Should you rent or own your equipment?

In the indie film world there has always been a debate over whether its better to rent or buy equipment for your production. Given the same amount of money, you can usually get much better equipment (and theoretically better production value). On the other hand, if you buy your equipment, at the end of the day you still have that equipment left over. You could use that equipment on your next production, and spread the costs out over two, three, or however many productions you make. Its an interesting quandary, which in this article I’ll show you how to solve…

In economics, there is a classical problem called the view point problem. Imagine you manage the technology department in some random large company. Inside your same company is the copy department. They charge you 25 cents for every copy you make. But the copy place down the road charges you 15 cents. You make a million copies a month. Being the brilliant manager you are, you start sending your people down the road to make copies, saving your department $100,000 a month.

The problem is that your view point is centered from inside your department only. When you look at the whole company, those copies only cost the company 10 cents itself. The rest of that 15 cents is staying inside the company…its just changing hands. By switching to the place down the road, you aren’t saving $100,000 your losing $150,000.

When it comes to film equipment, the problem sorta works in reverse. If you buy film equipment you see yourself as spending X amount of dollars on your company as a whole, but in return you make the mental leap that it isn’t costing the production anything…after all, you still have the equipment after your done right?

Returning to our copy department example above, you’ve essentially ignored the fact that the copy department still costs 10 cents a copy. You’ve said, “Well, I’m keeping it inside the company so its essentially free”. If we change the numbers a bit…lets pretend that copy machine really does cost the company 25 cents per copy. Meaning when you make a million copies there the total cost to the company is $250,000. At this point you’d be crazy not to go down the street where it costs 15 cents a copy.

So in order to make any real judgment as to whether buying is better than renting, what we need is an accurate estimate of how much using a piece of equipment really costs the production. But how do you do that?

How much does rental equipment cost?
Well, this is easy. Just find a quote and use it. Rental equipment is usually listed by the day, but remember many companies will work on a 2 day, 3 day week. This means you pay for X days, but you get it the whole week. Zacuto is a good resource for pricing, and it lists prices by week and even by month rather than doing the sometimes confusing 3 day week deal. Simply figure out how long your production will take, and estimate your costs.

How much does my own equipment REALLY cost?
The much harder thing to figure out is how much the equipment you own really costs. Remember, regardless of whether or not you’re producing anything, your equipment is still costing you money. So, we need some sort of device to figure out what equipment really costs. Fortunately, our friends in accounting have come up with a perfectly useful device - depreciation.

Depreciation is the accountant’s way of showing that over time things wear down, and become less valuable. There are several different ways depreciation can be done, but for our purposes we’re going to use the simplest method - straight line depreciation.

Straight line depreciation explained
It’s very easy to figure out straight line depreciation. Just estimate how long something will last (or how long it takes before its obsolete), then divide its price by that length of time. Here’s an example:

One 3-chip digital camera: $5000
All the bells and whistles, extra batteries, etc: $2500
Life expetency: 60 months

Cost: $125 / month.

Easy right? Well not quite. There may be additional costs you have to figure in, such as interest. But for simplicities sake, lets just pretend you bought it cash (economists forgive me if I don’t feel like doing some insanely long ROI benefit vs. risk analysis). Even without interest we still have to factor in the fact that the camera is costing us money even when we aren’t using it. A side note: If you did finance your equipment, rather than figuring out the depreciation of your equipment, you could simply take your monthly note as your cost.

So we have to make some way to figure out how the additional down time costs factor in, so that we can reach our ultimate goal of comparing renting to buying. The easiest way I can think of to do this is to include all time from the beginning to one production, until the beginning of the next. Let me give an example to clear it up:

RENT
One 3-chip camera: 100/day
Number of days: 6
total cost: 600

Very straight forward. But now lets say we do that same exact project

BUY
Straight line depreciation or monthly note: 125/month

If from the start of one production to the next is 3 months apart, then renting costs you $600, while buying costs you $375. Buying is cheaper using this example. If you take 5 months between productions, buying cost you $635…it would be cheaper to rent.

In fact, this example leads to a pretty simple formula.

Cost to rent / Cost to buy per month = # Months between productions.

Meaning that if the real number of months between productions is greater than the number from this formula, you should be renting. If you shoot more often than this number, then you should buy equipment.

Special Considerations

When you rent equipment, you usually rent just what you need for the production you intend to do. When you buy equipment, you tend to buy everything you can afford that you intend to use. When doing this calculation, you cannot factor out the equipment you buy, but do not use. For example, just because you do a music video where you don’t capture field sound, you still have to count your field sound equipment in your ‘cost per month’ of buying.

Practical situations
The above example is far from the real world situation. In the real world, you may be looking at buying more than $30,000 in equipment, versus paying $1800/day for equipment worth $120,000 plus. In addition, your needs may change long before the useful life of your equipment runs out. This year you may buy and HVX, and by next year you’ll need a Varicam, or even be shooting on 35mm film.

In the practical sense, my honest opinion is that unless you are shooting every month, doing commercials or other paid ventures, buying is probably not in your best interest. But everyone is different. Perhaps you are planning on shooting a web series, and even though you aren’t making money with your camera directly, you will be shooting two days out of every week. But using the formula I’ve presented, and adapting it to your own situation, you should now know whether renting or buying is better for you.