Paying for DVC?

[21stamps]

When I bought I had $12,000 in cash readily available. I could have transfered the other $4,000 out of CD's or other accounts, but decided not to.

I put $12,000 on my Disney Credit Card, paied that off in full the next month, and finanaced the remaining $4,000 or so through Disney. Why, I have no idea. I could have saved the interest by paying in cash, but I did not want to move money around. So yes, I am "stupid" from a strictly finanacial sense, but leaving the extra $4,000 where it was made me more comfortable.

-dave

No, in this situation you are fine, not stupid. Big difference to finance something when you have money elsewhere, and finance assuming that you can afford the monthly payment. I like Dave Ramsey, I follow some of his advice- but this is where I disagree with him. As long as I "have" the money somewhere, investments, savings, etc, then I do not feel like it is a bad thing to say-use a credit card for a remodel, or to lease a car. For me leasing worked. I knew that I would trade my car in every 2.5-3 years, it does NOT make sense to do a cash or financed to own purchase in that scenario.

With vacation ownership, as with anything, you need to look at Total Money Paid at the end of the loan-without assuming that you will pay it off early (unless you are it moving around to do so-next month), take that cost by the cost of your vacations, and like others have said- your break even point. More importantly- where is that "monthly payment" coming from? Will your savings/investments be compromised, if you lose your job can you continue the payments, will it cause any negative impact on other areas of your life? Some people will decide against it at that point, some will move forward.
All of this is what prevents buyer's remorse later on.

I would say that the majority of buyers do not do this though. It's why timeshare is what it is.

I have a client who has a timeshare at Marriott, DVC, Hyatt and a 4th that I'm forgetting. Their family loves vacation ownership, it fits how they travel and financially makes sense- those are the 2 biggest points. Even more than financing or paying cash.

 

[BraveLikeMerida]

We bought resale and paid in full (this was before the member perks of resale were stripped away-- that might influence our decision to buy resale). It's a decision everyone has to make for their own family, but we just felt we couldn't justify a luxury purchase if we didn't have the cash in hand to pay in full. (That is not a judgment on others' choices-- that is just the decision my husband and I arrived at for our family).

That being said, I don't believe that financing a large purchase is always a bad idea. When we bought a car a few years ago we had intended to put down a relatively large amount as a down payment, but found that we qualified for a financing rate of 1.57%. We decided to put $1000 down, finance the rest, and put the remainder of our intended down payment into our Roth IRAs for that year since the market gains on the money we invested are likely to make that 1.57% loan seem like nothing over the course of our working lives. (Yes, we're very exciting people.)

Long story short: You have to weigh your options when it comes to your money. Be educated about it, and consider what is a priority for your family. We're excited to be DVC members and it makes us happy.

 

[BraveLikeMerida]

Oh and I need to change my vote to financing through another company (monera). I am
Process of buying SSR contract of 200 points. Hopefully ROFR goes well.

Good luck getting through ROFR! We bought resale too and that was a stressful time for us.

 

[BraveLikeMerida]

We paid cash for a smallish (120 pt) resale contract. We did not want nor could we afford an additional monthly payment. Buying direct would have been much too expensive for us and we did not want PVB or AUL for our home resort. Buying resale fit our needs right now to travel every other year to WDW. We may plan on adding on down the road. We looked at this as a luxury and if we couldn't afford to pay outright we would not have done it. (Unfortunatly i always have Suze Orman in the back of my mind when we spend our money). We would never consider financing a vacation so why would we finance this type of purchase. Many people do finance timeshares and the only way that i see that could make sense is if you pay it off early to avoid significant finance charges. It is a very personal and individual decision and you have to know how you are with paying your bills or taking on too much. The great thing about DVC timeshare it that it does hold more value than most typical time shares, if you have to sell for financial reasons then you will get back some of your money.

We bought resale for exactly the same reasons.

 

[GoofGoof]

Your model does not go far enough, as it ignores risk. The affordability of future payments is contingent upon less-than-certain assumptions about the borrower's future income and expenses.

