Economics of lens purchases

[Shadowman]

When I was referring to "depreciation", I was referring to how depreciation might apply to a business. There are several guidelines applicable to the depreciation of assets for Businesses in AUS and the correct one to use is based upon several factors, including, but not limited to: the size of the business; the type of asset; the cost of the asset.

My opinion, answering your question is: Yes. The general premise of most of the guidelines seems to be "a useful life".

However, introduced in about 2007 (I think) were "Simplified Guidelines" and in certain cases a (small) business might apply what appears to be a simplified formula of depreciation to (mostly) the majority of (small) assets.

It occurs to me that lenses and cameras are simply tools of trade for a professional photographer: and accordingly taking as an example two tools with a similar life expectancy, one might get less life out of one tool used more often and more robustly or in poor conditions than the other similar tool, used less often and in different conditions.

For example, let's say a photographer has two lenses: EF 24 to 70F/2.8L USM and EF24 to 105F/4 L USM. Let's also assume he shoots a lot of open water swimming - and for open water swimming he is ON the water in a small vessel and uses almost exclusively the 24 to 70 F/2.8 for that purpose.

On the other hand, let’s say he uses the 24 to 105F/4 mainly for indoor functions, such as meet and greet; prize-giving and awards nights.

Let’s assume each lens is “used” for about the same number of hours each year – but the 24 to 70 shoots three times as many frames as the 24 to 105.

Now whilst we might assume that both lenses have a similar life expectancy I don't think there’d be much problem depreciating the useful working life of the 24 to 70 at 24 months and for the 24 to 105 might be perhaps double that period.

I have no idea how the Taxation Laws with respect to Depreciation apply in the UK, (or any other parts of the world) I assume that for every country there will be different rules.

The preceding is not: accounting; taxation or business advice.

Does that answer your question?

WW

William,

Yes it does, and I was also referring to depreciation for business purposes. And along that line in the U.S., at least for buildings-useful life can be extended provided certain criteria are met (such as a new boiler wouldn't apply but a new roof might). And I was wondering also if this would apply to camera equipment also. For instance, I have a 70-300mm lens that had a five-year warranty. The lens began to malfunction in year four. I sent it in for repair, much work was done on the lens. So does this repair increase its useful life or does it just merely return it to a good working condition and the original useful life remains the same?

Thanks

[Ken MT]

In NZ business tax laws, hand held cameras and camera equipment are expected to last 5 years, The diminishing value depreciation for business is 40%, while for straight line depreciation it is 30%. On the other hand chainsaws used by professionals are expected to last one year!

The repairs would be tax deductible, on the other hand any profit between the depreciated price and the sale price would be taxable. Any profit between the purchase price and the sale price would be capital gain, and presently not taxable, unless buying and selling is seen as a business

[jacobsmith]

Very good point but i always buy refurbished products to save money with great discount and you know i always got good camera's they still are working good. I believe in Overrunz Daily Deal Site which offers USA Daily Electronic Deals with great discount prices.

[Adrian]

In the UK, depreciation is irrelevant, it is added back for tax purposes (disallowed) and replaced by capital allowances.

Certainly in the UK (to address an earlier point) eBay prices on L glass remain very strong. For example, the typical price of a used 100mm L macro is around £550. A new grey import, with guarantee and no duty risk, is about £630. Would you rather have a brand new lens for an £80 premium?

In the last 6 weeks I have watched 10 of these lenses sell in the range of £530 to £570 on eBay. I actually bought one for £430 (boxed, with hood etc and immaculate). It was that price because the seller listed it to end mid-morning, hence sniper activity was at a low. So "bargains" can be had, but unusually.

There are a lot of photographers in the UK and eBay delivers significant liquidity to the market, hence if you are looking for a popular lens there are plenty around. I have lately been watching prices on a Canon 85mm L mk II as I want one for work (I already own one privately). Incredibly eBay prices have at times gone slightly above UK grey market prices for a new one.

Personally I would not have a problem buying a used lens from a seller with excellent feedback, as long as it was stated as immaculate, boxed etc and if I was paying at or ideally below market price. I could sell my 100mm L macro for about £550 which delivers a profit of about £50 after transaction costs. Cost of ownership is therefore in effect practically zero if I use it for say a year (as long as I have the cash to fund it in the first place).


This can actually be cheaper and much more flexible than renting lenses as long as you have the cash "deposit".

[rpcrowe]

There is another consideration in purchasing a used Sigma lens. Although, I believe, that present issue, Canon mount, Sigmas are up-gradable via the Internet; this was not always the case with Sigma lenses.

