Astounding!!! SSR owners save $145,000 over moderates by buying in

[Doctor P]

I have never been a defender of buying into DVC to save money, but decided to run the numbers through a spreadsheet to see what happened.

Here are the assumptions: 1) Buy 150 points. 2) Go for 8 nights during the Christmas season each year. 3) 3% inflation in room rates each year; 4) 3% increase in dues each year. 5) $100 per point to buy into SSR; 6) annual dues start at 4.50 per point; 7) you can get 8% on your money by putting it aside for your vacations; 8) If you pay cash, you can use the earnings from your investment account PLUS the amount you would have spent on annual dues to pay for your vacation each year.

Here are the pertinent facts:

1) Until the end of 2013, the person paying cash and investing their money comes out ahead and is adding money to their investment account (earnings plus dues are more than the cost of the vacation at a moderate resort).

2) From 2013-2034, the person paying cash has to dip into the principal of their investment account to pay for their vacations.

3) From 2035-2054, the person paying cash has to pay for the entire vacation out of current funds above and beyond the amount they would be paying in maintenance fees. The total amount of outlay above and beyond the DVC member's annual dues is over $145,000!!!!!!

Bottom line: It IS a ways out there, but DVC does save megabucks even over a moderate resort when one vacations with the same habits.

WOW.

 

[TammyAlphabet]

Thanks for the figures!!! I need an add-on!!

 

[greenban]

Dr. P:

You Rock!

I showed your financial analysis to my wife, and said, honey if we don't do an add-on right now, we've just lost over $140,000.00!

"In fact Dear, if we don't do 2 add-ons, we'll lose alnmost $300K!"

We'll she musta bought it, 'cause I'm back in ROFR X 2 now!

Thanks (I think)

-Tony

 

[unixadm]

DoctorP,

I had a similiar math thread I created last year shortly after I purchased:

Doing the math - The real cost/savings

I did a comparison of DVC Villa Cash rates to owning DVC.

BOTTOM LINE SAVINGS when compared to DVC villa cash rates: $63,296.46

 

[erikthewise]

SO, Doctor P, how are you going to spend your $145K?

 

[DisneyBill]

Now, it would be nice to see the facts in comparison to the Deluxe resorts. Maybe we too will buy an add on.

 

[unixadm]

Now, it would be nice to see the facts in comparison to the Deluxe resorts. Maybe we too will buy an add on.

Somewhere in between the $145,000 that Doctor P calculated for Moderates, and the $63,000 I calculated for Villas.

my guess would be somewhere around $85,000 savings for deluxes....depending on which deluxe.

 

[M4travels]

Dontcha just love saving money??!!!

Michael

 

[ericamanda01]

Thanks Doctor P! DH and I just started the paperwork this morning and when I show him this it will really hit home.

 

[Steamboat Bill]

wow...now I can afford to buy Disney pins from Disney rather than on eBay...

 

[Doctor P]

What's amazing to me is that I really try to tilt the assumptions somewhat against DVC. First, I assumed the $100 buy in, which no current owner has paid. Plus, we started with dues at $4.50 which is about 15% higher than the actual dues at SSR this year. The other amazing thing is that even buying one of the shorter term resorts at $100, you still make money over the moderate resorts. That amount appears to be about $20,000!

 

[rwcmath]

But 150 points don't buy 8 nights, not even in a studio at Christmas.

rwc

 

[T.E. Yeary]

Doctor P- I really liked your analysis! I copied it and handed it out to my staff. Thanks for taking the time to think it through and making it as realistic as possible. I'm sure you'll hear some "what if's", even so, it was a very good take on the whole $$$$$ of what's involved in the bottom line.

Tom

 

[Chuck8825]

It sounds great, but here is some "food for thought" you might want to consider:

- You need to keep in mind that the future savings you projected to occur in years 2035 through 2054 will be paid back in future dollars which will not be worth as much once discounted back to its net present value. Here is a quick example: if you were to receive $145,000 in 2054 and applied an 8.0% discount rate, the stated return on cash investments, the net present value would be $3,340. Not an impressive amount! Obviously if you assumed a significantly lower discount rate it would increase the net present value, but at that point you are just forcing the calculation to give the answer you want.

