Is DVC worth it if I already get 40% off rack?

[Disnee4Me]

We almost considered buying when they were first introduced (early 90s?) when I was mid 30s, my husband early 40s and our first son was just a baby. Then in 2003 by husband got "early retired", even though he was only just turning 54 and never found a real full time job, so officially retired at 62. Now we have a 22 year old in college and another son to start college in the fall. We have managed three trips to WDW since 2003 by driving down from CT and Disney Dollars that we cashed, and we are planning Christmas 2013. If I had spent the $$$ back then, I'm not sure we'd be able to go that often (okay so we did go to Italy this summer in celebration of our 25th wedding anniversary). So I'm not sure if owning a DVC would be beneficial if you get into financial struggles as we have.

 

[LuvtheGoof]

LuvtheGoof,

That may be how you choose to look at it, but any entry level course in economics, budgeting, or finanacial planning will tell you that $15,000 spent today is NOT the same as $15,000 spent 15 years from now, which is also not the same as spending $1,000 a year for the next 15 years. Money has a time value associated with it, along with the deterimental impacts of inflation. I would hazard to say that I could get a 10% return on that $15,000 over 15 years fairly safely. $15,000 deposited today, with 10% annual interest compounded monthly comes out to $66,800 after 15 years.

Are you going to tell somone who is 15 years away from retirement that $15,000 spent today is the same as $15,000 when they retire because "you already spent it". When in fact if they did not spend it, they would have almost $67,000 to retire with? Economics do not work that way. It may be easier not to look at it that way, but if you are doing any sort of sound financial planning for your future, you NEED to look at it that way (or hire somone who will)

-dave

Dave,

I agree that you can "make" more money by investing it (though I would like to know where you are going to get 10% right now ). Buying into DVC is not an "investment" of any kind. It is a way to save on the hotel costs associated with future Disney vacations. Nothing more, nothing less. Any other discounts we get are icing on the cake, and we do NOT expect those to continue, but are happy to take advantage of them when available. Obviously, like any major luxury purchase, you have to weigh the pros and cons.

Would you tell that same person that they should not buy that $15,000 boat now, but wait 15 years and they can pay cash for a $15,000 boat when they retire, which would not equate to the same level of boat they could have purchased 15 years previously? They would also have missed out on 15 years of boating enjoyment. I do believe that this is a good analogy, as either purchasing a boat or a DVC membership are both luxury purchases that one should not make unless they have the money to do so. If they need the money for retirement, then they are NOT good candidates for a DVC purchase, and maybe shouldn't even be visiting WDW, as just a few visits will eat up that $15,000 in hotel costs at a deluxe resort.

So I guess I have to ask you. If that person wants to visit WDW (or the GC at DL, or Aulani) on a regular basis, how are they going to pay for their rooms? Most of the times we have to vacation, there are NO discounts available, so we would have to pay rack rate to stay there. We will NOT move down to moderates or heaven forbid, a value resort. We are deluxe snobs (yes, I admit it!), and usually stay in a 1 bedroom DVC suite, even with just my wife and I. As I stated, our trip next year would cost us over $4000 just for the room, when our dues for the entire year are less than $1700. If all costs remain stable (meaning rack rate and dues both go up about the same), at todays prices, we would be spending over $100,000 for our rooms or just over $25,000 in dues. Since our buy-in was only approx. $30,000 for our points, adding in our dues comes to $55,000. Still a WHOLE lot cheaper than over $100,000. How would you advise that person if they are looking to visit WDW many times over that 15 years?

Kevin

 

[GoofGoof]

Dave,

I agree that you can "make" more money by investing it (though I would like to know where you are going to get 10% right now ). Buying into DVC is not an "investment" of any kind. It is a way to save on the hotel costs associated with future Disney vacations. Nothing more, nothing less. Any other discounts we get are icing on the cake, and we do NOT expect those to continue, but are happy to take advantage of them when available. Obviously, like any major luxury purchase, you have to weigh the pros and cons.

