An article on "Does DVC save you money?"

[mustinjourney]

At the end of the day, after owning DVC for 10+ years, I have more money in my pocket now then if I did the same vacations without owning DVC. So for me, that means DVC has saved me money, yeah! That doesn't even include the fact that I could sell all my points and have more than twice what I paid for them.

Meanwhile after 5-6 years of being invested in oil stock, I am still down from my initial investment, boohoo for me!

Looking back it seems like buying DVC was the smarter purchase even though it is a "consumption" purchase as compared to an "investment".

but what about all those warm fuzzies you get from owning XOM? You mean you don't take pictures of you in front of your portfolio and post it to facebook?

 

[havoc315]

If you think putting away cash to pay for college at some point in the future is "saving money", then you have no idea of the cost of college! No one would call paying for college "saving money"!

And if you are putting away money for retirement that you then plan to spend later, then you are not saving money. You are just deciding to spend that money later.

That's the definition of saving. Saving is putting away money to use later -- whether for college, retirement, etc. Once you start paying for college or retirement -- you're no longer saving.

I've saved to try to afford private college for my two kids. We have forgone vacations, we have forgone good cars, a nice house. We put more aside for college than we pay in the mortgage for our small townhouse. Because saving is the priority for us. That's saving.

So let's use that as a measure of savings:
If at the time your kid was born, instead of buying 200 points of DVC for 30,000... you put that into a pretty conservative investment with a 3% annual yield... adding your dues to the savings instead of paying dues... After 18 years, that $30,000 would have grown to $90,000... (enough for 4 years at most public colleges)

So who "saved" -- the person who spent the $30,000 on DVC... or the person who turned it into $90,000 for college?

In reality, the DVC buyer didn't get "$50,000 worth of vacations for only $30,000!" -- Instead, what they really got was, "I got $50,000 worth of vacations... but paid $90,000!"

 

[havoc315]

As you note -- 1BRs are the least economical from a point use compared to cash rack rates. Point charts are roughly double for a 1BR vs a studio -- whereas Disney charges about 50%-65% more for a 1BR compared to a studio.

One of the reasons I almost never book 1BRs with my points -- if I want more space, I'd rather book a 2BR and invite someone else to join us (grandparents). Sure, it's extra people in the rooms, but that also provides free baby sitters and someone else to help get the kids going in the morning.

Plus the kids get some great memories with their grandparents and same with the GPs.

Yes, that's why it's wise to use the type of room you'd actually book.

In some cases, a 1 br is such a bad value that you're actually better off booking a cash room.

 

[mustinjourney]

I‘m late to this thread, but I just wanted to say that this premise is wrong. It assumes everything needs to be a win-lose process, when it could be a win-win one.

Why would Disney make an offer that saves people money? Because it locks in future profits for them (park visitors), while costing them very little (most expenses covered by dues). At the same time, owners save on their accommodations compared to other onsite choices that they prefer. In order for owners to save, they need to commit going to a Disney property every year or two. So it can be a win-win process as long as owners can make this commitment.

When we purchased, we found making the longterm commitment to be the hardest thing to do. Who knows what they want to do 10 years from now? What I was able to do, was see that we could use our points over the next 5 years. I did an IRR analysis, with a goal of a return above 0% with resale value of $0. I’ve gotten a positive return somewhere in the 6-8 year range of ownership. So as long as we own for that period, we will come out ahead, but no “savings” there, just spending less.

agreed.

and to go a step further -- it's all about reducing their risk exposure.

Just look at covid-19. I've taken 3 trips since the parks reopened in July. If I wasn't DVC -- I wouldn't have taken any.

So aside from my annual pass revenue, Disney has gotten at least another $2000-$3000 in food/beverage/souvenirs out of me when they would have gotten nothing.

In addition to lowering risk due to black swan events -- DVC also allows Disney to fully fund their construction costs within a year or two (probably sooner) of opening a hotel. That saves them tremendous amount of money in financing that they might otherwise do -- or frees up more cash to invest into park expansions and upgrades.

