Need some wise advice...many years since purchase

Discussion in 'Purchasing DVC' started by Bethshaya, Jun 21, 2013.

  1. Bethshaya

    Bethshaya Mouseketeer

    Joined:
    Jun 13, 2004
    Messages:
    438
    I need some of your advice.

    We currently own BWV at 150 pts with an October Use Year.

    I was a single Mom for a long time, and 150 pts was great for getting a Studio every other year.

    Many years later, kids are grown, and I am remarried now. Our traveling style has changed.

    DH and I love the Cruise. But we don't have enough points to Cruise every other year.

    We usually get a verandah (6) and usually do the 7 day Eastern Carribbean (we don't like Mexico so don't do the Western). We also are thinking about doing other cruises, which of course would be more points (like Alaska or Med).

    We were married on the Magic in 2011, and just barely squeeked by with points. Now with the price increases, we won't ever have enough.

    We're trying to find out if it would be a better deal to purchase more Add On points to our existing contract.

    Not sure how much we should get, or if we need to worry about getting the same Use Year or even the costs.

    Can anyone help me walk through this before I call DVC?

    I don't want to get suckered into something before we know all about it and I know I'll get all into pixie dusy and fairy tales with the sales pitch.
     
  2. Avatar

    DIS Sponsor The Official Ticket Center is Orlando’s #1 discount attraction ticket agency, selling millions of Walt Disney tickets around the world.



    to hide this adverts.
  3. jillmc40

    jillmc40 DIS Veteran

    Joined:
    Oct 4, 2011
    Messages:
    537
    From what I have read since my short time being on planet DVC is that your best bet would be to rent out your points, take the cash and pay for a cruise. I do believe, that would be your wisest economic decision.

    From what I understand using Davids would be super easy (I have rented from them but not given them points) if you are less inclined to want to deal with it, but you could also probably do it pretty easy here on the board since you have a place that is pretty high demand in the fall for F&W...
     
  4. Bethshaya

    Bethshaya Mouseketeer

    Joined:
    Jun 13, 2004
    Messages:
    438
    What is "Davids"?

    PPS - Never mind, I found it.

    Not sure if I am comfortable renting out our points. Too much of a hassle. I like knowing that our rooms (and on DCL, our food as well) is a covered expense on our points and we don't have to worry about scrambling for cash or large deposits. We also don't have to think about it all year. We don't have to put money away out of every paycheck to cover it. The points are there to use when we want them. We just cover spending money and airfare (if needed).
     
  5. jillmc40

    jillmc40 DIS Veteran

    Joined:
    Oct 4, 2011
    Messages:
    537
    Davids DVC Rentals. They are used on this site, it is www.dvcrequest.com. I used them to rent points and it was super easy. They will give you 11.00 pp and find a renter for you!
     
  6. disneynutz

    disneynutz DIS Veteran DIS Lifetime Sponsor

    Joined:
    Dec 11, 2006
    Messages:
    19,341
    Things have changed, do you still want to vacation at WDW, how often?

    Do you enjoy DCL or would a different cruise line better fit your new interests?

    :earsboy: Bill

     
  7. ELMC

    ELMC DIS Veteran

    Joined:
    Jul 4, 2011
    Messages:
    1,981
    David's is a point rental broker. He matches owners who have extra points with clients wishing to rent points and takes a percentage cut. He has a great reputation and this system adds an extra layer of security for both renter and owner.

    But bigger picture, if you like cruising, you should simply pay cash to cruise. The value of any timeshare system is in its use of the core element of the system. In this case, the value of DVC is in staying in DVC resorts. Much has changed since you purchased your BWV contract, and not for the better. Point prices have more than doubled, so purchasing points for the sole purpose of cruising is going to be a very, very expensive proposition. Add in the fact that there has been a reduction in the number of cruises and staterooms available to book on points, and that there are extra fees for doing so, and it's not a great idea. It's also not a guaranteed perk, and can be eliminated completely at any time. If you are an existing owner who wants to use points every once and awhile for a cruise that's not an awful idea. But buying more points for the sole purpose of cruising probably is.

