This camera is really fantastic and a nice upgrade from the LX3. That's not to say that everyone should upgrade, but I think there are some significant advantages.
For me, I really needed the additional zoom and was very excited to hear that this is exactly what the LX5 had, without sacrificing the f2.0 lens. My brother needed a new camera anyway and was happy to get my 2 year old LX3. (By the way that camera is in nearly perfect condition. Panasonic really build a quality product with the LX line and I think the LX5 is even better.)
Here are the major comparisons to the LX3. Decide if these are worth it to you:
Better image stabilization. I am getting crisp photos at speeds as low as 1/10sec.
Better sensor than the LX3. The colors are slightly more accurate and the auto white balance works better (I need to make less adjustments).
Better low-light shooting. Perfectly usable up to 1600 out of the camera. Shots in ISO 3200-6400 can be used with some photoshopping. ISO 12800 won't be very good, but nice to have if you don't care about quality and just need a quick shot in the dark. With the LX3 I was getting usable shots at ISO 800.
Faster autofocusing.
Face detection.
Autofocus tracking!
Better processor. Faster startup and shot-to-shot time.
Better battery life... this camera lasts almost twice as long!! And I always thought the battery life on the LX3 was already outstanding. I'm going on a weekend trip soon and feel confident that this will last the entire weekend without needing a charge.
As mentioned, the added zoom is terrific. It's interesting to note that the overall size of the camera has remained roughly the same as the LX3 despite the upgrade.
Easier to get into the film mode with the dedicated movie button. I've tested this a few times and it's very useful for quick recording.
Better quality video. Uses the newer avchd codec, but you can always record in motion jpeg.
More comfortable to hold and better build quality.
Hot shoe, but I don't see this as a benefit to myself. The option to add an EVF or flash is nice, but defeats the purpose of keeping this camera compact. At that point you may as well get an SLR.
Better control with the GF1 style click wheel on the back. Seriously, this is the best PaS camera in terms of usability. You literally forget about the controls. Really well thought out. The menus are similar to the LX3 and "just work". Really a nice interface and plenty of options to tweak.
Improved screen. Looks better in the bright Singapore sun than my LX3 ever did. Wish it had more pixel density, but still looks great.
Added 1:1 square format is really neat. Not a major addition, but nice to have. I really like that the LX-series has a dedicated image ratio button. Very useful and unique. (note: the LX3 has 1:1 ratio as well, with the latest firmware, but the LX5 has a dedicated hardware button for it).
Complaints:
The lens cover needs to be built in. I really don't mind the one it comes with much, but there were lots of complaints about the lens cover on the LX3. Not sure why Panasonic chose to ignore these. I would definitely prefer not to worry about losing the lens cover.
Should be a better panorama mode. I think sony's "Sweeping panorama" feature is fantastic. Panasonic should adopt something similar if they can. The current mode works fine, but could be improved.
Wish list for the "LX6":
Larger sensor, like m4/3.
Brighter lens, F1.7 or lower would be nice :)
Built in EVF!
Articulating screen.
Built in lens cover.
Weather sealed to make it even more durable against splashes and dust.
Manual focus/zoom wheel that can be programmed like the canon S90/95.
I think adding these would make for a nearly perfect PaS.
Other cameras to consider:
Canon S95: I tried this camera out the other day and it's not as good as the LX5 in many ways, but does have a few advantages. Image quality on the S90 was not as good as the LX3/LX5. The LX cams are also wider at 24mm (I think the canons are 28mm). The jog dial on the back of the S95 is cool but since the camera is so small I found myself hitting it accidentally a few times and changing the settings. Can be kind of annoying, especially if you want to take a quick shot. The LX5 is also much nicer to hold and easier to dive into the menus as a result of the control placement. But to be fair, the Canon does start at a lower price point and is smaller. Assuming size and price are more important to you, I would say it makes for a fine choice. It's still better than most other cameras out there and also has an f2.0 lens. The addition of 720p on the S95 is nice as well (but doesn't allow for an AVCHD format, zooming while recording or continuous autofocus like the LX5). Also, having a programmable front selection wheel on the S95 is really smart and useful.
Canon G11: Not a big fan of this camera as it uses the same sensor as the Canon S90 and doesn't use as fast a lens. Lacks HD video recording and is more expensive. It's also larger and bulkier than the LX5. Overall I just don't feel like it is a strong competitor. The G12 will probably be something better to compare against the LX5 or any of the other cameras mentioned here. To the G11's credit, it does have an articulating screen and a view finder which is nice.
Canon G12: The G12 has since been announced and while it's surely seems like a nice camera I still think it's rather large and didn't add too many features to make it a good competitor to the LX5. It's probably still built like a tank, adds HD recording, but the lens isn't really that impressive to me. The LX5 matches it's zoom capabilities, but with a brighter/wider lense.