Can't the same be true about emptying your savings account to pay for DVC or a car? If you just have tens of thousands of dollars laying around then it's not an issue, but there is also a risk in completely depleting your savings. Let's say for example that I bought DVC for $12,000 and financed it. If I only had $12,000 in my savings account and I put $2,000 down I still have $10,000 in savings. If I have a $10,000 unexpected expense, let's say a major home repair, I now have the cash to pay for it. If I bought DVC with cash instead I'd have to either borrow money against my home if possible or maybe put it on a credit card. The end result is the same since I'd have no savings and $10,000 in debt. The only difference is if I walk away from my timeshare debt I lose my DVC points but if I walk away from a home equity loan I could lose my house.

I don't personally have a lot of debt and I didn't finance my DVC purchase, but I also don't think debt is always a bad idea. If you can afford to make the payments and have a relatively easy out if you lost a job or couldn't afford payments anymore (which you would with DVC) it's not a huge financial burden. The key question is: can you really afford the payments?

 

[glvsav37]

paid cash for a 230pt resale @ $55 pp OKW a few years ago (after the 1st resale restrictions but before the latest) aprox $13K.

I'm fortunate that I have a side business that pays for much of our 'fun expenses' which this came out of.

But while we are all examining each others spending habits, I'll share mine.

I'm not for or against the concept of financing....just 'what' I am financing. IMO Financing a DVC purchase wasnt for me. We looked it as where our "Break Even" point was going to be. For us, who normally stayed deluxe, in the summer, spending an average of $5-7K on the room, and knowing rooms rarely go down in price—we can break even after 2+ trips (including maintenance fees). Financing obv would have made this b/e point a little further out. And obv choosing resale vs direct costs factored into this highly as well.

But more so, we didnt want to finance this b/c of exposure and risk. I like to keep my monthly exposure as lean as possible. For many years, we had no car payments, not b/c we bought new cars cash, but we just drove older cars and kept ones we finished paying off. To us, the cash in pocket was better then the shiny new car. With something like DVC, I didnt want to make the choice of paying a housing bill or a DVC bill if god forbid either of us lost one of our incomes, got sick or otherwise.

my $0.02

 

[GoofGoof]

paid cash for a 230pt resale @ $65 pp OKW a few years ago (after the 1st resale restrictions but before the latest) aprox $13K.

I'm fortunate that I have a side business that pays for much of our 'fun expenses' which this came out of.

But while we are all examining each others spending habits, I'll share mine.

I'm not for or against the concept of financing....just 'what' I am financing. IMO Financing a DVC purchase was for me. We looked it as where our "Break Even" point was going to be. For us, who normally stayed deluxe, in the summer, spending an average of $7K on the room, and knowing rooms rarely go down in price—we can break even after 2+ trips (including maintenance fees). Financing obv would have made this b/e point a little further out. And obv choosing resale vs direct costs factored into this highly as well.

But more so, we didnt want to finance this b/c of exposure and risk. I like to keep my monthly exposure as lean as possible. For many years, we had no car payments, not b/c we bought new cars cash, but we just drove older cars and kept ones we finished paying off. To us, the cash in pocket was better then the shiny new car. With something like DVC, I didnt want to make the choice of paying a housing bill or a DVC bill if god forbid either of us lost one of our incomes, got sick or otherwise.

my $0.02

Makes sense to me. I'm in the same boat. My Accord had almost 300K miles before it finally died. I don't buy fancy clothing or a lot of expensive electronics. The one thing I spend money on is vacations. It's what I value most compare to other uses of my disposable income.

I think the one thing that makes DVC different and less risky than most timeshares is the easily available point rental market. If for some reason I do find myself in financial trouble for a year or two I can rent out my BLT points through a reputable dealer for $13 a point netting me a little less than $8 per point more than my maintenance fees. With traditional timeshares you can try to rent out your week, but it's a lot more work and a lot less certain you can recover at least your cost.

 

[TheGuyThatMakesSwords]

Quick note... I see one board member put $12K on his/her CC for a DVC cash downpayment - then questioned if they had done a dumb thing .....

NOT NECESSARILY . Wife and I bought from Disney directly. We made two charges with our Disney Visa... racked up $28K.
Ahhhhh - but we were DEAD ready to pay the card off in full .

