Any new thoughts on the OKW Extension

[RayRing]

I have been away from the boards for a couple of months.

Around last October and November, I read a number of posts detailing peoples thoughts about the OKW extension, and their reasons for accepting or rejecting the offer.

Now that some time has passed, and people have had more time to think, and talk about the offer, I am wondering if there has been any new thoughts that have influenced your decisions.

With the January 31st., 0% interest offer, and February 29th. 15/25 dollar deadlines are approaching, I wanted to come to a final decision for our family.


My DW is leaning towards accepting the offer to extend.

She lists the following reasons:
• Leaving more DVC Contract time for our children.
• 0% financing
• 15 dollars a point now vs. 25 dollars a point later.


I am leaning towards declining the offer.

I list the following reasons:
• It is hard for me to pay now, for something I won’t get the value out of for 34 years.
• I can plan ahead 8 to 10 years, but have difficulty thinking ahead 34 years. I am guessing that our kids will enjoy WDW for another 8 years or so. After that, their interest in WDW will decline, and taking Family Vacations, like we do now, will be difficult due to scheduling and the interests of the kids, based on their ages.
• I will be approaching my 80’s, when the current contract expires. I cannot see going to WDW very often at that age.
• Our kids will be around 40, when the current contract expires. I hope that they will be able to make and finance their own plans by then.
• I don’t know if WDW will be a yearly (or an every other year) destination spot, after 34 years. Disney does a good job of keeping things up, adding new things. However, after repeated visits, the wow factor is a lot lower now. Also, I see technology and other options available to everyone now, decreasing some of the wonder, that is (or was) a cornerstone of the visits to WDW).
• Potential lost value. Resale’s today for OKW look like they are around the low 70’s per point. I think (but don’t know) that after there are a number of extended contracts, and they start to turn over, that there will be a two level pricing of OKW resale’s. However I view that the difference between the a resale of a short contract and a long contract will not be 15 dollars, but closer to 5 (maybe 10). This makes me think of the new car effect (drive a new car off the lot, and it immediately is worth 80% of what you just paid).
• Maintenance fees. When we started as DVC Members, the maintenance fees were not a big deal, almost an incidental expense. Now they are approaching burdensome. I can stay in a moderate resort for nice long vacation, with what I now pay in maintenance fees (I know that a moderate, doesn’t even come close to a 1 and 2 bedroom, that we stay in now – but it would still be an onsite accommodation, without any major up front investment)
• BWV, BCV, and WL will be next on the extension track. I don’t know how this effects my decision, but I just think that there is a long term plan, and that offering extensions at these other resorts are part of that plan.
• New DVC Resorts. I wonder if an option would be to sell my current OKW contract, after buying a new one, when it becomes available. I don’t think this is really a good idea, or makes good financial sense. But it would provide another way of getting longer contracts, at a new locations, and the exact number of points we wanted.
• Crowds. More and more people in the same space. WDW keeps adding more accommodations, and more events, but it looks like they are just channeling more people into the same space. If this trend continues, I wonder what it will really be like in 5, 10 or 20 years (let alone after 34 years)
• Corporate Greed. (Probably isn’t a true reason, and shouldn’t be considered, but I still think about it). I know Disney is a company, and as such, they are suppose to maximize profit. However, it looks like it is their customers, that get shorted. Examples are: the Park Hard Ticket events (basically getting two days worth of proceeds, from one day), the Disney Dinning Plan (In 2007 it was a pretty good deal, in 2008 it is about an average deal, after another tweak in 2009 or 2010, it will no longer be a deal)

I know that this has been a long post, but I wanted to provide you with my current thinking.

I welcome others to share their thoughtful responses. I am hoping that by sharing information, that I will be better able to make an informed decision about accepting or rejecting the current OKW Extension offer.

Thanks.

 

[tjkraz]

There are a lot of other threads about this, but I'll just throw out some quick thoughts--albeit as a non-OKW owner.

I think a decision to extend is purely an emotional one. If you want the comfort of having the extra years, or leaving them to the kids, then go for it.

On a financial level, I think it misses all the marks. The present value of those 15 extra years is lot less than even the discounted $15 per point they are offering. With regard to resale value, there certainly will be a disparity between the extended and non-extended contracts. But I think the amount of the disparity is open to debate.

If you were to take your $15 per point and invest it with an 8% average return, you'll have about $32 per point 10 years from now. Will a 2057 contract be worth $32 more than a 2042 contract in ten years?

Regardless of your answer to this question, you have to admit it's a pretty low ceiling proposition as an investment. It's not like you stand to earn 15-20% on that added investment if you sell in a few years.