 

[havoc315]

The title of this thread is "Does DVC save you money?"

I said it before and I will say it again. If it saved people money, Disney wouldn't offer it.

I'm out.

Mostly correct. But that's neither a reason to be in or out.

Yes, Disney isn't giving anything away, they aren't a charity. They are charging as much as they can for everything they sell.
You give them $30,000 for vacations in 2060... Thinking you're getting $50,000" worth of vacations -- WDW invests that $30,000 and turns it into $100,000 by 2060. THey are the "winner," not you.
That's their business model.

But that doesn't make a DVC buyer into the "loser" either. No, you aren't really "saving money." But you may indeed be getting a good product at a fair price, that is a good value for you.

 

[Nabas]

As you note -- 1BRs are the least economical from a point use compared to cash rack rates. Point charts are roughly double for a 1BR vs a studio -- whereas Disney charges about 50%-65% more for a 1BR compared to a studio.

One of the reasons I almost never book 1BRs with my points -- if I want more space, I'd rather book a 2BR and invite someone else to join us (grandparents).

The 1-bedroom at Kidani Village and Bay Lake Tower have 2 bathrooms. They work better than 2 Studios if you have children or want a living room for everyone to gather in during the morning and evening. These are more family oriented than 2 Studios. Both sleep 5 and are better than cramming into a Studio.

My point is there are some scenarios where a 1-bedroom makes sense.

But I agree with your overall assessment that 1BRs are the least economical.

 

[RoseGold]

Actually, it's very possible some people have / can get ALL their $ back (especially those that picked up contracts around maybe 2011-2013 ish), but I wouldn't count on it going forward.

Almost all resale contracts bought in the last few years would meet this criteria. Heck, even if you count closing and sales commissions, my SSR would break even, and I only bought it a year and some change ago. That's the cool part about buying resale.

 

[mustinjourney]

The 1-bedroom at Kidani Village and Bay Lake Tower have 2 bathrooms. They work better than 2 Studios if you have children or want a living room for everyone to gather in during the morning and evening. These are more family oriented than 2 Studios. Both sleep 5 and are better than cramming into a Studio.

My point is there are some scenarios where a 1-bedroom makes sense.

But I agree with your overall assessment that 1BRs are the least economical.

my point was that if I go 1BR, I’d rather get a 2BR. Not two studios.

 

[4luv2cdisney]

Almost all resale contracts bought in the last few years would meet this criteria. Heck, even if you count closing and sales commissions, my SSR would break even, and I only bought it a year and some change ago. That's the cool part about buying resale.

That's great!

I haven't been following the last few years closely to know the pricing and I honestly don't know what closing and commissions and adding in all years of dues would bring it up to. I didn't want to overstate anything and get crucified! lol

 

[tigertides]

The author is a bit of a jerk. Most DVC members are not wealthy and do not fly First Class (unless you swing an upgrade). I think most DVC members are solidly middle class, perhaps towards the upper levels, but still not what you consider wealthy.

perhaps, but this statement is generally true:

“People who go to Disney every year don’t have much interest in saving money, because going to Disney is extremely expensive any way you do it.”

 

[Meglen]

perhaps, but this statement is generally true:

“People who go to Disney every year don’t have much interest in saving money, because going to Disney is extremely expensive any way you do it.”

Idk if I agree. Not saving money and putting some away for vacation are 2 different things. We have a decent savings and budget a trip every year or two.

 

[808blessing]

It reminds me of eating and exercising. Yes, you can burn off what you eat by exercising but it may take hours for a second of sweetness on your lips. Likewise, it takes seconds to spend/days to use what took weeks, months, for some years to earn and save. Spending is not saving.

But yes, you can actually 'make money' off of a DVC resale purchase. Absolutely.

 

[we"reofftoneverland]

That's the definition of saving. Saving is putting away money to use later -- whether for college, retirement, etc. Once you start paying for college or retirement -- you're no longer saving.

I've saved to try to afford private college for my two kids. We have forgone vacations, we have forgone good cars, a nice house. We put more aside for college than we pay in the mortgage for our small townhouse. Because saving is the priority for us. That's saving.