Would you tell that same person that they should not buy that $15,000 boat now, but wait 15 years and they can pay cash for a $15,000 boat when they retire, which would not equate to the same level of boat they could have purchased 15 years previously? They would also have missed out on 15 years of boating enjoyment. I do believe that this is a good analogy, as either purchasing a boat or a DVC membership are both luxury purchases that one should not make unless they have the money to do so. If they need the money for retirement, then they are NOT good candidates for a DVC purchase, and maybe shouldn't even be visiting WDW, as just a few visits will eat up that $15,000 in hotel costs at a deluxe resort.

So I guess I have to ask you. If that person wants to visit WDW (or the GC at DL, or Aulani) on a regular basis, how are they going to pay for their rooms? Most of the times we have to vacation, there are NO discounts available, so we would have to pay rack rate to stay there. We will NOT move down to moderates or heaven forbid, a value resort. We are deluxe snobs (yes, I admit it!), and usually stay in a 1 bedroom DVC suite, even with just my wife and I. As I stated, our trip next year would cost us over $4000 just for the room, when our dues for the entire year are less than $1700. If all costs remain stable (meaning rack rate and dues both go up about the same), at todays prices, we would be spending over $100,000 for our rooms or just over $25,000 in dues. Since our buy-in was only approx. $30,000 for our points, adding in our dues comes to $55,000. Still a WHOLE lot cheaper than over $100,000. How would you advise that person if they are looking to visit WDW many times over that 15 years?

Kevin

Buying DVC is not the same as buying a boat. You have the option to still go to WDW and pay cash rates (or renting points) vs buying DVC. With a boat if you wait 15 years to buy you lose 15 years of enjoying the boat. The time value of money component comes in when comparing buying DVC to paying cash for a room as you use it. If you want to calculate a breakeven point for DVC some people include time value of the initial money paid since you would not be putting all $15,000 down now with paying cash for a room. Simple example. If you pay $15,000 this year for DVC. Let's say the cash rate for a room for 1 week is $3,000. If you didn't buy DVC but put the $15,000 into an account instead to spend on future trips that account would earn interest. In year 1 you would take $3,000 out of your account to pay for your trip but you would have $12,000 left. That $12,000 would earn $1,200 in interest at 10%. At the start of year 2 you save $700 in dues but pay $3,200 for your next trip so you take net $2,500 out of your account and the balance drops to $10,800. You then earn $1,080 in interest. Run the math through and eventually the account goes to zero and then negative. That is your break even point. Without any time value component your breakeven will likely be around 5 years or less compared to deluxe resorts. If you use 10% it will be 10+ years. For me personally, 10% is way too high as a rate. Keep in mind you would be dipping into the cash each year to pay for your room so it's not as practical to put the money into an aggressive growth mutual fund or buy individual stocks. That is probably what it would take to get a 10%+ return. I used 5% in my calculations which I feel is very conservative. If you left the cash in a bank account it would be less than 1% today, but who knows what rates will do in 5 years, 10 years.

I have said many times that with DVC there are a number of variables that go into the calculation that you could tweak it anyway you want it to go.

 

[dizzney]

Buying DVC in '99 with cash, no financing was the smartest move we made for our future Disney vacations. We figure that we recouped our cost in 5 years with the way we vacationed, we added on 3 times (all direct) to bring us to 375 points (275 at BWV our fav and 100 at BLT) and allwithout financing. Financially we have been able to vacation in ways we could not have afforded without DVC. In the last 12 month period, we had one vacation fo 9 nights with between 4 and 14 people staying with us (had a BW two bedroom and added studios); a second for 8 nights with 4 people in a BW one bedroom; a third for 4 nights in a BW studio with just my DD13 and I (mother daughter trip!) and the two night cruise on teh amgic out of NY with two cabins for 5 of us. I try to use our points to their best advantage (going forward wouldnt do a cruise on points but the 2 night out of NY was affordable as I had the points to use). Our only regret is that we didnt buy in sooner than '99.

 

[Phonedave]

No argument with the Time Value of Money... I just want to know where you are getting 10% annual interest . I could use the advice .