- What if maintenance costs start increasing at a much higher rate in 10 or 15 years? This might push the breakeven date out a few more years. Also, what incentive will owners have to continue to fund major repairs in the last few years of ownership. Some owners might decide they would prefer to give up the last few years rather than incur high maintenance costs.

- Lastly, if you paid for vacations with cash you might not feel compelled to take a vacation every year. However, with DVC you either use it, or loose it.

- What if

 

[rinkwide]

...if you paid for vacations with cash you might not feel compelled to take a vacation every year. However, with DVC you either use it, or loose it...

Exactly. I'm not vacationing this year and I let my 500 points go for $5500 cash (all for free, right here on these boards).

That is what you meant by "loose it", right? - i.e., Turn 'em loose for a tidy profit.

 

[unixadm]

- Lastly, if you paid for vacations with cash you might not feel compelled to take a vacation every year. However, with DVC you either use it, or loose it.

Not true....with DVC, you can bank a year of points and borrow from the following year, basically using 3 years of points in a single use year, and then not taking a vacation (or at least a DVC vacation) for the year prior and year after your planned trip, so a DVC vacation every 3 years.

As others have said, you can also rent or transfer points as well which will make a bit of a profit above what you paid for the points.

 

[JimC]

Anyone who wants a spreadsheet to do this for themselves can send me a PM with your email address.

 

[DVC Sadie]

Wow, I am so glad that I can save my dh some more money with another add on. Thanks to OP for this thread.

 

[Doctor P]

It sounds great, but here is some "food for thought" you might want to consider:

- You need to keep in mind that the future savings you projected to occur in years 2035 through 2054 will be paid back in future dollars which will not be worth as much once discounted back to its net present value. Here is a quick example: if you were to receive $145,000 in 2054 and applied an 8.0% discount rate, the stated return on cash investments, the net present value would be $3,340. Not an impressive amount! Obviously if you assumed a significantly lower discount rate it would increase the net present value, but at that point you are just forcing the calculation to give the answer you want.

- What if maintenance costs start increasing at a much higher rate in 10 or 15 years? This might push the breakeven date out a few more years. Also, what incentive will owners have to continue to fund major repairs in the last few years of ownership. Some owners might decide they would prefer to give up the last few years rather than incur high maintenance costs.

- Lastly, if you paid for vacations with cash you might not feel compelled to take a vacation every year. However, with DVC you either use it, or loose it.

- What if

You can take the assumptions for what they are--assumptions. But, I would suggest that for the most part they are extremely conservative rather than aggressive. If room rates go up by more than 3% that makes the analysis look better, and I frankly think that it is at least as likely for room rates to go up as fast if not faster than maintenance fees. Incidentally, there is no discounting error made here, IMHO. Remember that each year you are comparing apples to apples, and all the analysis is done in current dollars. Any money that stays in the system after a given year is paid interest, so earlier dollars ARE valued more than later dollars. In addition, the maintenance fees are given to the cash payer each year to use towards their vacation (I thought I had made an error in my analysis, but I realized that I HAD considered the maintenance fees on both sides of the equation by considering them a cost for owners and "free money" for cash payers in the out years, so all is fine).

 

[Splash Mountain Fan]

It sounds great, but here is some "food for thought" you might want to consider:

- You need to keep in mind that the future savings you projected to occur in years 2035 through 2054 will be paid back in future dollars which will not be worth as much once discounted back to its net present value. Here is a quick example: if you were to receive $145,000 in 2054 and applied an 8.0% discount rate, the stated return on cash investments, the net present value would be $3,340. Not an impressive amount! Obviously if you assumed a significantly lower discount rate it would increase the net present value, but at that point you are just forcing the calculation to give the answer you want.

- What if maintenance costs start increasing at a much higher rate in 10 or 15 years? This might push the breakeven date out a few more years. Also, what incentive will owners have to continue to fund major repairs in the last few years of ownership. Some owners might decide they would prefer to give up the last few years rather than incur high maintenance costs.

- Lastly, if you paid for vacations with cash you might not feel compelled to take a vacation every year. However, with DVC you either use it, or loose it.

- What if

I agree 100%. You must take into account the time value of money.