Join DVC or invest buy-in cost

Discussion in 'Purchasing DVC' started by 720L, Jan 14, 2007.

  1. 720L

    720L DIS Veteran

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    My DH quickly put together some number to help us decide on DVC.

    We are still trying to convince ourselves that buying into DVC is the best
    option, financially. Consider the following.

    If you purchased Disney stock in 1987 when it was $5 per share, which is now
    worth $35 per share, you would have a 600% return on your investment or 30%
    per year averaged for 20 years. So if instead of buying into DVC you bought
    $15,000 worth of Disney stock today, 20 years from now it would be worth
    $90,000.

    Taking a 10 night stay once a year in a moderate resort at rack rate in
    today's dollars and figuring a 3.12% compounded annual rate increase for the
    next 20 years would cost you $45,190 total cost. Do the same calculation
    for a deluxe at rack rate and with a 30% discount would give $72,487 and
    $50,740 respectively.

    At the end of 20 years take the $90,000 balance of your Disney stock
    investment minus $45,190 total moderate resort cost over 20 years puts your
    Disney stock value at $44,810. This is money that you would not have if you
    had bought into DVC 20 years prior. Now if you subtract your Disney stock
    value of $44,810 from the total you paid for moderate resort stays over 20
    years, $45,190, you get $380, so essentially that is all it cost you to stay
    at moderate resorts over the last 20 years.

    $90,000 value of Disney stock at the end of 20 years
    -$45,190 Total cost over 20 years to pay rack rate at a moderate resort
    =$44,810 Real value of Disney stock adjusted for paying for moderate stays
    -$45,190 Total cost for 20 years of moderate stays
    =$ 380 Total cost to stay at moderate resorts over 20 years.

    Now lets look at a rack rate deluxe stay for 10 nights each year for 20
    years.

    $90,000 value of Disney stock at the end of 20 years
    -$72,487 Total cost over 20 years to pay rack rate at a deluxe resort
    =$17,513 Real value of Disney stock adjusted for paying for deluxe stays
    -$72,487 Total cost for 20 years of full price deluxe stays
    =$54,974 Total cost to stay at deluxe resorts over 20 years or $2748 per
    year.

    10 night stay per year for 20 years at a deluxe with a 30% discount

    $90,000 value of Disney stock at the end of 20 years
    -$50,740 Total cost over 20 years to pay rack rate at a deluxe resort
    =$39,260 Real value of Disney stock adjusted for paying for deluxe stays
    -$50,740 Total cost for 20 years of 30% discounted deluxe stays
    =$11,480 Total cost to stay at deluxe resorts over 20 years or $574 per
    year.
    NOTE: $574 per year is less than your dues would be each year for 20 years.

    Bottom line, the only way DVC makes sense is if you paid full price for
    deluxe resorts had you not joined DVC.

    Now the disclaimer, the assumptions based in my calculations assume Disney
    stock will perform at least as good as it did over the past 20 years for the
    next 20 years. Generally historical data is no predictor for future returns
    on a stock. A 30% discount at deluxe resorts is also not assured, but not
    unrealistic. I also did not assume that the yearly DVC fees would be also
    invested if you bought stock rather than join DVC, if you factor this in as
    well it comes out even more favorable to invest in stock over joining DVC.
     
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  3. tjkraz

    tjkraz <img src="http://www.wdwinfo.com/images/silver.jpg

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    OK, seriously, I don't want to be mean, but your entire analysis falls apart right there. Getting even a 10% annual return on investment dollars is often difficult these days. And most investments involve risk. The most secure investments like US Savings Bonds or bank CDs run about 5-6% annual return.

    To think that you can AVERAGE 30% return by pouring all of your money into TWDC stock is just completely unrealistic.
     