The rate of return on my 401(k) this year is %10.1 so far. REIT's lately - the Real Estate market is comming back!


-dave

 

[Phonedave]

Dave,

I agree that you can "make" more money by investing it (though I would like to know where you are going to get 10% right now ). Buying into DVC is not an "investment" of any kind. It is a way to save on the hotel costs associated with future Disney vacations. Nothing more, nothing less. Any other discounts we get are icing on the cake, and we do NOT expect those to continue, but are happy to take advantage of them when available. Obviously, like any major luxury purchase, you have to weigh the pros and cons.

Would you tell that same person that they should not buy that $15,000 boat now, but wait 15 years and they can pay cash for a $15,000 boat when they retire, which would not equate to the same level of boat they could have purchased 15 years previously? They would also have missed out on 15 years of boating enjoyment. I do believe that this is a good analogy, as either purchasing a boat or a DVC membership are both luxury purchases that one should not make unless they have the money to do so. If they need the money for retirement, then they are NOT good candidates for a DVC purchase, and maybe shouldn't even be visiting WDW, as just a few visits will eat up that $15,000 in hotel costs at a deluxe resort.

So I guess I have to ask you. If that person wants to visit WDW (or the GC at DL, or Aulani) on a regular basis, how are they going to pay for their rooms? Most of the times we have to vacation, there are NO discounts available, so we would have to pay rack rate to stay there. We will NOT move down to moderates or heaven forbid, a value resort. We are deluxe snobs (yes, I admit it!), and usually stay in a 1 bedroom DVC suite, even with just my wife and I. As I stated, our trip next year would cost us over $4000 just for the room, when our dues for the entire year are less than $1700. If all costs remain stable (meaning rack rate and dues both go up about the same), at todays prices, we would be spending over $100,000 for our rooms or just over $25,000 in dues. Since our buy-in was only approx. $30,000 for our points, adding in our dues comes to $55,000. Still a WHOLE lot cheaper than over $100,000. How would you advise that person if they are looking to visit WDW many times over that 15 years?

Kevin

All true points, but you still have to put every thing into the same time from when asking questions.

It is NOT correct to ask in 2027 "were all those memories of boating over the last 15 years worth $15,000"

The CORRECT question to ask in 2027 is "looking back over the last 15 years, would you rather have those boating memories or $67,000 cash in hand right now"


When you look at something spread out over time it is even more important. Lets say you can buy a 15 year DVC for $15,000 cash - no dues. Assume that the cash vacation cost is going to be $1,100 a year. It looks like a no brainer, DVC costs $1,500 over those 15 years. But, if you put that $15,000 cash into an account earning a paltry %1.5 interest, and took out $1,100 every year for a vacation, you would still have about $100 left at the end of your 15 vacations. To do any sort of real comparison of costs you have to take into account interest and inflation (in reality there are a host of other factors as well.

-dave

 

[toolsnspools]

That is unless you get hit by someones else's boat is 2026....

 

[LuvtheGoof]

I have said many times that with DVC there are a number of variables that go into the calculation that you could tweak it anyway you want it to go.

I absolutely agree with you. There are many variables that each family has to look at before deciding if DVC is worth it to them. It just works for us.

Kevin

 

[WWWD]

When you look at something spread out over time it is even more important. Lets say you can buy a 15 year DVC for $15,000 cash - no dues. Assume that the cash vacation cost is going to be $1,100 a year. It looks like a no brainer, DVC costs $1,500 over those 15 years. But, if you put that $15,000 cash into an account earning a paltry %1.5 interest, and took out $1,100 every year for a vacation, you would still have about $100 left at the end of your 15 vacations. To do any sort of real comparison of costs you have to take into account interest and inflation (in reality there are a host of other factors as well.

-dave[/quote]

You can't use the same vacation cost of $1,100 for DVC vacations versus paying out of bank account.

DVC is a luxury purchase to help one save on luxury vacations. Sure I can visit WDW cheaper ways, but I want it the deluxe way. Just like if I bought a luxury SUV and decide to get the flex fuel option to save money, I'm not saving money in general; I'm saving money on my luxury.