So why do this?
Because we got a good $280 worth of Disney Cash for our next trip - at ZERO cost to us. Similar situations can be had with OTHER 1% back CCs.

The KEY is to be ready to PAY CASH, right out of the gate, for those CC charges. Rack 'em to the stratosphere, let the charges clear, then pay 'em off .

Our CC companies HATE us . For YEARS, we have cost THEM money . Can't last.... I know in my heart they will wise up .

 

[GoofGoof]

Quick note... I see one board member put $12K on his/her CC for a DVC cash downpayment - then questioned if they had done a dumb thing .....

NOT NECESSARILY . Wife and I bought from Disney directly. We made two charges with our Disney Visa... racked up $28K.
Ahhhhh - but we were DEAD ready to pay the card off in full .

So why do this?
Because we got a good $280 worth of Disney Cash for our next trip - at ZERO cost to us. Similar situations can be had with OTHER 1% back CCs.

The KEY is to be ready to PAY CASH, right out of the gate, for those CC charges. Rack 'em to the stratosphere, let the charges clear, then pay 'em off .

Our CC companies HATE us . For YEARS, we have cost THEM money . Can't last.... I know in my heart they will wise up .

Always a good plan. I have an American Airlines card I use for mostly everything. With a little extra planning I can often get free flights . The key is to always pay it off before they hit you with finance charges and interest.

Not too long ago I think it was maybe Sam's Club that was offering a free $10 gift card for every $100 of gift cards purchased around the holidays and they had Disney cards. I remember people talking about using the gift cards to pay DVC dues and then using the extra $10 cards to buy food or park tickets. I haven't seen that offer lately, but if it ever comes back it's a good way to get a little something back when paying your dues.

 

[ScoutN]

Always a good plan. I have an American Airlines card I use for mostly everything. With a little extra planning I can often get free flights . The key is to always pay it off before they hit you with finance charges and interest.

Not too long ago I think it was maybe Sam's Club that was offering a free $10 gift card for every $100 of gift cards purchased around the holidays and they had Disney cards. I remember people talking about using the gift cards to pay DVC dues and then using the extra $10 cards to buy food or park tickets. I haven't seen that offer lately, but if it ever comes back it's a good way to get a little something back when paying your dues.

Imagine that + Chase Freedom 5% Cash Back at the Wholesalers.

 

[Seanual757]

Bottom line is it's none of our business we have no say on how, why, or if people should and should not finance or pay cash for DVC.

Each person’s reasoning for paying cash or financing are totally different than others, nobody should be knocked for making a decision on how they should spend their money. Those making assumptions on why folks should NOT do something. I will tell you this when you start paying my bills then you can tell me how to spend my hard earned money.

I got asked this very question on Saturday from a neighbor why I change cars so often. My answer is simple I like cars and I like to drive new cars. Are vehicles a bad investment absolutely they depreciate the second you drive off but I do not care. I can afford a new cars every few years so be it. Do I search for deals yes I do my last two deals were 0/72 months on my Camaro and my Suburban.

So in the end it’s your decision spend your money how you want to spend it and enjoy your purchases.

 

[glvsav37]

^^^ thats why its called "Personal" finance lol

 

[GoofGoof]

Bottom line is it's none of our business we have no say on how, why, or if people should and should not finance or pay cash for DVC.

Each person’s reasoning for paying cash or financing are totally different than others, nobody should be knocked for making a decision on how they should spend their money. Those making assumptions on why folks should NOT do something. I will tell you this when you start paying my bills then you can tell me how to spend my hard earned money.

I got asked this very question on Saturday from a neighbor why I change cars so often. My answer is simple I like cars and I like to drive new cars. Are vehicles a bad investment absolutely they depreciate the second you drive off but I do not care. I can afford a new cars every few years so be it. Do I search for deals yes I do my last two deals were 0/72 months on my Camaro and my Suburban.

So in the end it’s your decision spend your money how you want to spend it and enjoy your purchases.