    If you're not using your DVC points to stay at DVC resorts anymore, then renting the points out is a great option. I don't know too much about your personal situation, but if you're not going to Disney anymore then now might be a great time to sell. Depending on when you bought, you could probably get more for your contract than you paid for it. Hope this helps! :)
     
  8. ImagineerTHAT

    ImagineerTHAT Imaginerd

    Joined:
    Jun 7, 2013
    Messages:
    189
    If you are using your points to cruise and don't want to rent, why not sell your deed? It's a great time to sell and you have a sought after location.

    If you aren't planning on using the DVC resorts and just want to cruise every other year I would get my money out of DVC, pay cash for a cruise and invest the rest in a low risk option.

    I definitely would NOT buy more points direct from DVC just to cruise on points. Would be throwing your money away.
     
  9. drusba

    drusba <a href="http://www.wdwinfo.com/dis-sponsor/index.

    Joined:
    Aug 19, 1999
    Messages:
    9,269
    As you have seen the point cost of the cruise has gone up over the years, and you should assume it will continue to do so. Points should not be purchased just to keep doing the cruise. Value wise it is not a good deal, and simply adding points to keep doing the cruise just sets you up for when the cruise point cost will again rise to a level above the points you have in three to four years. You would be better off renting the points you have and paying cash for the cruise.

    If you are still bent on getting more points, you should buy points based on their possible use for DVC resorts not the cruise. In your situation that would likely mean purchasing at the same resort. As to same use year, when you purchase through Disney that is what you will get.
     
  10. Bethshaya

    Bethshaya Mouseketeer

    Joined:
    Jun 13, 2004
    Messages:
    438
    We still go to DVC resorts from time to time and I don't want to sell my deed. I still want my children to be able to take their children to the resorts in the future. But would like to add some pts so that we have options on where we go in these "empty nest" years. 150 doesn't get us what it used to. We are currently planning a DVC visit in 2014 with the in laws, so we still go. Just not like clockwork, every other year like we used to.

    We won't always be going on cruises. But for the next few years (5-10), we would like to take a few. Seeing that we only go every other, or every third year on a vacation anyway, that means only 3 or 4 trips on a cruise.

    So maybe I need to get over my fear of renting out my points and just rent them and use the cash for these years. By then, we'll have grandkids and be back to doing the parks again with lil ones and pixie dust in tow.

    Thanks guys. I needed a Disney kick in the pants.
     
  11. robinb

    robinb DIS Veteran

    Joined:
    Aug 29, 1999
    Messages:
    31,459
    If you want to add on more points, it will probably be cheaper to go through a resale agent and yes, you will want your same use year.

    Here is a thread that will describe current successful pricing for DVC contracts: http://www.disboards.com/showthread.php?t=3001288

    That is the general consensus. Using points for cruising is not a great bargain and you get more "bang for your buck" by renting your points. If you rented out two years at once - 300 points - you would receive $11 per point from David or $3300. Your dues are $5.6458 per point, so you would clear $1606.
     
  12. jillmc40

    jillmc40 DIS Veteran

    Joined:
    Oct 4, 2011
    Messages:
    537
    I will let Bill and ELMC take over since they are the masters at this stuff...Anything I have learned about this has been from them :worship:
     
  13. disneynutz

    disneynutz DIS Veteran DIS Lifetime Sponsor

    Joined:
    Dec 11, 2006
    Messages:
    19,341
    Sounds like a plan. Good luck and have fun! :thumbsup2

    :earsboy: Bill
     
  14. lorie13

    lorie13 Mouseketeer DVC Gold

    Joined:
    Jul 1, 2010
    Messages:
    217
  15. ELMC

    ELMC DIS Veteran

    Joined:
    Jul 4, 2011
    Messages:
    1,981
    Yes, then I agree that selling your deed is not a good idea. Thanks for clarifying. :)

    Based on that information I feel even stronger that you shouldn't buy a new DVC contract to cruise. DVC is a 30+ year commitment. It doesn't seem like a good idea to purchase DVC for 3-4 cruises over the course of 10 years.

    It really is no big deal. But if you're that scared, you can always find someone to transfer your points to. That way you're not on the hook for a rental and you get paid in advance. Very little risk for you.
     