Olympus EP-L1: This camera is also a worthy competitor and has the benefits of a larger sensor and interchangeable lens. However, the build quality is not as good, the lens that comes with the EP-L1 isn't very impressive and it's a bit larger. You will need to spend some serious money on the 20mm f1.8 lens which makes this purchase almost twice that of the LX5. If you are okay with the kit lens this is a great bargain for just slightly more than the LX5.
Pansonic GF1: This was the most difficult decision to make for me. Relatively speaking, the GF1 costs slightly more than the LX5, but comes with a better lens (20mm f1.8) and is m4/3 like the EP-L1. While the 20mm kit the GF1 does take noticeably better pictures, I still ended up choosing the LX5. Why? The LX5 is still cheaper (the price difference does matter to me, it might not to you), has image stabilization (the GF1 does not) and it's substantially smaller. I like the GF1 and think it is tiny compared to traditional digital SLRs, but it's still not as convenient as a compact PaS like the LX5. Basically, I see myself taking the LX5 to more places and using it more in general. I think that beats out the image quality edge that the GF1 has.
Ricoh GR Digital III: Looks interesting and has a nice spec'd 28mm f1.9 lens, but is fixed (no zoom) and has no HD video recording. I didn't test this because I need zoom and HD recording, and it's also larger and a good amount more expensive than the LX5. I've heard the menu system on the Ricoh's is one of the best to use, but it seems to be targeted at a very niche audience.
Samsung TL500: Was really impressed and seriously considered this camera because I read about it having a f1.8 lens at 24mm! And it has a nice articulating AMOLED screen. I played with the camera a bit and was impressed, but it's larger than the LX5, doesn't have as good a zoom range and about 1/2 the battery life. I've also examined the TL500 image samples on the web and don't think they are good as the LX5. Low light performance is a little less impressive, but the LX5 just produces more crisp images with better colors IMO. This is comparing jpg's straight out of the camera, not RAW files. Lastly, there is no HD video recording (only does 480p). The price on this camera is great though and it looks and feels like it will last a LONG time. Great design here by samsung.
Sony NEX3/5: Gorgeous cameras for sure. First I've seen that come with a metal kit lens. This oozes quality and I really wanted to like these cameras. With the pancake lens they are fairly tiny and remember they use a full size APS-C sensor. Also, the NEX3 is not much more expensive than an LX5. I didn't purchase either for a few reasons. First, the flash isn't built in. You need to screw it on, which is annoying because it doesn't go on easily. It took me a few tries to get the threading to interlock. I don't take off too many points for this, because you can just leave the flash attached all the time. The biggest problem I have is the manual functionality and the firmware in general is lacking and isn't very fluid. This is also partially a result of the sparse manual controls the cameras have. It's hard to adjust any settings and really seems to be designed for users who want to just use the auto mode. This is completely OK, just not the camera for me. If you purchase this camera and intend to use the manual functionality (and don't mind digging around the menu a bit) I'm confident this camera will give you excellent results. You also get the great Sony "sweep" panorama mode I wish Panasonic would implement. And let's not forget the useful tilt screen. Out of the two, the NEX3 (the NEX5 adds 1080p video) is probably the most direct competitor to the LX5 in terms of price and could be a good choice for many people. Like I said, I really wanted to like these cameras, but the controls and software feel a bit like a rush job.
Conclusion:
After weighing the LX5 against the competition I think overall it's the most balanced camera out there and a worthy successor to the classic LX3.
If you're willing to sacrifice some features and IQ, but need a cheaper camera with a fast lens and with smaller size go for the Canon S90/95.
The LX3 still competes with most of the cameras mentioned and is a terrific bargain. I'd definitely recommend looking into getting one if you're a bit tight on cash, but want a great camera that will last years and years.
If you don't mind being able to record video and are willing to sacrifice some IQ look at the Samsung TL500, it has even faster glass than the LX5 and offers some unique features like an articulating AMOLED screen. Overall an excellent value for what you get.
The Sony NEX3 produces great results with it's larger sensor and is an interchangeable lens system for a price that's very close to the LX5. But it lacks manual functionality and has an awkward to use flash component.
Finally, if you want SLR-like image quality and are willing to pay a bit more, look at the Panasonic GF1. The 20mm kit will take amazing photos but you get a less compact camera, no zoom, no image stabilization, and of course the higher price for a camera that's already about 1 year old.
Hope this was helpful.
Additional Notes:
I discovered that if you hold the "play" button while turning the camera on, it will bypass extending the zoom and go straight into picture review mode. Useful if you just want to look over some images without taking off the lens cap!
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