Thin film heads for the hard disk drive industry are fabricated with equipment and processes similar to integrated circuits. One key difference between IC and thin film head (TFH) manufacturing involves the separation of devices following the completion of the wafer-level processing. As a result, the relative placement of individual devices on the wafer, commonly referred to as colinearity, is extremely important and will impact individual device performance and overall yield. Application of advanced KrF step-and-repeat tools is common in TFH manufacturing, but ArF and KrF step-and-scan systems are just being introduced to achieve the imaging performance required for next generation TFH devices. This change will also improve colinearity performance and enable additional degrees of freedom for optimization. Colinearity performance is comprised of individual metrics similar to those in traditional IC overlay budgets with some unique differences. This paper will present error budgets highlighting the photolithographic contributors to colinearity for both step-and-repeat and step-and-scan systems. These budgets will then be populated with experimentally collected performance data for current step-and-repeat and step-and-scan systems. The benefits of step-and-scan colinearity performance relative to that of step-and-repeat will be highlighted along with additional modes of optimization enabled via step-and-scan lithography.