The time value of money can be used to shoot down any purchase. For me, quality of life (just having fun) will trump that at times. And, that is why DVC is a very personal decision - no "right" answer here.

 

[LuvtheGoof]

The CORRECT question to ask in 2027 is "looking back over the last 15 years, would you rather have those boating memories or $67,000 cash in hand right now"

And that is exactly my point about vacationing at Disney as a DVC member. We would NOT trade the awesome memories that we have made just in the last few years, much less the new ones we make every new trip, for any amount of money. We are pretty much set for our retirement already, so can afford to vacation at Disney multiple times per year. It works for us, but not for everyone.

When you look at something spread out over time it is even more important. Lets say you can buy a 15 year DVC for $15,000 cash - no dues. Assume that the cash vacation cost is going to be $1,100 a year. It looks like a no brainer, DVC costs $1,500 over those 15 years. But, if you put that $15,000 cash into an account earning a paltry %1.5 interest, and took out $1,100 every year for a vacation, you would still have about $100 left at the end of your 15 vacations. To do any sort of real comparison of costs you have to take into account interest and inflation (in reality there are a host of other factors as well.

-dave

Very true, there are a LOT of factors that have to go into any major purchase, such as DVC. I do think that inflation is more of a wash, since the room rates are actually going up faster than the dues rate that we pay. We have decided that WDW (and the occasional trip to DL) is where we want to spend our vacations, so DVC was the right decision for us. I totally agree that it does not make financial sense for a lot of people. If they are looking at skiing vacations, european vacations, or visiting elsewhere, they are NOT good candidates for DVC.

BTW, I do have to say that your $1,100 vacation would never work for us (I know it was only an example). Even with our flights free (using miles) and our room paid for with points, we still spend more than that in a week at WDW. We would go through that $15,000 in less than 2 years. We would have to make at least a 70 percent return each year on our $15,000 to pay for our vacations!

Kevin

 

[MKCP 1985]

Short answer: no.

 

[ParentsOf4]

Short answer: no.

Please don't take this the wrong way but I've crunched the numbers. Yes, DVC is worth it, even if you consistently get a 40% discount year-after-after. Furthermore, even WDW doesn't know what discounts they will offer 12 months from now. If you want to make the assumption that you'll get 40% off for the next 20 years, then good luck to you.

DVC's financial aspects depend a lot of factors that have to be included in the calculation in order to determine the break-even point. Everyone who is serious about DVC from a financial perspective should use a spreadsheet, play with the assumptions, and it see if there is a scenario that works for them.

The least expensive option is to rent points from a DVC member. This costs less than a Deluxe Resort from Disney, even with a 40% discount. If you feel comfortable renting points from a third party and are interested in DVC mostly as a way to stay inexpensively at a Deluxe Resort, my advice is to just rent points. If DVC interests you in other ways, go for it.

 

[GoofGoof]

The time value of money can be used to shoot down any purchase. For me, quality of life (just having fun) will trump that at times. And, that is why DVC is a very personal decision - no "right" answer here.

I am a happy DVC owner and I agree that just having fun and enjoying my vacation is what is important to me. In this discussion someone brought up time value of money and it is a valid economic factor in the decision process. You could rent DVC points each year instead of buying into DVC. In both cases you enjoy the exact same room, the only difference is how you pay for it. If you are comparing DVC to cash rooms or renting points the time value of your initial investment has to be factored in. I crunched all the numbers and with an interest rate of 5% the breakeven point for me was still only about 10 years compared to renting points. If you were to up your rate to 10% then the breakeven would get longer, maybe 13 or 14 years. If you reduce it to 0% it's probably less than 7 years. At the end of the day it's all an academic exercise which has nothing to do with enjoying your purchase. It only helps to justify the decision to buy vs rent.

 

[MKCP 1985]

Please don't take this the wrong way but I've crunched the numbers. Yes, DVC is worth it, even if you consistently get a 40% discount year-after-after. Furthermore, even WDW doesn't know what discounts they will offer 12 months from now. If you want to make the assumption that you'll get 40% off for the next 20 years, then good luck to you.

