View Full Version : Has anyone calculated in LOST INTEREST when determing DVC value?

02-01-2001, 01:08 PM
The first time I did the calculations, the DVC seemed like a good deal as long as I visited at least once each 3 years for the life of the membership. Based on the new higher prices, I did the calculations again, and this time I added in the interest I could get by just putting the money in a long term CD. With these calculations the savings are very mimimal.
If had calculated utilizing some higher return investment, I likely would have calculated that it is cheaper to just pay-as-I-go.

Has anyone calculated the actual cost of the points being used 40 years from now?

Peggy Sue
02-01-2001, 01:18 PM
I can't answer your question, but I do have a question for you..are you basing your "pay as you go" calculation staying at a DVC resort, or luxury resort paying the cash rate, with inflation?? Are you basing your calculation on how many nights per year a studio would yeild compared to the same number of nights for the cash price?

Have a wonderful day!

02-01-2001, 01:18 PM
I did figure lost interest on the declining principal amount (declining since I would still be spending $$ on vacations) and had no trouble satisfying myself of the value of DVC for me.

However, using your DVC membership once every 3 years is only marginally advantageous and, while you may still come out ahead before 2042, you may not be able to enjoy the same savings as those who travel every year (or more). The program is still sound and offers true flexibilty and excellent accommodations at many locations. You can "run the numbers" for DVC the same as for any timeshare property. Figure a reasonable return on the initial investment and ask yourself if you could find similar accommodations for that amount (plus any annual fees). If the answer is still no, then DVC is still a bargain!


02-01-2001, 01:48 PM
Just another point. With DVC you can sell your intrest 10, 15, 20 years down the road, and will most likely get more than it's original cost. If you pay as you go, in 10, l5,20 years down the road, you will have .... NOTHING

OKW '93

02-01-2001, 01:50 PM
Doc that was smooth!!!! I agree DVC is more fore the families that would visit at least yearly.

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02-01-2001, 01:59 PM
Hi eileenkeeney;

I'm a banker. When we bought into DVC I ran all kinds of fairly scary numbers. Hey it's a banker thing. If I put'm here I would get bounced from the boards. But maybe this will help.

I did tons of discounted cash flow and time value of money stuff. What I found was I got deluxe accommodations at moderate prices.

I did a cost of a point analysis for a guy on this board a while ago. Not as nuts as mine but same general results.

I figure the real cost is what it costs every year to have your DVC points including the opportunity cost of your investment.

I tried to use fairly common sense logic hope it helps you. Here is that post:

Cost of a point

Here is a quick and dirty look from a cost of financing point of view. Backed up with a real world market proof. (I majored in finance years and years ago.)

Cocktail napkin finance puts the cost per point at about $10/year. Here is how:
Maint. per point - - - $3.16
Financing (see below) - 6.84
Annual cost of a point-$10.00

Finance cost is calculated as follows:
The $72 you invest in your DVC point is either paid for with cash you have to invest or borrowed. If it is your money you give up the opportunity to invest it for a return. If you borrow it you pay interest.

If you invest you may get 9 to 10% in the market. If you borrow a home equity loan falls in the same range.
Say 9.5% so the finance cost is:
$72 per point x 9.5% = $6.84

So does this pass the reasonability test?

Yeah, you can rent points for about $10 on board related to this one. So it seems reasonable.

Uglier math would get about the same number. Your mileage may vary.

OK you can wake up. Finance 110 class is over.
You can clear the cobwebs by visiting my web page to get back into a Disney mind set:

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02-01-2001, 02:32 PM
Hey Bennet. Where can you get a 9.5-10% return? Especially after Mr. Greenspan's announcement yesterday.


02-01-2001, 03:17 PM
You can drive yourself nuts over this. The bottom line is if you are going to vacation anyway, this is an opportunity to save a little by prepaying.
With our resale purchase at BW for $62/pt I also believe we can resell it later and come out even.
You hear horror stories about other TS's but all I've seen are positive remarks at how easy it is to exchange the points.

02-01-2001, 04:50 PM
I just love it when people bring up the old IF excuse. IF I won the lottery, I could buy as many points as I wanted, IF a meteor hit my house, I'd be dead, IF IF IF.

OK, you're telling us that you are going to take some lump sum and put it away for 40 years so it will collect interest, and you're not going to go on vacation and touch any of it, right! And you might take mediocre vacations in cramped rooms during those 40 years.