If it were me, I'd take the money earmarked for the extension and just buy an add-on at SSR or AKV. You won't get as many points, but you will get to start using them immediately (and every year for the next 45-50) rather than waiting until 2043 to start getting something for your money.

 

[gmboy95]

I am with you on the "leaning against"....this is totally something that has no value for 30 some odd years.....and frankly, when your kids are that old they can pay for it themselves .....I tell my son all the time, when 2042 comes just wheel my wheelchair into bay lake, and the bills on you after that!!!!

 

[MakKoen]

As a long time lurker, I would wanted to way in that we are not going to extend. I would rather buy an additional contract than invest the money in our current contract. (PS, I plan on posting in another year so just wait)

 

[nisiemouse]

We turned in our postcard not to extend months ago. Has anyone gotten the documents to be notarized yet?

 

[Chuck S]

Fom reading the boards, it seems like they are waiting to send out the paperwork for the owners to sign the denial until after the February reply deadline.

 

[nisiemouse]

Fom reading the boards, it seems like they are waiting to send out the paperwork for the owners to sign the denial until after the February reply deadline.

Thanks. I haven't been on the boards as much lately. We did get the credit on our dues statement for doing the paperwork.

 

[Saratoga Souris]

With only 200pts ..... $3000 isn't a whole lot of money in the grand scheme of life. I see it as an "perk" for the kids that the gov won't get a slice of.... we put all of their names on the contract with Right of Survivorship.... better than cash IMHO

 

[JimMIA]

I think Tim nailed it above. A decision to extend is an emotional decision, not a sound financial decision. Nothing wrong with that, but it makes no financial sense.

If I were going to put more money in DVC (which I'm not), I'd buy a 50 point addon somewhere and have those points for the next 35 years.

 

[OKW Lover]

We did the extension, even though we will probably expire before our OKW contract does. We did it for our children, grandchildren and yet to be great grandchildren.

 

[disney dumbo]

Just a few thoughts... maybe someone else has posted before... (and maybe it's already been shot down!)
On the resale market... if you have a shorter life... you may not be as appealing to the purchasers... maybe like a stripped contract. It maybe worth $15 now... to get a higher price if you want to ever sell. Like in 20 years when you are ready to sell... it will be your 14 year contract vs. someone else's 29 year contract. I believe 29 year contract will sell faster and definitely for more ... how much??? anybody's guess... surely more than $15 difference.

Of course if you have a huge number of points on a contract... I wouldn't do it... because it looks like the large contracts are harder to sell.

If you plan just to play your out contract to the original end... I wouldn't worry... you've made that decision years ago... you can't lose because you've already paid and made the plan. But if there might be a need either for future family enjoyment or resale potential... I think it might be important to extend.

I hope to see the other resorts contracts extended!

 

[tjkraz]

On the resale market... if you have a shorter life... you may not be as appealing to the purchasers... maybe like a stripped contract. It maybe worth $15 now... to get a higher price if you want to ever sell. Like in 20 years when you are ready to sell... it will be your 14 year contract vs. someone else's 29 year contract. I believe 29 year contract will sell faster and definitely for more ... how much??? anybody's guess... surely more than $15 difference.

That's true. But in order to do a valid extend vs. non-extend comparison, we need to consider what we would do with that $15 over the next 20 years. In my first post above I pointed out that if you invested the $15 (per point) and earned 8% annually over the next ten years, you'd have $32 to show. Carry that out to twenty years and you'd have nearly $70 per point.

So the question isn't whether the contract differential will be $15 in another twenty years--it's whether the contract differential will be greater than that $15 after it's been invested for the same period. In this case...will the contract with 29 years remaining sell for $70 more than the contract with 14 years left.

(And, to be blunt, if you're only averaging an 8% return on your investments over 20 years, you need a new investment adviser. )

As for how quickly the contract will sell, that's another topic that's open to debate. While a 14-year DVC contract won't offer the wild back-end savings of a 40 or 50-year contract, it may be quite attractive to folks with more limited desires. Imagine a new family who envisions taking Disney vacations just while the kids are relatively young.

A 14-year contract will certainly cost less than a 29-year contract or a 50-year contract, making it quite attractive to those fearful of a long-term commitment or those with limited budgets.

 

[disneymayz]

I only have 70 points which allows me to go 2 years not 1 then 3 not 1 then 2 not 1 etc. It only cost me around $1000. As others have stated, our kids or their kids will be able to enjoy it. My thoughts on the "I will just rather buy an add-on at another resort with the money." = now you have more money to spend a year because of the new add-on's annual dues.