So let's use that as a measure of savings:
If at the time your kid was born, instead of buying 200 points of DVC for 30,000... you put that into a pretty conservative investment with a 3% annual yield... adding your dues to the savings instead of paying dues... After 18 years, that $30,000 would have grown to $90,000... (enough for 4 years at most public colleges)

So who "saved" -- the person who spent the $30,000 on DVC... or the person who turned it into $90,000 for college?

In reality, the DVC buyer didn't get "$50,000 worth of vacations for only $30,000!" -- Instead, what they really got was, "I got $50,000 worth of vacations... but paid $90,000!"

That’s a crappy investment! 18 years and it’s only gone from 30k to 90k?

 

[smisale]

Mostly correct. But that's neither a reason to be in or out.

Yes, Disney isn't giving anything away, they aren't a charity. They are charging as much as they can for everything they sell.
You give them $30,000 for vacations in 2060... Thinking you're getting $50,000" worth of vacations -- WDW invests that $30,000 and turns it into $100,000 by 2060. THey are the "winner," not you.
That's their business model.

But that doesn't make a DVC buyer into the "loser" either. No, you aren't really "saving money." But you may indeed be getting a good product at a fair price, that is a good value for you.

That's the definition of saving. Saving is putting away money to use later -- whether for college, retirement, etc. Once you start paying for college or retirement -- you're no longer saving.

I've saved to try to afford private college for my two kids. We have forgone vacations, we have forgone good cars, a nice house. We put more aside for college than we pay in the mortgage for our small townhouse. Because saving is the priority for us. That's saving.

So let's use that as a measure of savings:
If at the time your kid was born, instead of buying 200 points of DVC for 30,000... you put that into a pretty conservative investment with a 3% annual yield... adding your dues to the savings instead of paying dues... After 18 years, that $30,000 would have grown to $90,000... (enough for 4 years at most public colleges)

So who "saved" -- the person who spent the $30,000 on DVC... or the person who turned it into $90,000 for college?

In reality, the DVC buyer didn't get "$50,000 worth of vacations for only $30,000!" -- Instead, what they really got was, "I got $50,000 worth of vacations... but paid $90,000!"

I invested in 400 shares in disney at 89.00 dollars a share in march and now I cashed out at 198 per share. now that's an investment I think ill buy more points and it won't cost me a penny. invest 35,600 and got out at 79,200 in 12 months not 18 years

 

[Bing Showei]

I invested in 400 shares in disney at 89.00 dollars a share in march and now I cashed out at 198 per share. now that's an investment I think ill buy more points and it won't cost me a penny. invest 35,600 and got out at 79,200 in 12 months not 18 years

So you sold your 400 shares of DIS just a few weeks shy of hitting the mark for long term capital gains... to potentially buy a timeshare that “won’t cost [you] a penny.” Your logic is consistent, I’ll give you that.

 

[smisale]

So you sold your 400 shares of DIS just a few weeks shy of hitting the mark for long term capital gains... to potentially buy a timeshare that “won’t cost [you] a penny.” Your logic is consistent, I’ll give you that.

Thank u

 

[havoc315]

That’s a crappy investment! 18 years and it’s only gone from 30k to 90k?

Yes... I intentionally quoted investments with almost no risk. I believe I used a 3% return.
At at 8% return, you’d have $180,000.
At a 12% return, you’d have $324,000.

So really... when you spend $30,000 for “future” travel.. it’s akin to really spending $90,000 - $324,000.

So no wonder Disney sells this. They take your $30,000 and turn it into $300,000... while they give you $50,000 “worth” of vacations.
Under the right circumstances, it may be beneficial to everyone. But I have a hard time calling that “savings.”

I don’t like to talk about personal financials. I did recently buy DVC.. my kids are teens. Around the time they were born/young, did consider DVC. Instead, put the money towards college savings. Now have enough for about 3-3.5 years of private college for each of them saved up. (We have a couple more years to save up for that last year).