The reality of the situation is that you're NEVER going to put the money away and save it and not touch it, the reality of putting into DVC is that YOU ARE going to take vacations, probably more than before, most of us do Disney twice a year, plus we've already used DVC to take a European vacation (London and Paris) and taken our 2 children with us also, If we were paying cash, I know we wouldn't have done it, and I still have 41 years more to have great vacations and my DVC is paid off, so I only have to pay maintenance.

Until you see the size of the one-bedroom and above DVC accomodations, you'll never understand, If I was just buying DVC to stay in a studio which is equivalent to a regualr hotel room plus a refrigerator and microwave, I wouldn't have bought our DVC, but when we walked into the one-bedroom, we were hooked.

At the end of the 40 years you would have LOST more in fun, family memories and unforgetable vacations, but you might have $200000 in the bank?

So go ahead and put your $15,000 in the bank, and don't ever take another vacation anymore, we'll see how long you live, but do keep us informed on how the stress is on your body and mind.

You know the Mastercard commercials 40 years of saving=boring life, some interest, 40 years of DVC vacations=priceless.

02-01-2001, 04:55 PM
BRAVO Normr! :) :D <IMG WIDTH="15" HEIGHT="15" SRC="/infopop/emoticons/icon_razz.gif" alt="razz">

02-01-2001, 05:19 PM
DVC is not the cheapest way to go so it is legitimate to look at this from a financial standpoint. Of course it all depends on what you compare it to. You can buy a cheaper timeshare and exchange into Orlando for total cost around $1000 per year. You can stay at Roach Inn even cheaper or you can stay at the GF for much more. For us, it allows us to stay at much nicer accomodations for about the same price as a decent hotel off site. Is that worth a now 41 year commitment, for us it is, for some it's not.

Good luck.


02-02-2001, 06:26 AM
>Joeblack DIS Veteran
>From: Quito, Ecuador

Now I have to go look at a map. :)

> Hey Bennet. Where can you get a 9.5-10% return? >Especially after Mr. Greenspan's announcement >yesterday.

It is a 40 year contract. I figure 9 to 10 is the long term equity market return. But point taken.

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02-02-2001, 07:12 AM
This is my first attempt at responding, hope I don't make too many enemies.

1. Money is not the issue, it is what it buys.
2. With DVC you have an asset, which will always
have a value.
3. With DVC you will not spend one more penny on
a Disney accomodation.
4. If this is an investment for money ( you will
have made a poor choice ).
5. If this is an investment for you and your
family's well being ( you chose wisely ).
6. The theoretical cost of the DVC is moot, in my
opinion, as we will never have enough money.
7. The benefits derived are priceless, where can
one go and receive so much pleasure and
enjoyment for the price paid ( then its even
year after year ).

I guess I could go on, and on. I know the question
was specific, but after you factor in the intan-
gible well being, in my opinion, who cares where we would have been, money wise.

My analogy is: when you buy a new car, after so many years you have lost your value. With the DVC
you still have value.

I will be waiting for the on-slaught of responses.

02-02-2001, 07:48 AM
I just love reading these boards! But to answer your question "Yes" I did factor in lost interest and found that when I also factored in inflation and taxes and our vacation patterns we will hit our break even point in 7 years.

One point I would like to make about "Interest", and of course this differs per your individual situation, is what goes with it...TAXES! In my families case I'm trying to find investments which don't earn me 'Taxable' interest. The way I look at the DVC is if my family can go to Walt Disney World and avoid paying $2000 - $3000 in lodging expenses per year then I view that as $2000 - $3000 of 'non-taxable' interest! Which in our case is a good deal.

Good Luck in your decision making process and I hope you determine whats BEST for YOUR family!


02-02-2001, 09:13 AM
As our guide put it when we bought 6+ years ago, don't buy this for an investment. Buy it because you are going to use it.

We use to stay at the CBR. The rate there when it opened was $69.00 a night . Now it is almost triple for the same accomodation. These rates at WDW are not going to go down.

We still believe it was money well spent.

02-02-2001, 09:18 AM
I guess this has been said before, but I never even think of the opportunity cost, lost interest, on my car. I could have spent 1/2 as much on a new car or 1/4 as much on a used car. I like driving around in a big gas guzzling SUV.

Creeping socialism was seen hundreds of years ago when James Madison said: "I believe there are more instances of the abridgement of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations."

02-02-2001, 09:34 AM
My calculation was actually very raw.
Based on the fact I need to decide by the end of February weather to dump the same chunk of money into a 7% CD, or purchase a DVC membership, I calculated the following:

How much interest could I get on the money in 3 years + dues I would pay in 3 years + interest I could have gained on those dues paid for each year they were paid in advance of the expected point use (lost interest on dues calculated at only 5%).
I ended up with $3759, and that was with interest compounded yearly. I add to this, the % of the 10,800 that applies to the 3 years, which is about $791. This brings the cost of my 3 years of points up to 4550.
At the end of 3 years I would have 450 points, enough to stay one premier week in a 2 bedroom.