DVC's financial aspects depend a lot of factors that have to be included in the calculation in order to determine the break-even point. Everyone who is serious about DVC from a financial perspective should use a spreadsheet, play with the assumptions, and it see if there is a scenario that works for them.

The least expensive option is to rent points from a DVC member. This costs less than a Deluxe Resort from Disney, even with a 40% discount. If you feel comfortable renting points from a third party and are interested in DVC mostly as a way to stay inexpensively at a Deluxe Resort, my advice is to just rent points. If DVC interests you in other ways, go for it.

Thank you for the courteous response explaining your rationale. The primary reason I say no is because most people who may consider a DVC membership with buying enough points to take the type of vacation they want can better use the lump sum of money required for the points payment for other life expenses, and then annual payments are still required for the length of the contract, and those payments are only going to go up.

In the past 5 years (okay, more than 5) that I've been a member on these boards, Disney has had to fend off two hostile takeover rumors. Who knows what the future will hold, but there is no "out clause" for a change in ownership of the parks.

Better in my opinion to take the special offers. There are always good deals on and off property.

Resales are only good deals for buyers right now. Points are discounted well below the acquisition cost. If I were to buy into DVC, it wouldn't be with the expectation I could get my money back out of a resale if things don't turn out.

There are a large number of people happy with DVC, so that speaks volumes. It wasn't right for me.

 

[Phonedave]

When you look at something spread out over time it is even more important. Lets say you can buy a 15 year DVC for $15,000 cash - no dues. Assume that the cash vacation cost is going to be $1,100 a year. It looks like a no brainer, DVC costs $1,500 over those 15 years. But, if you put that $15,000 cash into an account earning a paltry %1.5 interest, and took out $1,100 every year for a vacation, you would still have about $100 left at the end of your 15 vacations. To do any sort of real comparison of costs you have to take into account interest and inflation (in reality there are a host of other factors as well.

-dave

You can't use the same vacation cost of $1,100 for DVC vacations versus paying out of bank account.

DVC is a luxury purchase to help one save on luxury vacations. Sure I can visit WDW cheaper ways, but I want it the deluxe way. Just like if I bought a luxury SUV and decide to get the flex fuel option to save money, I'm not saving money in general; I'm saving money on my luxury.

The time value of money can be used to shoot down any purchase. For me, quality of life (just having fun) will trump that at times. And, that is why DVC is a very personal decision - no "right" answer here.[/quote]

What I gave was an example of how the time value of money works, not a real world comparison of rack rates vs. DVC. $15,000 now for a 15 year DVC with one vacation a year, or $1,100 a year cash for the EXACT SAME vacation. What looks better? On the surface $15,000 now looks better because $1,100 per year over 15 years comes out to $16,500 - a savings of $1,500 if you went DVC. However if you take into account you could put that $15,000 into an account bearing 1.5% interest, and take out $1,100 a year for a trip, you would earn you $1,600 in intrest. more than offsetting the $1,500 in DVC "Savings".

Of course there are other factors that come into play with DVC, as they do with most purchases. That is not the point. The point was (and is) that you cannot discount the time value of money when making this decision. ALL factors must be considered, and interest and inflation are one of them. You cannot just decide to ignore it because "you consider the money already spent". I am not using it to shoot down DVC (heck I own DVC myself - and am quite happy with it). I am just saying that along with everything else that one considers when making a purchase, you most consider this as well.

-dave

 

[JAG107]

I love Disney math!
Well in uncomplicated terms, without DVC my family and I would continue to be value customers instead of staying in a deluxe studio with a kitchenette (untold meal savings so far). Granted we didn't know anything about resales or renting pts before we bought the direct kool aid, I still see the purchase as a great value for us long term (I avoid the use of the term "investment", as I know dang well this is only going to cost me more as time goes on).
basically I never paid less than $80 a night at a value, yet for a few bucks more now have a room a stone's throw from MK with an uncrowded bus stop.