With this know they have my down payment and I will not have to pay a penny till March 2009. They extra money we paid for the extenion will pay for itself in less than 1 week stay.

 

[rsinj]

.

 

[disney dumbo]

That's true. But in order to do a valid extend vs. non-extend comparison, we need to consider what we would do with that $15 over the next 20 years. In my first post above I pointed out that if you invested the $15 (per point) and earned 8% annually over the next ten years, you'd have $32 to show. Carry that out to twenty years and you'd have nearly $70 per point.

So the question isn't whether the contract differential will be $15 in another twenty years--it's whether the contract differential will be greater than that $15 after it's been invested for the same period. In this case...will the contract with 29 years remaining sell for $70 more than the contract with 14 years left.

(And, to be blunt, if you're only averaging an 8% return on your investments over 20 years, you need a new investment adviser. )

Not trying to argue... 'cause I love seeing all that number crunching... and I'm not THAT smart!

If you use your 8% return on investment theory, how much should someone ask for their OKW contract they purchase today for $70/pt, in 20 years (with 14 years left)?

For some reason, I keep thinking if Disney offered 2 contracts in the present market... one for 35 years at $85/point and one for 50 years at $100/pt... I'd buy the 50 year one.

Bottom line, I do agree with those that say it's an emotional decision. How much do you (or your vision of future travelers) love staying at OKW?

 

[sjdisneywedding]

(And, to be blunt, if you're only averaging an 8% return on your investments over 20 years, you need a new investment adviser. )

.

lol yeah sure,

another case of someone putting the numbers together to get the outcome they have already reached in their heads

fact is you shouldnt be basing todays purchases on what you might be make in 20 years or 30 years ro 50 years.

you could save that money today and have nothing to show for it in 20 years or you could have an equal amount or you might have more

 

[sjdisneywedding]

My thoughts on the "I will just rather buy an add-on at another resort with the money." = now you have more money to spend a year because of the new add-on's annual dues.

.

exactly true those 2 scenarios are not even in the same ball park. I still cant figure out why people keep using that one.

completely different

 

[sjdisneywedding]

On a financial level, I think it misses all the marks.

again depends on your point of view, to me it makes unbelieveable financial sense

so which is a better deal

15 years and 3750 points for $3750 and 15 years of MF's or
50 years and 2000 poiints for $3750 and 50 years of MF's

250 points extended= $3750
total points potentially used: 3750(250 points for 15 years)

new 40 point contract = ~$3750
total points potentially gained: 2000(40 points per 50 years, Ill even give you the 50 years although its less at this point)

as you can see you can use whatever math you want to get to your conclusion, it works either way

you can not debate that the same $3750 will get you almost double the points with an extension as with a new contract

not to mention the new contract has 35 years MORE of MF's

 

[Sabor]

again depends on your point of view, to me it makes unbelieveable financial sense

so which is a better deal

15 years and 3750 points for $3750 and 15 years of MF's or
50 years and 2000 poiints for $3750 and 50 years of MF's

250 points extended= $3750
total points potentially used: 3750(250 points for 15 years)

new 40 point contract = ~$3750
total points potentially gained: 2000(40 points per 50 years, Ill even give you the 50 years although its less at this point)

as you can see you can use whatever math you want to get to your conclusion, it works either way

you can not debate that the same $3750 will get you almost double the points with an extension as with a new contract

not to mention the new contract has 35 years MORE of MF's

The Error in your Logic is the New Contract MF are on 40 points a year
and the renewal is on 250 points a year , and those 250 points will MF starting in 35 years , so will be a lot higher per point than the MF being paid on 40 points today.

Even if they did not go up at all

15 years of points = 250 * 4.00 a point = $1,000 a year or $15,000
50 years of points = 40 * 4.00 = $160 a year * 50 or $8,000

A lot less Maintenance fees on the 40 point extension

 

[disney dumbo]

As I think about this more... sorry if this was all hashed out long ago... but to me the biggest rub is that they only give 1 year interest free.

Seems that all this money is pure gravy to Disney... they haven't put any additional funds out for this offering... sure they are giving up future rights to a property... but their out of pocket right now is zero.

To the individual owner... it is a surprise expense. It may be something more folks want... but haven't budgeted for.

And since this may be a model of offerings to other resort contracts that could be extended... maybe our thoughts and opinions should be expressed with hopes that someone might listen.

It would be interesting to know... if the interest free loans were given out for a longer time period... if more people would sign up for this offer.