Now I ask myself, is the value that I can buy, with these 450 points, worth that much more then what I could buy with the $4550.

I just paid for a week at OKW and it was just over $3500 (and since the trip starts before value season ends, it is at the value season rate).
I could stay in a wilderness cabin even cheaper. In fact two wilderness homes might be an option for a bigger crowd.

After my week in a 2 bedroom at OKW I will decide if the extra luxury is worth the extra money.

I did NOT calculate based on borrowing a years points ahead. I did not calculate the rate at which prices are going up, although as the economy slows this will slow also.

As far as selling the vacation plan in the future, if each year I only spend the interest gained on the money, I always still have the initial 10800 in the bank. However if I start tapping into the initial 10800, as I did in my calculation, I end up with LESS money each year for vacation.

I also calculated the actual cost of the 40th years points, based on interest lost only on that percent of the 10800.
It turned out that that years 150 points actually cost over $3000, not including dues.

I am considering that there is a risk, in that I might actually tire of Disney (although I doubt it based on my life history). Plane fare could become prohibitive, in which case I would vacation on the west coast.
The value of the points at DisneyLand is not much of a value, since the disneyland hotels do not have good deals on suite type accomodations. For less then the cost of the points I could stay at Residence inn. If I was into luxury non-suite style accomodations, then this might be of some value to me.
If there were an OKW style disney resort, on the west cost, on any nice west coast beach, I would have joined the club years ago.
Trading with non-disney resorts is an option, but it was not a cost saving option when I compared to the cost of just paying for the same vacation.

02-02-2001, 09:53 AM
The decision to join DVC is an investment. You invest your money and time and your get back the refreshment and renewal of great vacations.

I think is only responsible to look at the thing and say for what I am paying, do I expect to get back a reasonable value. It is only natural to compare DCV with the option of paying cash for comparable vacations. But the value isn't easily measured in dollars.

Interest is an interesting word. It can mean percentage of financial return or it can mean appeal or fascination.

Reading these boards it is clear that the active DVCers here think they have made sound investments both financially and in those other, and for many of us more important, meanings of interest.

The real decision to make is what kind of INTEREST is really important to your family.

I can't get enough of the fun we have with as a family related to our DVD vacations. Not just going but planning and remembering too. If the kids inherit less money and more appreciation of finding ways to have fun, together as a family, that is a legacy I am interested in passing on.

Now some folks get that camping but I prefer WDW.

Which is good 'cause DW, a.k.a. Zurgswife (ZW?), just picked up another 130 BWV points in a resale.

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02-02-2001, 11:03 AM
Eileen- What is your point here? Are you trying to justify a purchase despite your financial misgivings? Then you really need to read the above posts again to determine the value - both financial and intrinsic. If you're negative about DVC, you probably are in the wrong place- as most board members are quite content with their purchase.(in fact when I was researching a purchase, I couldn't find anyone who was not happy with DVC- maybe there is a silent majority out there but I haven't seen them)Buy because it gives you pleasure, don't buy if it makes you uncomfortable. It's that simple!

[This message was edited by kem330 on 02-02-01 at 02:39 PM.]

[This message was edited by kem330 on 02-02-01 at 02:40 PM.]

02-02-2001, 01:45 PM
Your calculations are ok, but I believe there are a few things you should consider.
1)It is getting increasinglky harder to find a 7% cd.
2)You are not taking into consideration inflation and the continually increasing price of hotels at WDW. The same room you paid around $3600 this year will be more expensive in 3 years.

3)The value of the 2 bedroom unit is the lowest of all. Why? Well, the difference in points between a studio, a 1-br unit and a 2 br unit is a lot higher than the difference dollar-wise between the same units. Why? I really don't know. If I had to make reservations for a 2br unit, I would much rather reserve 2 studios and pay less points.

4) There are some things that you just can't put value on. Like Bennet said, after you're gone from this earth the most treasured memory you can leave to your loved ones are the good memories you spent with them.

Why go to California Grill or Victoria and Alberts if you can get as full eating at McDonald's? Why buy a Sports car if a Yugo will take you just as far? With DVC you are guaranteed class A vacatons for practically most of your life at moderate prices. If you plan to go every 3 years, I agree with you..it might not be such a great idea, but if you want to go at least every other year, I think it is well worth it.