  4. Pennyguy23

    Pennyguy23 DIS Veteran

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    I agree, Pretty Bad:sad2:
     
  5. MIDisFan

    MIDisFan Mouseketeer

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    I have to agree with tjkraz. You should be more realistic in your assumptions if you are seriously considering DVC. A 30% return on your investment and a 30% room discount? It sounds more like you are trying to talk yourself out of buying DVC. JMHO
     
  6. Slakk

    Slakk House of Mouse Fan

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    If they can do it please show me where to sign up!

    I believe this - if you need to spend all that time manipulating numbers to make a decision then more than likely DVC is not for you.

    If you enjoy running around looking for cheap codes or traveling at value season and staying in value or moderate then DVC is not for you.

    DVC is not cheap but I will take my 5 nights at VWL in a 2BR vila over the All Stars any day!
     
  7. jimmytammy

    jimmytammy <font color=purple>Swivel, it's a hard habit to br

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    DVC is probably not a good choice for folks who are looking at it from a financial investment point of view. Is it better choice than most timeshares? I would say yes if most of your time you want to be in the Orlando area. If not, I would consider one of the other timeshares that may be equal to how DVC operates. And that is few and far between, IMO.

    To approach buying DVC, you need to from the heart. Will it give you what you need emotionally, will it give you much needed vacations for years to come, will it force you to vacation when otherwise you might not, will it provide you nicer accomodations that otherwise you might not be willing to or can afford those types of rooms at that given time, etc.?

    You put a lot of effort into your financial thinking, I will give you that. But you may be over analyzing a bit. I feel as if you may be analyzing your way right out of buying into DVC.

    Bottom line....do what your heart tells you.
     
  8. 720L

    720L DIS Veteran

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    "I believe this - if you need to spend all that time manipulating numbers to make a decision then more than likely DVC is not for you."

    That's what I think also! (MY DH posted that thread not me)

    "If you enjoy running around looking for cheap codes or traveling at value season and staying in value or moderate then DVC is not for you."

    We don't go only if there is a cheap code and we go during peak seasons. We also stay at AKL sometimes (with AP discount). What we don't enjoy is wasting our money on something we don't really like/need. We are trying to determine if we will like DVC.
     
  9. tjkraz

    tjkraz <img src="http://www.wdwinfo.com/images/silver.jpg

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    For what it's worth, here is why we DID choose to buy into DVC:

    Our purchase price = $79 per point

    $79 / 50 years = $1.58 per point, per year (initial investment)

    $1.58 + $4.12 dues = $5.70 total cost of each point per year (in 2007 dollars)

    A One Bedroom DVC villa at Saratoga Springs for Adventure, Choice and Dream seasons runs between 20 and 25 points per weekday. That means our OOP cost for a 1B is about $114 to 142 per night. That's less than what we would pay for a moderate room with reasonable discounting and substantially less than the cash rate for the same room ($416 to $546 per night with the 12.5% tax.)

    Granted that financial analysis is a bit over simplistic, but it's enough to convince me that we made a wise decision.
     
  10. Slakk

    Slakk House of Mouse Fan

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    It HAD to be a man!!! :lmao:

    Honestly if you are an AP holder and like to enjoy your trips then DVC is for you. I love the fact I can plan and stay in amazing suites versus a hotel room.

    For us Disney is relaxing now - DVC taught us to relax and enjoy our trips. We no longer commando.

    We travel at least once a year. This year we are staying at VB, BCV and VWL and in December we took a cheap weekend trip to HH plus have done BWV and SSR...for us our 2 years trips almost pay for half the cost of buying in!

    Plus we invite my parents (or somehow after we joing it became a joint vacation) and give our son some pretty cool memories.

    It is hard to compare a villa (with a full kitchen and washer and dryer) to a regular hotel room. We have stayed almost everywhere and find DVC is just so much more for the money.

    I am also an AKV lover so the new VAK is thrilling me to no end. I enjoy staying at all of the resorts - each one has its plusses. For us DVC allows us to have our annual WDW trip without the worry. We go when we want staying in the room we want.