 

[havoc315]

... Not to stir the pot..
But at least as to 2042 expiring resorts, it's probably cheaper to rent points than to buy direct from Disney. So if you want to "save" as to those resorts, you'd "save" more just renting each year, as opposed to buying.

And actually running the numbers... at least if you are keeping the DVC through expiration, it's usually going to be cheaper to rent as opposed to buying, whether direct or resale.

Figure I'll show my math ---
You start with $30,000...
Person #1 -- buys 200 points for 30,000. (resale at some place like BLT)
They then pay about $1600 per year in dues (this will increase over time, but we will stick to the current dues)
Assuming keeping DVC for 40 years: They will pay a total of $94,000

Person #2 starts with $30,000. They invest it at a modest 5% return.
They still use 200 DVC points per year -- Like person #1 puts $1600 to dues, person #2 puts $1600 to renting points, and they take the extra cost out of their investment.
So at a rental rate of about $17 per point (pretty common renting directly from an owner).. The rental cost is $3400 per year. They use the $1600 that they would have put towards dues, and take the remaining $1800 out of their investment account. They do this for 40 years. (yes, point rental cost will increase.. but this essentially balances out the increase in dues, so both examples are paying a similar increase)
At the end of 40 years, person #2 still has $11,000 remaining in their investment account. So person #2 has actually paid a net cost of only $83,000.

Let's change the assumptions a little: Let's say the investments were more aggressive, with an 8% return:
Then, after 40 years, person #2 would STILL have $242,000 in their investment account. Even after using 200 DVC points per year: Overall, they turned a $180,000 PROFIT by renting points INSTEAD of buying them up front.

 

[RoseGold]

... Not to stir the pot..
But at least as to 2042 expiring resorts, it's probably cheaper to rent points than to buy direct from Disney. So if you want to "save" as to those resorts, you'd "save" more just renting each year, as opposed to buying.

I disagree. Let's take the most expensive, Beach Club.

https://www.dvcresalemarket.com/blog/best-economical-dvc-resort-to-purchase-fall-2020/
So, assuming a $14.67/point/year cost. Closing would add .25 to a 200 point contract, that's 14.92 to buy points. Sure, right now points are Covid distressed and going for that. But good luck getting Beach Club at 11 months for that.

 

[havoc315]

I disagree. Let's take the most expensive, Beach Club.

https://www.dvcresalemarket.com/blog/best-economical-dvc-resort-to-purchase-fall-2020/
So, assuming a $14.67/point/year cost. Closing would add .25 to a 200 point contract, that's 14.92 to buy points. Sure, right now points are Covid distressed and going for that. But good luck getting Beach Club at 11 months for that.

?? Of course I'm not going to get Beach Club at 11 months for $14.92 per point. But since I put $30,000 into an investment instead of locking the money into DVC, I have investment income that more than makes up for the difference...

So ok, Beach club resale is $159 per point. Dues are $7.44 per point. So if I buy 200 points at Beach Club: $31,800 up front. With closing costs, let's call it an even $33,000. 21 years of dues: paying $31,248 in dues, or $1488 per year. A grand total of $64,248.

Now, let's put the initial $33,000 in a 8% return investment. And rent our points every year.
So at $20 per point -- We will pay $4000 per year to rent. I'll take $1488 out of my pocket (just like a DVC owner), and I'll take the other $2522 out of my investment account.
Now, my 8% return actually almost exactly matches the money I need to pay for my point rental (in excess of the dues payment!)

So how much do I end up paying at Beach Club? Under this scenario, my total cost as someone renting points: $30,848

I "saved" almost $34,000 by renting the points instead of purchasing.

(Results change based on investment return rate and assumption point rental cost -- For example, if you only got a 4% return on the investment, and paid $19 per point rental in 2021 dollars, then you'd break even... renting would have the same ultimate cost as buying. But if it was a 5% return and $19 per point, you'd save a few thousands dollars by renting instead of buying. If it was 6% and $18 per point to rent, you'd save about $25,000 by renting your points)