I agree with your point of view that in the end it's ultimately a personal decision and nobody can tell you whether it's right or wrong. However, in the context of the thread the OP did ask people how they paid and asked for opinions. I think it's valid to share opinions at that point and of course it will be skewed towards each of our personal situations and stage of life.

 

[Phonedave]

Quick note... I see one board member put $12K on his/her CC for a DVC cash downpayment - then questioned if they had done a dumb thing .....

NOT NECESSARILY . Wife and I bought from Disney directly. We made two charges with our Disney Visa... racked up $28K.
Ahhhhh - but we were DEAD ready to pay the card off in full .

So why do this?
Because we got a good $280 worth of Disney Cash for our next trip - at ZERO cost to us. Similar situations can be had with OTHER 1% back CCs.

The KEY is to be ready to PAY CASH, right out of the gate, for those CC charges. Rack 'em to the stratosphere, let the charges clear, then pay 'em off .

Our CC companies HATE us . For YEARS, we have cost THEM money . Can't last.... I know in my heart they will wise up .

I think you were referring to my post. No, I paid it in full the next month - I did it so I could get the points as well. I was saying that maybe finanacing the remaining $4,000 was not smart, given that I had the funds to pay for it.

You are not costing the credit card companies money. Remember, when you use your card, they are charging the mechant a transaction feel. You put $28,000 on the card, because of the $280 in "free money" you would get. But the creadit card company charged DVC somwehere in the realm of $800 for that charge. The credit card company is doing just fine. In the end, we as consumers pay for it, because mechants raise their prices to cover the credit card transaction fees. TANSTAAFL

 

[piglet21]

Currently researching purchasing DVC contract and wondering how people on this site have paid for their membership.

My fiance and I recently closed on our first DVC membership earlier this year. We bought a small resale contract and chose to finance the purchase through our local bank with a personal loan. For us, we saw it as an opportunity to establish and build some joint credit together before getting married in December (we're 24 and 25 so we don't really have any joint debt yet). Our loan will be paid off at the end of this year, and while we will incur some financing charges, we felt it was well worth it to have some shared debt. We are currently looking to move from his first house to our first home and by having this debt with our bank getting pre-approved for our mortgage was a breeze, so I do believe that financing purchases like this sometimes makes sense. On the other hand, I would have never purchased DVC or any other luxury through financing if I knew I couldn't pay if off in a year, two years maximum, and didn't have the cash on hand elsewhere as the value really declines once you start paying crazy amounts of interest!

 

[steviej]

can anyone give a ballpark on the interest Disney charges when you finance through them?

 

[note2001]

can anyone give a ballpark on the interest Disney charges when you finance through them?

They are high, but not much higher than the other brokers out there. I've heard they range between 9.9 and 12.9% these days, depending on your credit and experience with them. It used to be those who had accounts with them in good standing would automatically get the lower rate with no pull on their credit score.

I'm not judging anyone, but strongly suggest everyone looking to buy get a good solid payoff plan in place before committing to anything. An affordable, accelerated plan is always best, and if one can get in some bonus air miles etc while at it, all the better.

EditedToAdd: Most importantly: make sure DVC is right for the way you want to travel. Compare what you'll get out of owning DVC (with minimal housekeeping, which some find very important) against traveling at will however and to wherever you want. There are many threads out there about this. Just know what you are getting into.

 

[GoofGoof]

can anyone give a ballpark on the interest Disney charges when you finance through them?

Depends on % down and credit rating

For existing members:
20% down = 9%
10% down = 12%

For new members there are 3 tiers based on your credit score:
20% down = 10%, 12% or 14.5%
10% down = 12%, 14%, 17.5%

 

[steviej]

Depends on % down and credit rating

For new members there are 3 tiers based on your credit score:
20% down = 10%, 12% or 14.5%
10% down = 12%, 14%, 17.5%

Any idea how those tiers are decided? The wife and I have credit scores from mid to high 700's

 

[GoofGoof]

Any idea how those tiers are decided? The wife and I have credit scores from mid to high 700's

Not sure. My guess is anove 700 is best tier (lowest rates). You are probably best off just calling and asking what the current rates are and what the tiers would be.