Credit requirements for DVC?

[Dean]

I'm new here and just retuned from 8 days at Walt Disney world. It was my 3rd trip. I'm interested in dvc. Can anyone tell me why I should buy direct and not thru a resale place please

The ONLY reasons that make sense for a new buyer are for very small contracts say 50 or less, if you can only get what you want direct and where the price difference is small. Some also look at speed of the transaction and financing but IMO these are never a reason unto themselves.

 

[suebeelin]

I'll lend you money at 12% interest rate, and all the same terms of a loan (dvc property as collateral). Lol.

I think I'm making 1% on my cash. Woohoo.

 

[Steven25]

The ONLY reasons that make sense for a new buyer are for very small contracts say 50 or less, if you can only get what you want direct and where the price difference is small. Some also look at speed of the transaction and financing but IMO these are never a reason unto themselves.

Thanks. So sounds like I should look into resale

 

[Dean]

Thanks. So sounds like I should look into resale

Assuming DVC makes sense for you and you can you can afford it. The title of this thread is credit requirements? but I feel if you can't pay cash you can't afford it.

 

[cricket_99]

Strongly agree. Save if you need to, then pay cash. And remember, you will have yearly maintenance fees due on top of any ongoing financed charges.

 

[beno44]

Assuming DVC makes sense for you and you can you can afford it. The title of this thread is credit requirements? but I feel if you can't pay cash you can't afford it.

Unless you are going to WDW regardless, then you can justify a certain level of finance fees..

 

[MsTessP]

"Unless you are going to WDW regardless, then you can justify a certain level of finance fees.."

Careful...this only applies if you would actually be paying those rack rates at deluxe villa properties. If you would be going to WDW regardless, but staying at a value resort, or even a moderate, then this statement does not apply. For myself, I put aside money that I would have been paying for a financed purchase for about 2 years then used that money with another amount I had put aside and bought resale for cash for less that 50% what it would have cost me to buy direct. We saved over $9 thousand, not including all the fees and interest payments we didn't have. We stayed in a moderate during those 2 years.

 

[beno44]

i had decided to do a summer 2016 trip, would have stayed at a deluxe.. have recently decided to buy a 160-200 point resale in time to book something.. my goal is to close by end of October ahead of 7 mos window.. wont have the entire amount, goal is 40%..goal is to have it paid off in 2 years... looks like about $1200 in finance costs, i am sure i will save that much in resort fees in 2016 and 2017 resort costs if i booked a room through Disney..

 

[Friendlyadvice2]

i had decided to do a summer 2016 trip, would have stayed at a deluxe.. have recently decided to buy a 160-200 point resale in time to book something.. my goal is to close by end of October ahead of 7 mos window.. wont have the entire amount, goal is 40%..goal is to have it paid off in 2 years... looks like about $1200 in finance costs, i am sure i will save that much in resort fees in 2016 and 2017 resort costs if i booked a room through Disney..

For the benefit of potential new DVC members on the forums, $1,200 in financing costs is heafty for a two year loan. Also, many say they'll pay it off in 2 years and something else comes along instead or it just becomes easy to make the "small" monthly payment while using cash flow for something else. The financing costs greatly increase then.

In addition, I think you'll find that your justification of the finance fees being offset by resort costs via Disney is not good financial analysis when you can rent points and stay at the deluxe for much less than going through Disney anyway.....I see no savings in your example. IMO since you are going to stay at a Deluxe anyway, to mazimize any savings, I suggest you rent until you can purchase a contract without financing.

 

[beno44]

Rent at $14 a point vs pay $6.30 per point maintenance fees.. costing me an extra $1232 each year.. correct? $2500 extra cost or $1000 in finance cost...

 

[freediverdude]

I kind of agree that if someone keeps renting, they may never be able to do the saving for the initial purchase (or take many many years to do so). Might as well go ahead and finance and then try to pay it off as soon as you can. I do believe there is an argument to be made that even IF you do Disney's most expensive financing and pay the minimum for the whole 10 years until it is paid off, that you will still save a lot of money over the course of the 50 year contract. 15-20 years is the break even instead of the typical 7, but you're still way way better off than spending money staying on cash for 20 years, and still have something that is worth thousands of dollars.

 

[beno44]

I am looking at it this way... i am now spending about $87 a point for AKV than the current $80 resale.. still way better than buying them direct

 

[Friendlyadvice2]

Rent at $14 a point vs pay $6.30 per point maintenance fees.. costing me an extra $1232 each year.. correct? $2500 extra cost or $1000 in finance cost...

No, I don't see it that way.

I rented points 1 1/2 months ago for $12/pt. and have secured a November reservation for family for $12/pt. In looking at the market, there's no need to pay $14/pt. You also haven't provided complete details for your situation, so I'll have to use some averages based on what you did disclose:

If you're now going to present your argument on a cost per point basis then you'll need to account for the amortized price/pt of your initial buy-in over the life of the contract, which for a 160 pt. AKV contract is somewhere around $2/pt. at the average going rate. That changes your $6.30/pt. to $8.30/pt. Your $1,200 in financing fees over two years, which I suspect will be much higher, will add another $3.75/pt. ($1,200/320 pts.) taking your cost from $8.30 to $12.05/pt. You're already spending more than what you can rent for, have taken on significant risk, and I have not yet accounted for the opportunity cost of your buy-in in the form of the time value of money which is conservatively 6.5% after taxes for the average person employing a buy and hold strategy. As I stated above IMO, financing affects the cost of your contract significantly. Rather than incur $1,200+ in financing costs, why not rent until you can purchase a contract outright? This minimizes your risk in case you can't meet your goals and provides savings.