  16. DannysMom

    DannysMom DIS Veteran

    Joined:
    Jun 1, 2007
    Messages:
    2,026
    I agree that transferring points to another DVC owner is a great option. No need to worry about a reservation or an inexperienced renter, just "sell" your extra points to another owner, transfer & be done. You get your cash & they get their points. Seems like there are always owners that want to plan some sort of big trip, but need extra points to do so.

    Sent from my iPad using DISBoards App, please excuse any typos or autocorrects!
     
  17. dmunsil

    dmunsil Disney Uber-Nerd

    Joined:
    Jan 11, 2008
    Messages:
    857
    I just want to underline and in fact escalate what others have said about cruising being a bad use of points. When someone says that using points for cruises is a "bad use of points" you might think that means that the discount you're getting is lower. No, we mean that you're not getting a discount at all. This is a "negative discount" situation.

    Cruising with points costs MORE than the rack rate for the cruise. And there are no discounts with points, whereas you can often get discounts on cruises. So using points to take a cruise once in a while because otherwise they'd expire might make sense. Buying points specifically because you need them for cruises is throwing money away. Literally, not figuratively.

    Let's take as an example the August 24th Eastern Caribbean cruise. For the category 6 stateroom you mentioned, it's about 480 points for two people or $4,000 cash with no discounts. That's $8.33 per point.

    You might think that if you buy, say, Saratoga Springs, the dues are only $4.81 per point, so you're saving money. No, because you had to pay $130 per point to buy them, and that money comes with opportunity cost as well. To make it easier to compare, let's amortize that $130 across the 41-year remaining lifespan of Saratoga Springs. The historical rate of inflation for dues at Saratoga has been 2.6%, so let's assume it goes up similarly in the future. And let's amortize our $130 with payments that go up every year by 2.6%, so they're comparable; the whole total of dues plus amortized buy-in goes up every year the same. Then we can look at this year and see if we're saving money.

    We'll assume 4.5% interest, since that's the long-term interest on safe bond funds. The payment schedule for that $130 amortization starts this year at $4.51. $4.51 + $4.81 is $9.32, so you're paying $1 more per point, or a total of $480 more than the cash price, to take the cruise.

    The reason that renting ends up being a good deal is that you can get $11 for your points. So if you have points that cost you $9.32 and you can get $11, you come out ahead. At that point renting is like an investment. You have to believe that rental rates are going to go up as fast as dues, and I'm not sure that's going to happen.

    This analysis is not theoretical; you could take the money you were going to spend on points and put it in an actual mutual fund that really exists, and every year take out your amortized deduction, add to it the amount you would have spent on dues, and your money will run out in 41 years, and that amount of money will be enough to take the cruise and have cash left over for other stuff.

    In practice, it's hard to actually be that rigorous about money. But if you can be, you totally save.
     
  18. Bethshaya

    Bethshaya Mouseketeer

    Joined:
    Jun 13, 2004
    Messages:
    438
    Thank you!

    That was exactly the number crunching that I was looking for to make sense of it all.

    We'll stick with our current points and rent out if needed, or pay cash outright on a cruise and still have the points to use for an extended trip in the parks.
     
  19. ELMC

    ELMC DIS Veteran

    Joined:
    Jul 4, 2011
    Messages:
    1,981
    Correct me if I'm wrong, but doesn't this contradict your theory that since your purchase price is already spent, that you can actually look at the cost of the cruise in terms of the cost of the maintenance fees?

    I have two problems with this analysis. The first is that you are using a 41 year horizon, which is incredibly unrealistic and opens the door for a significant margin of error. The second problem I have is that you are assuming a 4.5% rate of return each year as if it were constant and guaranteed. However, if there's one thing we know about investments is that they contain risk and fluctuations in rates of return. If you invest your money now and for the first few years you experience flat or negative returns, the numbers are not going to work out the same as if you had an even 4.5% rate of return over a period of time. You have to admit that much of your analysis is theoretical and is subject to a tremendous margin of error. So while you might deem my straight division method of calculating the cost of points as being overly simplistic, I view it as being immune to many of the variables that can destroy your analysis, including the assumption that one will actually invest the money they would have spent on DVC in the first place. The opportunity cost is zero if one is going to spend the money elsewhere.
     