    Next year we are treating my brother and his family as well as my parents - we NEVER would have been able to without DVC.

    Good luck with your decision.
     
  11. dumbo71

    dumbo71 DIS Veteran

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    Let me start by saying, I'm glad you are giving this a lot of thought because DVC is a large purchase.

    We purchased because we visit WDW at least once a year and planned on doing so for the foreseeable future. We also purchased DVC because we felt it was the best out there for an Orlando stay. We also purchased because we wanted larger rooms with seperate bedrooms. Our idea of vacation is not being crammed on top of each other so the Timeshare thing made sense.

    Notice I didn't talk about DVC as a money saving venture or an investment. It isn't either of those things. It is more emotional than anything really. It has not saved me money, in fact we spend more now at WDW than we did before DVC.

    Good luck with this decision. Sounds like you are really thinking it through which is very good.
     
  12. CapeCodFam

    CapeCodFam DIS Veteran

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    I think DVC and investments are 2 different things. DVC, for us, is an affordable vacation plan to the place we love the most. Investments' goals are to make money.

    Either way, it's a nice problem to have. ;)
     
  13. SuzanneSLO

    SuzanneSLO DIS Veteran

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    Whether DVC makes sense or not all depends on your assumptions. I ran some calculaitons using the the following assumptions:

    Current rack rate at a Moderate for an water view or king room in Oct: $185
    Current rack rate at BW for a standard room in Oct: $369
    Lest's assume both rooms are consistently available at a 30% discount, making them $129.50 and $251.30. With room tax of 12.4%, these rooms would currently be $185.56 and $282.46.

    Minimum purchase for a new DVC member is 150 points, but let's say you buy 154 points, which will get you 11 nights in a row at BWV in preferred or Boardwalk view in Oct. The current price of BWV from DVC is $95/point + closing costs, for a total of about $14,830. Annual dues are $4.8847 per point, making the dues that first year $752.24.

    Thus, that first year you will spend a total of $15,582.24 to buy into DVC and stay 11 nights at BWV. In contrast, if you stay at 11 nights at a Mod that year, you will pay $1,602.56 and if you stay 11 nights at BW, you will pay $3,109.84.

    Let's assume that you can consistently earn a 6% return on your investments after paying taxes.

    Let's assume that inflation will be 3.12% each year and let's assume that both room prices and DVC dues go up that amount.

    So the second year, as a DVC member, your dues will be $775.71, and paying them will allow you to stay for 11 nights at the BWV. In contrast, you will need to shell out either $1,652.56 for 11 nights in a Mod or $3,206.86 for 11 nights at the BW.

    At this point, a DVC member who is wants to maximize value for his or her $$$ would take the money they are not spending on rooms and invest it. This would allow an investment of almost $2,431.15 if not staying at the BW or $876.85 if not staying at a Mod.

    The money invested by the DVC member from not paying each year to stay at the BW quickly adds and up and by 2014, the DVC member will have more in the investment account than the non-member would have.

    Investing the difference not spent at a Mod adds up more slowly, with the break even point is in 2032 but the non-DVC member is economically better off to this point in time only if you assume that the membership itself has no value. Note that in 2042, when the BWV membership truly does have no value, the DVC member will have $30K more in the investment account than the non-member.

    I was glad the OP posted this and I was surprised that buying DVC did as well as it did. Of course, I really don't think 30% discounts are really doable, which makes DVC even better financially. That said, I think if that kind of discount can be consistently had, it will be at the last minute. For example, the current AP discount for late Feb to the end of March at a Deluxe is about 30%. If you are the kind of traveller who can take advantage of those kinds of deals, then DVC probably isn't right for you.

    But, as others have said, purchasing DVC only makes sense in comparison to a Deluxe hotel and the decisions on whether to stay Value, Moderate or Deluxe really comes down to an emotional one for most familes.