I have a 28mm f/1.8 Sigma which I purchased to use with my first digital camera, a Canon 10D. When I started using a later Canon (30D), I learned that my 28mm lens was not compatible because of the Sigma practice of "reverse engineering". I attempted to send the lens back to Sigma to be re-chipped for the 30D only to learn that Sigma could not of would not re-chip the lens. This is because Sigma had replaced the lens with a new model and would not support the older lens.

Luckily I had purchased the lens used so I was not out a big sum of money and also lucky in that I have an old Canon D60 (not 60D) Canon DSLR which I have converted for full-time infra-red photography. The 28mm works on that camera since it was the DSLR Canon offered just prior to the 10D. I am happy that I can still get some use out of this lens because it is eally a nice piece of glass...

OTOH, I have a Canon EF 135mm f/2.8 Soft-Focus lens which was among the first issue of auto-focus Canon EF glass. That lens interfaces with my newest cameras (7D) just fine. I also have an older model Tamron 90mm f/2.8 AF SP lens which also works just fine on my 7D.

[tclune]

The notion of a lens "holding its value" seems considerably more nuanced than expressed in this thread so far. I am sure that I am not alone in being unwilling to buy or sell camera equipment direct to strangers. So, for me, the actual resale value is massively less (as are the risks of being swindled). Typically, the resale value through a reputable store seems to be about half the amount that the store will resell the lens for. I honestly have no idea of how to amortize the cost of fraud in buying and selling to strangers. I assume that the amount that a store discounts the sale item more than covers its costs, but by how much I can't estimate. And I would add that being swindled out of a professional lens would be a huge cost to me, even if it were statistically rare. Given the few times that I have sold equipment, a single incident would be a very big deal.

Taken overall, my assessment is that resale value is really not an important part of my buying decision. I'll buy the best lens for the intended purpose that fits my budget, and not give any thought to the cost of resale. If I am selling another lens as part of the acquisition, better resale may mean that I can get a somewhat better lens because my total available cash is higher, but I would never bother counting my chickens before they hatch on what I would get in the distant future when I resell the lens (assuming it isn't lost, stolen, or broken by that time.)

[Adrian]

Interesting perspective from the risk averse end of the spectrum. I fully understand that some people are wary of buying or selling used goods. eBay (for example) has some useful protections, but although I have a trader mentality, I prefer not to rely on them. However, risk can be mitigated substantially as a buyer by collecting good in person, inspecting them and paying in cash. I would always do this for very high value goods or with any seller who did not have excellent and significant feedback.

Seller risk is quite easily mitigated by selling as seen and only releasing the goods when irrevocably cleared funds are in your bank account. (In this context I am not a fan of paypal at all!)

The purpose of the thread was merely to suggest that the used market can be useful to people prepared to accept a certain degree of risk in exchange for a significant saving against new prices.

(as an incidental aside, I have just watched a used 2X Canon Mk II extender sell for about £260 including postage). A grey market brand new Mk III can be had for only about £40 more.)

[xpatUSA]

. . . Clearly you have to fund [lenses] in some way it as the initial outlay is quite high, but the economics of ownership make sense to me (I never borrow money).

This does not hold true for the Tamrons and Sigmas though. If eBay pricing is used as a guide, depreciation is heavy (circa 40% in a year). This usually outweighs the cost of ownership of the OEM lenses.

Adrian

By bringing economics into the equation, I suppose it becomes a question of Return on Investment (shortened down to ROI in the USA to keep outsiders guessing, not unlike the mention of an "L lens", just kidding).

If Adrian is a Pro then ROI might be a guide as to what lens to buy. If not, then it's a straight cost consideration. I've had some success with used lenses on eBay, flipping them if desired for sometimes a profit, sometimes not. Researching the eBay market is easy enough with appropriate queries filtered by "Completed Listings" followed by a calculation of the average or (better) the median price. This is what I do for pricing watches anyway.

Yesterday, I was looking at Leica 45mm Elmarit macro lenses for micro-four-thirds (or, to confuse UK motorists, M43). I had bought one last year and sold it at a slight loss. Then recently, I fancied another one(as we do). When I bought and sold before, the median was about $450 US. Now I see it's quite a bit more! Should have kept it

[Adrian]

No, I'm not a pro. (Not photography anyway). I'm in the financial derivatives business. Cameras are just a hobby, but as I can't help looking at practically everything as a potential trade I buy used gear with half an eye on what I can flip it for if it turns out I don't like it. Profitable trading is how I have been encouraging my son to build up his kit (quantum and quality) so it is also part of his early business education. I am not sentimental about gear at all: just tools and everything is potentially for sale if cash value exceeds function. ROI is irrelevant to me for hobby gear as there is no investment component: my idea of an investment return is 50-100%!