  20. dmunsil

    dmunsil Disney Uber-Nerd

    Joined:
    Jan 11, 2008
    Messages:
    857
    That's not my theory, so if that's the way you took it I can see why you didn't like it. :)

    Before buying something like this, you can look at it a variety of ways. You can amortize the whole buy-in, on the theory that you'll never sell it and accounting for sunk cost just complicates things. That's what I did. It would be better to cost it using net present value, but I started down that road and it got complicated to explain. I think the amortization example is easier to conceptualize.

    Note that I have never and would never say you can ignore the sale value of your points when calculating costs, except when you're figuring out what your brother-in-law should pay to use your points. :) Unless you don't like your brother-in-law, and then you should use double your cost as the buy-in factor. :lmao:

    Once you've actually bought something like DVC, you *should* choose to acknowledge sunk costs. The difference between what you paid for something and what you could realize from selling it is a sunk cost. So if the OP actually bought 240 points so she could go on a 480-point cruise every other year, she should account for, let's say, $60 per point as sunk cost and amortize the remaining realizable value of $70 (after broker commissions and fees) that she could get by selling the points.

    So if she did that, the amortized cost is now $2.12 per point for the first year, which added to the $4.81 dues means the ongoing cost is only $6.93. To me, this makes the key points just as well.

    So yes, by accounting for sunk cost she's getting a tiny discount on the cruise of about $1.35 per point, but she had to pay an eye-popping $14,400 of non-recoupable cost in order to get access to that discount. Perhaps needless to say, the net present value calculation for this whole scenario is negative, because in 41 years she will never realize $14,400 in present value of discounts unless the ratios change to be wildly in her favor. I'm sure you agree that buying with the expectation that the discounts in the program will get better would not be a prudent approach.

    If you already own points, accounting for the original cost of the points as the actual amortizable value is just perverse. You don't own something that valuable any more - you threw away a bunch of money when you bought in, and now you own something that's worth a lot less. Recognize it and move on. Pretending your ongoing costs are higher than they really are is just beating yourself up about your past financial mistakes. Fine, beat yourself up, promise yourself not to do it again, and then write off the sunk costs and move on.

    Sure, you could use a shorter horizon just to add a measure of safety. There are lots of things you could do to get a higher safety factor. The life of the points is 41 years, so that's the obvious period to use. But since it's already a bad deal at a 41-year horizon, it's an awful deal with a 20-year horizon. The shorter the horizon, the worse it looks.

    Well, I sort of agree. It's a fundamental problem with financial analysis of any future value - there is no guaranteed return. However, 4.5% is quite conservative. Vanguard's Lifestrategy Income or Inflation-protected bond fund, or several others have a long-term average that is higher than 4.5%, and really low volatility. The idea is that you account for the expected volatility by projecting a lower return than you think is actually likely, to give yourself some cushion.

    For a long time, long-term US government bonds, which are pretty much the definition of risk-free, were paying 5% or more. For that reason it's not uncommon to use 5% as an interest rate for generic time value of money calculations. I thought I was being extra conservative by using 4.5%. You can use 3% if you want to have extra cushion. It doesn't change the analysis that much.

    I can't help but see using an implied zero interest rate as ignoring opportunity costs, which lets folks believe they're saving money when they aren't. If someone owed you $100, you would not think that $5/year for 20 years was a reasonable payment, so you shouldn't pay yourself that way.

    I think it's totally reasonable to lower the interest rate if you want to be conservative, just not all the way to 0 (though keep in mind that lowering the interest rate makes timeshares look more attractive, not less). You can use a shorter time horizon, so you have some extra wiggle room. But straight division of the cost by the number of years does not seem prudent to me. It's miles better than ignoring the value of the contract entirely, which I agree is the much more serious and much more common error. So we're really actually very close on this. We both agree you have to account for the cost of the buy-in. We have a slight difference of opinion about the best way to do that accounting, but in the grand scheme of things at least we agree on the important stuff. :)
     
  21. bumbershoot

    bumbershoot DIS Veteran

    Joined:
    Mar 5, 2007
    Messages:
    48,353
    Alas she wouldn't be able to use the resale points for a cruise.
     

Share This Page