02-02-2001, 03:12 PM
Yes I did factor in lost interest ( and cost of borrowing) and I calculated I'd break even after 6 trips. Since that time it costs me my dues ( about $800 a year ) to be able to have 20 days of top quality accommodation. I think that is a very good deal. If you only go every 3 years it will take you a little longer to break even.

IMHO you can't use figures like 10% as a potential return in the stock market because that is only a guess and as most brokers literature says the cost of your investment can go down as well as up !!. You can only use either a fixed borrowing figure or something like a CD which GUARANTEES your return. I think 6-7% is a fairer figure.

Granted the cost of DVC has risen since I bought in , but then so has the price of hotel rooms !! I think the numbers still work.

02-03-2001, 10:05 AM
Of course I am trying to seriously consider if I want to buy a membership, and not just trying to be negative or talk anyone else out of a membership.

Did anyone notice that I left taxes on interest out of my calculations. I have several more calcualtions to run anyway, including the use of points borrowed 1 year ahead, and the subtraction of taxes I would pay on interest. President Bush may help lower this, but if he does I should probably save anything he saves me to supplement my social security when I retire :-).
I thought about this tax thing while I was sleeping, and it was based on remembering something in one of the messages that mentioned something about trying to find investments where the returns were not taxed.

Yes, I can put the money into a CD, keep it there, and get 7% interest (the 7% interest is contingent on my acting by the end of February and only guaranteed for 1 year).
Saving, when I have a goal or purpose has never been a problem for me. I even have a buffer for living expenses, for one year (down to 8 months of I buy into DVC), just in case I loose my job. Even Mr. Greenspan would be proud of me.

Yes, I will take vacations anyway, and likely vacations with accomodations pretty close to that of a 1 or 2 bedroom DVC unit. The question is how I am going to pay for these vacations and what risks I am going to take in the process. I do live on the West coast, this makes the DVC a much higher risk for me, then someone on the East coast.

4 years ago, when I looked into DVC, I found only ONE unhappy customer. While timeshares, as a class, have the highest rate of consumer complaints, the DVC has a good record.

While the re-sale value of DVC memberships is pretty good right now, the closer it gets to 2042 the harder these will be to sell.
Unlike most timeshare sorts of plans, this plan does expire.

Had the stock market continued with its irrational gains, I would have gained enough on my investments to pay for really nice vacations :-).

How long are the points good, before they expire. I noticed people trying to rent out points so they would not loose the points. I consider this a negative.

Are the Wilderness Lodge Villa units as orange as they look in the pictures. This will clash with my whole wardrobe, which is mostly pink. (another negative).

I am also considering buying into OKW via the resale market.

02-03-2001, 11:23 AM
Eileen, You need to do what is best for you and you situation. I am very much like you, I need to know all of the information before I can make a decision. It drives my husband batty. Our decision to purchase a DVC was probably the easiest and most exciting thing we have ever done. We are always so worried about how much money we are going to have for retirement or how much it is going to cost us to take our next vacation. Life is to short and now we have finally invested in our family and we can look forward to some wonderful quality time together and to me this is priceless.

Also don't worry there is not a lot of oranges in the VWL. They are however more north woods type of look. The color pink could be a problem.

02-03-2001, 11:47 AM
<BLOCKQUOTE><font size="-1">quote:</font><HR> I do live on the West coast, this makes the DVC a much higher risk for me, then someone on the East coast.

I don't understand. How does living on the West coast make DVC a bigger risk? If DVC were on the West coast maybe there would be some risk that CA would sink into the ocean but please clarify this statement for me.



02-03-2001, 12:54 PM
While I agree you need to consider finances before purchasing DVC I really don't get all these financial gyrations. Of course, some folks consider it part of the fun I guess. DVC is not an investment that will bring you any monetary gain. It says that multiple times in all the offerings. It even warns against depending upon rental income.

DVC is much more akin to purchasing a car. Do you consider the pros and cons of putting money into a CD versus a Corvette? Let's say you know you will have to drive. You really love the BMW but the Hyundai will get you there. But, you are well off and go ahead and purchase the BMW. In the DVC example....you know you like to vacation at WDW fairly regularly. You could stay at the moderates or look for deals to allow you to stay elsewhere. OR you could purchase into DVC and know the type of luxury accomodations you will have now and in the future. You check your finances and decide that you can handle the purchase and the "gas & maintenance" (yearly dues) without creating a hardship. Go for the DVC. On the other hand, you may not have the cash to lay out right now and that's okay. It's not worth going into hock to drive a BMW or to purchase DVC. Or you may not be planning to vacation fairly regularly at WDW, Vero or HHI and then maybe it's not for you either. But trying to project what the money spent would do spent differently is a way to make yourself crazy.

