a date inside the term
- Default and repossession: what recovered collateral realizes, on an orderly or forced premise
- Sale-leaseback: the value of assets a company is selling and leasing back
What you get
A file that survives the counterparty.
A lease appraisal is read by someone who wanted a different answer. You receive a complete report, not a printout: a written narrative of scope and methodology, an itemized appendix valuing each asset at the serial-number level, photographs from inspection, and the lease language the conclusion was built to.
- The lease's own definition of value quoted and applied, not a generic one substituted for it
- Every extraordinary assumption and hypothetical condition labeled
- Cost, market and income approaches applied by a certified appraiser, not a database
- Independent senior review on every report
- Independence stated plainly, whether we are party-appointed or appointed as the third appraiser
Where this connects
A lease touches more than one value.
The same assets under the same lease can need a different premise depending on who is asking and why. Here is the related work a lease file tends to involve.
Who orders it
Both sides of the lease, and the third appraiser.
Lessors and equipment finance companies order lease appraisals to set and test residuals, to price an end-of-term option, and to value collateral recovered after a default. Bank leasing arms order them for the same reasons with a credit file behind the request.
Lessees order them to know what an option is actually worth before they exercise it, and to test a lessor's figure. Counsel on either side orders them when an end-of-term position has to be defended. We are also appointed as the third appraiser under an appraisal procedure, engaged by both parties or by the two appraisers jointly.
What we need to start
Five things.
- The lease, with its schedules and amendments
- The equipment schedule, with serial numbers and locations
- The option notice and the dates driving the timetable
- Maintenance and service records, where the clause ties value to a maintenance standard
- Site access, and who arranges it
Common questions
Answers, up front.
How is a residual different from an appraisal at end of term?
A residual is a forward-looking estimate made at origination or reviewed mid-term: what the lessor expects the equipment to be worth at a future date, used to structure the lease. An end-of-term appraisal is a current opinion of value on an effective date that has arrived, built on the equipment as it actually is and on market evidence that now exists. Lessors use us for both, and they are separate assignments with separate scopes.
Can you appraise equipment that has already been repossessed?
Yes, and that is a different premise from an option value. Recovered collateral is normally valued on an orderly or forced liquidation basis, because the lessor is selling into a market rather than continuing an operation. Where the assets have been pulled and consolidated, the report says where they were inspected and what condition the removal left them in.
Do you appraise a portfolio of leases, or only single schedules?
Both. A portfolio review looks across schedules at concentration by asset class, age and region, and reports where the booked residuals sit against current market evidence. Individual schedules that drive a decision still get valued at the serial-number level rather than modeled from the portfolio.
What about equipment leased inside a sale-leaseback?
A sale-leaseback needs a value for the assets the company is selling, and that is an ordinary fair market value assignment with the premise set by what happens to the equipment afterwards. Since the assets keep running in place under the same operation, the value normally reflects an installed, in-use context, and the report states that plainly.
Are you independent if one party is paying for the report?
Yes. Who pays does not change the conclusion, and USPAP prohibits accepting an assignment on a value contingent on a result. A party-appointed appraiser reaches their own supported opinion, and a third appraiser under an appraisal procedure is appointed by both sides or by the two appraisers together. The file records which role applied.