Financing vs. Purchasing Upfront
. . . . As an MBA, I know that without including any variables, financing with the added interest will always cost more vs purchasing something outright or upfront. When looking at purchasing DVC points, which bring a substantial initial upfront cost, do you think financing with the benefit/Value of receiving the points immediately outweigh the benefit/value of saving a few years to purchase the points outright?
Some variables you might consider in your thoughts ie. Will the resort “sell out” while saving to purchase outright (direct purchase)?
Can you “make back” your interest by renting unused points?
Interested to hear everyone’s thoughts on how they might handle this or how you went through your purchase of DVC points!
I know this is an older thread, but perhaps there are people who are still wrestling with this decision.
First, let me tell you my own 'history' with DVC. I purchased 3 contracts from Disney, Direct, and paid cash. At the same time, I purchased 2 contracts from Disney, Direct, and financed them. Then, I purchased 3 contracts on the Resale market, and paid cash. Now I am waiting to see how much Riviera will cost, and I will likely buy it, or, if I don't, I will probably buy another contract. I will probably finance either the Riviera, or the Resale contract. I paid off the two contracts that I previously financed in ONE year. I don't know how long I will take to pay off a new contract, but I will pay it off at least somewhat early.
Okay, so, you can see I am on both sides of this equation. And here is why: From a strictly FINANCIAL point of view, it almost certainly is NEVER a good idea to finance. BUT, buying DVC is not and never was a strictly Financial decision. We buy DVC because we want what it can give us. So, there is an Opportunity Benefit, and a 'Loss of Opportunity' cost, that will apply depending on what you choose or don't choose.
Is it worth it to you to finance a contract and pay 10% more, per year, for a few years, but save 50% or more on your hotel room costs, every year? I think so. You get the benefit.
And let us suppose you do save up money so you can pay cash. What has happened in the meantime? Not only have you not been able to get the cost benefit on your vacations, but the cost of your DVC will now almost certainly be higher AND you will have lost the CONTRACT YEARS that it has taken you to save the money. Your contract will now be SHORTER, so you will be paying MORE MONEY for LESS YEARS, unless you decide to forego that resort and purchase whatever the newest resort is, and it will likely be EVEN HIGHER PRICED.
I remember being on the Monorail, passing out of the Contemporary and looking at Bay Lake Tower as it was being built, and almost finished. People were talking about it, and I remember thinking to myself, "What a WASTE. There is NO WAY that Bay Lake Tower can EVER be worth what they are charging for it. Anyone who buys it is making a mistake!"
Well, the mistake was mine. Years later, I purchased Bay Lake Tower at RESALE, AND I PAID ALMOST 50% MORE FOR IT THAN I WOULD HAVE PAID IF I HAD BOUGHT IT DIRECT RIGHT AT THE BEGINNING. I corrected my error in judgment, BUT IT COST ME MORE MONEY, AS WELL AS A SHORTER CONTRACT AND THE LOSS OF BENEFIT FROM THE USE OF IT. How are these things not clear to people? Whatever DVC costs now, it WILL cost MORE in the future. Period. It might not go up fast. If there is a recession, it might not go up at all for a few years. But the general trend is and has been UP. Again, let me emphasize that in just a few years, RESALE contracts at BLT were costing almost 50% more than the original, direct price. So, how does saving up the money while skipping the vacations, avoiding financing, and then paying cash, really save you any money?
I am putting aside money to buy at Riviera, and I have around $14,000 saved for it. But, if I like what I see, you can bet I WILL NOT WAIT, to buy Riviera. And if I don't like Rivera, I will start looking for a fat, juicy contract somewhere else.
