Leasing equipment - what am I missing??
Thought I'd solicit some advice or words of wisdom from the wiser COW brains in here...
For the first time ever we are toying with the idea of leasing equipment. We have leased company vehicles many times in the past (just took delivery on one, in fact), but we have never leased equipment.
Here's the story...
We had been planning all along to get a new camera or two this year, specifically the Canon C300PL. When we were looking at a couple of vendors' websites yesterday, everyone seems to be linking to this lease offer that Canon has right now through the end of next month. They are basically offering a 24-month lease, with a $1 buyout at the end. They say it's a "0% Rate Lease" (yes, I know, you can't really put an APR rate on a lease, it's apples and oranges), but by that they mean the sum of the lease payments totals exactly the same as the purchase price of the cameras (in this case, $16,000 each for the bodies... the MSRP on them is $20K but everyone sells them for $16K)).
I would usually tell people "Don't lease anything, except vehicles under the right circumstances," but in this case I don't really see a downside to it. Is there one that I'm missing? It would seem that we could simply expense the monthly lease payments (not having to worry about depreciation on expensive items), avoid the sales taxes, and not have to hand over as big a pile of money all at once... and not spend any more total in the end.
Is this a good idea? Or am I missing something (highly likely)?
Fantastic Plastic Entertainment, Inc.
Can it pay for itself in 12 months? Then go for it. Do you not have a camera rental place nearby where you can rent it only as-meeded, just on a per-job basis? If not... Then the lease option seems to make sense to me, frees up a little cash flow for other needs.
We just did a large lease of gear thru a couple vendors and one of the items is the C300. This is my second lease. Did a 28 month lease with the $1 buyout. Have your lawyer double check the fine print. I got into a lease with specific requirements for ending the lease and it got painful. The new company I went with had clearer, simpler language and we went with them.
I say lease away!
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
Thanks, Rich, it sounded like a good idea to me, too, at first blush.
Yeah, I know you're big on rental, Mark... but it really doesn't work for us.
The nearest cine rental house is two hours from us in Nashville, and we don't have the luxury of knowing far enough in advance what we will always be doing at the drop of a hat. It's 2:35pm now, and I didn't think I'd be shooting today... but have just learned I might be later on this afternoon. Things like that happen here all the time.
We used to rent superspeed prime lenses from this same Nashville house, but quickly learned the disadvantages having to plan and schedule so carefully so we finally bought our own. I was always nervous about it, too, because they would ship them down the two-hour ride on a Greyhound and I'd pick them up at the bus station (which actually was convenient, two blocks from our studio). It would make me nervous though to show up and there would be this silver case on the loading dock, the contents of which were worth more than I paid for my first house... even with a convenient carry handle that anyone could have walked off with. We need gear that's available to grab next door in the studio all the time.
Can it pay for itself in 12 months? Who's to say? Technically it could probably pay for itself in a couple of months, but that's beside the point (and the one it's replacing has long since been paid off). There's more to it than financial value... there's bodily physical value, too. In addition to being better and easier to use, this new camera body weighs less than the battery on my present "A" camera. When you're approaching the half-century mark like I am, lugging around less weight has a value all its on.
Fantastic Plastic Entertainment, Inc.
I concur with your final statement all too well: the ENG cameras get smaller as I get older, right now, we're just about keeping even with each other.:-)
Yes, I'm big on renting, but my rule of thumb is, if you're going to rent it more than ten times in a year, you're better off owning it.
I've had two leases. My advice is to go with what your CPA says, it's too complicated for regular folks to understand what the best tax angles are. There have been situations where my CPA told me to just lay out the cash, other times he approved the lease option.
As my memory recalls, I believe in Illinois we can't avoid tax due to leasing. And although I had the proverbial "$1 Buy Out" there was an end fee of a couple of hundred bucks for some reason that I argued about but there it was in super small legalese. I see in your avatar you are using a director's viewfinder so you should be able to read the small print with it.
If you are leasing from the finance company that Canon or it's best retailers recommend, post a thread at this site and I bet you can get detailed reviews of them at:
Lastly, the Sony FS700 is $8000 less than the C300 and I don't think the clients can see the difference. Here in Chicago my competitors (who have more money than I do) are migrating to the FS700 if they did not buy into the F3 earlier. The FS700 is becoming the popular flavor now.
I think its encouraging for businesses to get a new lease on life with the prevalence of a low interest rate. A lot owners and start up companies are now exploring the leasing of equipment to improve their cash flow and reap the financial benefit of having equipment leasing for their businesses on a long term basis. There are a lot of reputable leasing companies who are up front and gives value to their clients. Times are evolving so i think they are worth your consideration
Wow, I've been "not an attorney" for so many years I'm equally unqualified to "not be an accountant." That said,
I don't think given the current tax incentives you even have to worry about depreciation. I'm pretty sure this year you can depreciate the entire cost of the camera bodies in the first year. But then I'm not an accountant. Ask yours.
I really like Rich's advise of reading the fine print and examining more than one lease option. I also agree that with a $1 buy-out at the end unless you think the camera will drop by half in street price the first year (been known to happen) you probably can't go wrong. Then again, even though it's in an entirely different class, the Black Magic cam is going to reek havoc with the mid market and may even have some effect on higher end stuff like the 300. Only those with a crystal ball can say for sure.