An interesting idea actually might be a sale / lend / swap section on this forum for members who pass some sort of credibility criteria?

Adrian

[xpatUSA]

No, I'm not a pro. (Not photography anyway). I'm in the financial derivatives business. ROI is irrelevant to me for hobby gear as there is no investment component: my idea of an investment return is 50-100%!

An interesting idea actually might be a sale / lend / swap section on this forum for members who pass some sort of credibility criteria?

Adrian

Good for you, Adrian!

I've made more dinero betting on the S&P 500 than anything else!

And passing "some sort of credibility criteria" as opposed to "some sort of credibility criterion" is perhaps all we need to bring us into a new era of acceptability.

Keep up the good work!

[William W]

William,

Yes it does, and I was also referring to depreciation for business purposes. And along that line in the U.S., at least for buildings-useful life can be extended provided certain criteria are met (such as a new boiler wouldn't apply but a new roof might). And I was wondering also if this would apply to camera equipment also. For instance, I have a 70-300mm lens that had a five-year warranty. The lens began to malfunction in year four. I sent it in for repair, much work was done on the lens. So does this repair increase its useful life or does it just merely return it to a good working condition and the original useful life remains the same?

Thanks

Firstly I am sorry for not answering: it's only just now I noticed this reply was another question - I missed it earlier.

To answer your question - as I understand the laws to be in AUS: if the lens were set to be depreciated over the 5 year period (sensible if it had a 5 year warranty) then if it malfunctioned and was sent to repair, that repair would have no affect on the business's depreciation plan EXCEPT if the lens were written off - which would also probably be sensible to do if it went in for repair at year 4.

So the "useful life" is not really "the actual useful life as it turns out" - the depreciation is set on the ledger from the date of purchase as "it is expected to be the useful life" it is too fiddly and not necessary to change the ledger entries, unless the item is either: 'written off beyond sensible repair'; 'lost or stolen' or 'sold' (usually at the depreciated value), before expected end date of it expected "useful life".

Sorry again for not noticing the question - hope you still have an alert on the replies.

WW

[Shadowman]

Firstly I am sorry for not answering: it's only just now I noticed this reply was another question - I missed it earlier.

To answer your question - as I understand the laws to be in AUS: if the lens were set to be depreciated over the 5 year period (sensible if it had a 5 year warranty) then if it malfunctioned and was sent to repair, that repair would have no affect on the business's depreciation plan EXCEPT if the lens were written off - which would also probably be sensible to do if it went in for repair at year 4.

So the "useful life" is not really "the actual useful life as it turns out" - the depreciation is set on the ledger from the date of purchase as "it is expected to be the useful life" it is too fiddly and not necessary to change the ledger entries, unless the item is either: 'written off beyond sensible repair'; 'lost or stolen' or 'sold' (usually at the depreciated value), before expected end date of it expected "useful life".

Sorry again for not noticing the question - hope you still have an alert on the replies.

WW

Reply received, thank you for following up.

[William W]

good, thanks.


ASIDE:The email alerts at CiC cease until one logs back in (i.e. you don't get one for EVERY new post) - I have missed posts at the end of the last page before, when a new page has started, but I don't know how I missed yours at the top of page 2.

Is there anyone else who prefers an alert for every new post - or am I in the minority? Should I start a new thread asking that question? Is it possible / easy to configure?

On another (un-named) forum, I have always read (ALL) the new posts to a thread in which I am interested, via my email inbox: that saves me a lot of fiddling going in and out of the forum and saves a helluva lot of time.

WW

[Shadowman]

good, thanks.


ASIDE:The email alerts at CiC cease until one logs back in (i.e. you don't get one for EVERY new post) - I have missed posts at the end of the last page before, when a new page has started, but I don't know how I missed yours at the top of page 2.

Is there anyone else who prefers an alert for every new post - or am I in the minority? Should I start a new thread asking that question? Is it possible / easy to configure?

On another (un-named) forum, I have always read (ALL) the new posts to a thread in which I am interested, via my email inbox: that saves me a lot of fiddling going in and out of the forum and saves a helluva lot of time.

WW

The moderators might catch it more quickly in the Community Lounge.

[William W]

Thanks - will do.