02-03-2001, 01:45 PM
We also evaluated actual costs of the investment, what the opportunity costs were, etc. The bottom line for us was that in almost five years of marriage, we had not taken a break from work.

DVC not only made sense financially for us, it also provided us with the opportunity to take a vacation once a year without any guilt. That's priceless.

http://www.wdwinfo.com/sites/family/jump1.gif All work and no play makes Lisa a silly girl

02-03-2001, 03:19 PM
Some people are just too anal and therefore could never really enjoy Disney, they're too wrapped up in worrying every second of their lives how much money they could have made, (Must be Republicans)) ;) µ

02-03-2001, 03:37 PM
<BLOCKQUOTE><font size="-1">quote:</font><HR> Some people are just too anal and therefore could never really enjoy Disney, they're too wrapped up in worrying every second of their lives how much money they could have made, (Must be Republicans) [/quote] Yes, and some people would jump off a cliff if Disney said so, neither affect the validity of this discussion. It's a lot of money and one needs to be comfortable about how they spend it. Besides, DVC is not appropriate for everyone and people need to decide if DVC is right for them IN THEIR OWN WAY.


02-03-2001, 03:52 PM
Sorry normr, your conclusion is way off. Republicans like to have fun, too.

http://www.wdwinfo.com/sites/family/jump1.gif All work and no play makes Lisa a silly girl

02-03-2001, 09:40 PM
I have no time for such financial nonsense. I'm much to busy planning my next visit to the BWV in November!!!!!

CBR Nov 1 to 3
BWV Nov 4 to 11
Back to work Nov 12

02-04-2001, 01:22 AM
<BLOCKQUOTE><font size="-1">quote:</font><HR> Some people are just too anal and therefore could never really enjoy Disney, they're too wrapped up in worrying every second of their lives how much money they could have made, (Must be Republicans)) [/quote]

I'm sure Rich will be here soon...



02-04-2001, 06:09 AM
I do not consider interest lost (opportunity cost) since I would be spending the money somewhere else on vacation anyway. I look at the DVC as a chance to enjoy my family and retain my sanity. If you are too worried about the money no vacation idea will ever make total financial sense unlwss you are wealthy enough to buy prime real estate.

02-04-2001, 09:31 PM
Since someone asked,
It is a higher risk for me, being on the West coast, because Airfare could make a vacation on the East coast less of a value for my money then a vacation on the West coast. The DVC values at DisneyLand are not a value to me, since I prefer the off-site accomodations when visiting DisneyLand, as they give me a higher bang for MY dollar.

Anyway, I've gotten a lot of data from this discussion and will make my decision and change it at least 10 times before my money is commited.
After the money is commited I am sure I will spend some time thinking I made the wrong decision.
Last time I went through this thinking, I invested in my company stock, which could have gone up more then enough to pay for this next vacation had I cashed in at the right time :-).

By the way, I am not a Republican, I am an Independent as is the majority of the population yet seem to share more views with the Green Party and even the Democratic party then the Republican party. Part of me wants Disney to be held responsible for draining so much of the Florida Swamp and be forced to return the swamp to way it was. Another part of me really thinks that Disney does a better job of providing entertainment then any other company, and just wants to take advantage of all the fun.
(But then we don't need to get into a political discussion here).

Lisa F
02-05-2001, 05:31 AM
But Disney is one of the most environmentally friendly companies out there. I'm not sure what you mean by saying on one hand you think Disney should restore the swamp land they developed, unless you feel that every piece of raw nature in the entire country (including the one your house is sitting on!) should be returned to its natural state. Disney does maintain a relatively large portion of its property as a natural wetlands habitat and has vowed to never develop that part, as was part of Walt's original vision for the property. The efforts they take to recycle (including processing and recycling used water, which is why when the droughts were encouraging brush fires a couple of years ago, Disney had plenty of water to still do daily fireworks displays).

Anyway, just thought you should know, and I apologize for the off topic response. Disney is a lot of things, but as a company I think they are one of the more "green" ones out there, so you can buy into DVC with confidence that devistating the environment is not one of Disney's evils.


"You employ stone, wood, and concrete, and with these materials you build house and palaces. That is construction. Ingenuity is at work. But suddenly, you touch my heart, you do me good. I am happy and I say 'This is beautiful.' That is architecture. Art enters in."
-Le Corbusier

02-05-2001, 06:00 AM
You are right, political and general environmental comments are WAY off topic for this thread about calculating interest in a DVC purchase and for this Board in general.
Those comments would be very appropriate for the Community Board and/or the DizBiz Board.