 

[Friendlyadvice2]

I am looking at it this way... i am now spending about $87 a point for AKV than the current $80 resale.. still way better than buying them direct

Purchasing AKV resalse versus direct....Now that I agree with!!!!

 

[freediverdude]

No, I don't see it that way.

I rented points 1 1/2 months ago for $12/pt. and have secured a November reservation for family for $12/pt. In looking at the market, there's no need to pay $14/pt. You also haven't provided complete details for your situation, so I'll have to use some averages based on what you did disclose:

If you're now going to present your argument on a cost per point basis then you'll need to account for the amortized price/pt of your initial buy-in over the life of the contract, which for a 160 pt. AKV contract is somewhere around $2/pt. at the average going rate. That changes your $6.30/pt. to $8.30/pt. Your $1,200 in financing fees over two years, which I suspect will be much higher, will add another $3.75/pt. ($1,200/320 pts.) taking your cost from $8.30 to $12.05/pt. You're already spending more than what you can rent for, have taken on significant risk, and I have not yet accounted for the opportunity cost of your buy-in in the form of the time value of money which is conservatively 6.5% after taxes for the average person employing a buy and hold strategy. As I stated above IMO, financing affects the cost of your contract significantly. Rather than incur $1,200+ in financing costs, why not rent until you can purchase a contract outright? This minimizes your risk in case you can't meet your goals and provides savings.

The problem I see with your calculation is that you are amortizing the points cost over the life of the contract, but amortizing the financing over just two years of the contract. The financing should be added to the total cost of the contract that you're paying and amortized over the life of the contract, at least in my mind it should. So that $1200 should be spread over how many years left on AKV? Adding much less to the cost per point per year than $3.75. The real figure is probably somewhere around $.25 per point per year added to the $8.30 per point.

 

[beno44]

Now this is what I am unsure about.. My next trip is going to be summer of 2016, both teachers so can be flexible on exact dates...

I want to close by Oct so within 7 mos of June 1... save up as much as possible by then and finance the rest.. But thought about waiting to close until April or May so I can finance less..

Worth it and taking a chance of finding something at 1-2 months out??

 

[disneynutz]

Now this is what I am unsure about.. My next trip is going to be summer of 2016, both teachers so can be flexible on exact dates...

I want to close by Oct so within 7 mos of June 1... save up as much as possible by then and finance the rest.. But thought about waiting to close until April or May so I can finance less..

Worth it and taking a chance of finding something at 1-2 months out??

Only you know if it's worth it. You will probably find something if you don't care where you will stay and when.

Bill

 

[nalajms]

Worth it and taking a chance of finding something at 1-2 months out??

1 or 2 months out from late June through early August you'll have several choices for 1 bedrooms. Studios and 2b will mostly be limited to SSR. OKW and AKV (standard & savanah) will likely have some dates open.

I closed on an SSR resale last May (early May). Got the member number and online booking before Memorial day. Booked 4 nights in a SSR 2bd without problems. It was for late June. OKW was available, but I opted for SSR. I remember thinking my points will go into holding if my brother's family cancels on me!

 

[Dean]

Unless you are going to WDW regardless, then you can justify a certain level of finance fees..

Not in my opinion but I don't feel people should finance vacations in general including Disney or even go on vacation with significant consumer debt (which is the same thing BTW). I used to make exceptions for pending tax returns, bonuses and the like but the problem is when people finance, they add risk and often don't follow through on the payoff anyway. I know that's not very popular around here but that's how I see it. Better for 10 perfect candidates to never buy than for a single person to buy poorly and have their life fall apart. We see posts routinely about divorce, jobs losses, medical issues, even death of a spouse.

Rent at $14 a point vs pay $6.30 per point maintenance fees.. costing me an extra $1232 each year.. correct? $2500 extra cost or $1000 in finance cost...

It's not that simple. Not only are you ignoring the up front costs, you're ignoring the time value of money in the calculation. Certainly owning is cheaper than renting long term comparing DVC to DVC all else being equal. But IMO, renting a time or 2, even when DVC sounds perfect, is an investment in a potentially much better choice. Better to slow play, learn more, and make a better choice up front than make a poor choice quickly even if it costs a little more due to renting. I know some try to buy quickly to get that next trip in and count it as a reduction in their purchase and while it does offer MINOR savings IF one makes the perfect choice up front, often they don't. The real savings in renting at $14 a point vs owning is no more than $2-4 pp depending on the contract & home resort.

 

[beno44]

I guess different strokes for different folks, in the grand scheme of a largest investment, the extra cost vs extra savings stretched out over the length os the contract is tiny... and financing a portion of a AKV contract makes MUCH more financial sense than buying direct from DVC at the current offerings.