Updated October 22, 2026
Quick answer
A lender values your excavator at what it would bring at auction - usually forced or orderly liquidation value, not what you paid or a dealer's asking price - then advances a share of that, typically in the range of 50-80%. Engine hours, undercarriage wear, brand, emissions tier and service records move the valuation more than anything about your business.
Three Numbers, and the Lender Uses the Lowest
Owners usually start from the purchase price or a listing for a similar machine. A lender starts somewhere else entirely: what it could recover if it had to sell the machine without you.
| Value | What it means | Used for lending? |
|---|---|---|
| Retail / dealer asking | A reconditioned machine on a lot, often with a warranty | No - the highest and least relevant |
| Fair market value | A willing buyer and seller, no pressure | Sometimes as a reference |
| Orderly liquidation (OLV) | Sold over a reasonable marketing window | Common on larger or newer units |
| Forced liquidation (FLV) | Sold quickly, typically at auction | The conservative basis many lenders price to |
The advance is then a percentage of the liquidation figure, which is why the first number an owner hears is almost always lower than expected. Our guide to orderly versus forced liquidation value explains the gap in detail.
Hours Matter More Than Age
On a truck, mileage and model year drive value. On construction equipment the equivalent is the hour meter. A five-year-old excavator with low hours can be worth more than a three-year-old unit that has run double shifts.
What a lender and appraiser look at alongside the hours:
- Whether the hours are believable. A meter that reads low against visible wear, or a replaced meter with no record, pushes the valuation down rather than up.
- Major component history. A documented engine or hydraulic pump rebuild changes the picture on a high-hour machine.
- How the hours were earned. Demolition, quarry and forestry work wears a machine faster than general site work, and appraisers look for it.
Undercarriage, Brand and Attachments
Three things that rarely matter on a truck matter a great deal on yellow iron:
- Undercarriage condition. On tracked excavators and dozers, tracks, rollers, idlers and sprockets wear out and are expensive to replace. Appraisers estimate remaining undercarriage life as a percentage, and a worn undercarriage comes straight off the value.
- Brand and dealer support. Machines from makers with deep dealer networks and parts availability resell faster, and a lender prices the depth of the buyer pool, not the brand name.
- Attachments. Buckets, thumbs, hammers and quick couplers add value when they are common and match the machine; specialised attachments add less than they cost.
Emissions Tier and Where the Machine Can Be Sold
Diesel engines in off-road equipment are built to federal emissions tiers. Newer Tier 4 Final machines sell into every market; older tiers can face a narrower buyer pool. In California, the Air Resources Board's in-use off-road diesel fleet rules limit how long older engines can stay in service in covered fleets, which affects who will buy an older machine there.
A lender cares because a narrower buyer pool means a lower, slower recovery if it ever has to sell. Two otherwise identical machines can be valued differently because of the engine tier alone.
What You Can Do Before the Valuation
You cannot change the hours, but you can change how much of the machine's real value is visible:
- Pull the service records - oil analysis, dealer invoices, component rebuilds.
- Photograph it properly - hour meter, serial plate, undercarriage from both sides, bucket and attachments, cab.
- Fix the cheap, visible things - leaks, broken glass and missing guards cost little and drag a valuation.
- Know what is owed. Anything still financed comes off the top; see borrowing against equipment you are still paying off.
For the formal side - who can sign an appraisal a lender will accept - see who can appraise business equipment.
A Worked Example
Illustrative arithmetic, not a quote. A mid-size tracked excavator, owned outright; the owner's estimate comes from a recent listing for a similar unit, and both liquidation values from an appraisal:
| Step | Figure |
|---|---|
| Owner's estimate | $165,000 |
| Orderly liquidation value | $118,000 |
| Forced liquidation value | $96,000 |
| Advance at 65% of FLV | $62,400 |
| Less closing costs | Varies |
The owner expected to borrow against $165,000. The lender is lending against $96,000. Knowing that before you build a plan around the money saves weeks.
Frequently Asked Questions
Do lenders use what I paid for the machine?
No. They use what it would bring if sold - usually forced or orderly liquidation value - and then advance a percentage of that. Purchase price and dealer listings are not part of the calculation.
How much of the value will a lender advance?
Advances against forced liquidation value commonly fall in the range of roughly 50-80%, depending on the machine, its condition, how quickly it would sell, and the business's ability to repay.
Do high hours rule a machine out?
Not on their own. High hours lower the value, but a well-maintained machine with documented rebuilds and a strong resale market can still support a meaningful advance.
Does the undercarriage really matter that much?
On tracked machines, yes. Undercarriage replacement is one of the largest repair costs on an excavator or dozer, so appraisers estimate the remaining life and adjust the value for it.
Do I need a formal appraisal?
For larger loans, usually. Smaller deals may rely on a desktop valuation from photos, serials and auction data; larger ones often require an on-site inspection by a credentialed appraiser.
Sources & Further Reading
- American Society of Appraisers — The professional body that credentials machinery and equipment appraisers.
- The Appraisal Foundation — Publisher of the Uniform Standards of Professional Appraisal Practice (USPAP) that credentialed appraisers work under.
- California Air Resources Board: In-Use Off-Road Diesel-Fueled Fleets — California's rules on older off-road diesel engines, which narrow the buyer pool for older-tier machines.
Figures above describe ranges commonly seen across lenders and reflect published guidance as of the date on this page. Confirm current terms with the cited source or your lender before acting.