    DVC also only makes sense if you can plan ahead and be flexible. If you can't get a reservation for the room you want, then the room you have already paid for thru DVC is not worth that much to you.

    Best of luck to the OP in your decision -- Suzanne
     
  14. castleri

    castleri DIS Veteran

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    Two of my three contracts I was able to purchase outright - the third I am still paying off by switching balances whenever offered 0% balance transfers.
    My OKW and BCV contracts are currently worth more than I paid if recent for sale numbers are accurate. My SSR is a break even at this point because of commissions if I decided to sell. I didn't buy based on financial info but on the idea of prepaid vacations and at a place I love to visit, plus the options of trading for other places if desired (so far only Disneyland Hotel, GC and a week at Vaill). I look at my cost per trip as the maintenance fees x's the number of points at this point. If I sell before resale prices go down I really haven't lost that much. I would have spent money on vacations anyway so it wouldn't have been available to invest. I had occasion to stay at POR this past April and while it was a nice room and probably close to a DVC studio it just wasn't the same and actually cost me more when you figure it out. I would suggest you take the tour next time you are there and if possible rent some points for a stay of at least a couple of days. You really don't get the feel until you stay at a DVC resort. I would reccommend a 1 BR at OKW or a studio at any of the other resorts. As it is a big financial outlay you are right to do your research and make certain you would like what you are going to purchase.
     
  15. tomandrobin

    tomandrobin DIS Veteran

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    Forget about investing in Disney stock and all that crap.

    Bottom line is this, if you are planning to go to Disney every year for the next 8 plus years, and staying in deluxe/moderate accomadations, then DVC is for you. You will be going on vacations! The only question is where and how much you will be spending.

    Oh, and you need to go back an add a value for the DVC membership and put that into the "real cost" of DVC if you sold it in 20 years. It will be worth something, if you bought SSR, you would still have 27 years left on the contract. I doubt it would be worth less then what you will pay now for it.
     
  16. TammyAlphabet

    TammyAlphabet DIS Veteran<br><font color=red>Life Member - "excl

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    I think this hit the nail over the head! It reminds me of making a list of the pros and cons of marrying someone. If it doesn't feel right, it isn't.
     
  17. Granny

    Granny Yeah, I'm a guy

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    I think this sums it up pretty well. ::yes::


    Hey, I resemble that remark!! Besides, who would have thought a man would start out a post commenting about his DH?? :confused3
     
  18. 720L

    720L DIS Veteran

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    "Hey, I resemble that remark!! Besides, who would have thought a man would start out a post commenting about his DH?? "

    LOL!! Too funny! He obviously wanted it to sound like I was writing the post--believe me I wasn't. All I care about is going to Disney as often as I can, all the other stuff I leave up to him.
     
  19. kimberh

    kimberh DIS Veteran

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    I have had Disney Stock for about this period of time, and I am going to have to check all my paperwork. I do not believe that we have seen this type of return. The stock has taken some major hits through the years. It is doing well right now, but it had a hard time when Euro Disney was being built and several years after, then it bought Cap ABC , went back to issue price. All that being said, I do not think that we have experience this GREAT return that has been posted. I bought more when it hit Issue price, because I believed in Disney and the park attendance was high. Eisner was even quoted as saying, when asked about the stock price and Euro Disney,"Let the Mouse be the Mouse," all that being said, I will now read the rest of the posts.

    Or Maybe I do not understand how Stocks works, I just know what my balance is.
     
  20. kimberh

    kimberh DIS Veteran

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    This I can agree with! If you decide to buy, make sure it is a decision you can live with and most of all, Enjoy!!!!
     
  21. TenThousandVolts

    TenThousandVolts <font color=darkcoral>I just gave 2 examples for t

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    It was 5 in 87 and it is 35 now. But it is easy to find a 600% return investment when you are looking for it in a rear view mirror. If only it were that easy! I am very happy to see DIS at 35. I bought a few years ago and finally it is doin' something- hooray.
     

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