At Grand Californian now, going on DVC tour tomorrow...

[ELMC]

Cause I assume people have little bit of common sense to figure it out .

Possibly. But I think it's just as likely that people will actually believe that their timeshare is free each year because they paid for it up front. Perhaps I am being too pessimistic.

As to renting it is very possible that you won't be able to find someone to rent from you for what you want . Depending on how soon you realize your not going to use your points.

While I can see how you'd say this, I think that the problems with renting have been overblown. I closed on a June UY contract last year in mid May and had two weeks to rent out 100 points. I did so with no problem for $6 each, which more than covered the maintenance fees. With banking and borrowing, I don't think it's any more difficult to manage points for rentals as it is one's own personal vacations.

Not really getting why it bothers you if people shear there timeshares . I am sure people all the time share/give things with friends with value all the time .

Good question. It really doesn't bother me per se. I just find it interesting how differently people view timeshares as opposed to their other assets. I agree with you in that I'm sure people share things of value with their friends all the time. I'll go out to an expensive meal with friends and think nothing of picking up the check, just to be nice.

But I think the most direct comparison would be vacations. I would no sooner give my timeshare away as I would call up a travel agent and offer to pay for my friend's vacation, even though they're essentially the same thing. But I think that there are many people who would do the former and not the latter. I just find it interesting the mentality that some people form with their timeshares, specifically pertaining to the thought process that it is "free" each year because it has been paid for at an earlier point in time.

 

[dmunsil]

IF they can get their points rented, IF they didn't wait till the last minute, and IF they have points to rent at a resort someone wants for a decent price. That sounds like a headache to me when I can pick up the phone

Sure, yes. It's not nothing that you can trade in points for things quickly and easily. It's worth something.

In a sense, this is all a luxury purchase. It's like one group is saying, "My Rolex is fantastic! Look at the detail and workmanship!" And the other group is saying, "A Timex tells time just as well, and costs thousands of dollars less. Objectively, the Rolex is a bad bargain." Neither is wrong.

In this case, the specific issue is: is the ability to quickly change your points into hotel rooms and cruises (at a conversion rate that isn't great) worth around $40-50 per point? Some say it is, some say it isn't. I say it isn't to me.

For me, I wouldn't even get into DVC without the ability to rent. What happens when you don't want to go to a DVC resort OR an RCI resort OR a Disneyland hotel OR a cruise? Or if you can't go because of some emergency or conflict or financial distress? My answer is simple: I'll rent out my points. If I didn't have that option, I probably wouldn't buy into DVC at any price.

One thing about cash is that you can use it for anything. DVC points are like special cash that can only be used for Disney stuff. But given that in a pinch I can rent my points, that makes the whole transaction seem much less risky and it makes DVC points feel like owning a slightly illiquid security. Now that I can understand.

But the fact that lots of people buy into DVC and are very happy with their purchase, when they don't even know that point renting exists, suggests that lots of other people don't think like me. And that's perfectly OK.

 

[BestDadEver]

Can you explain how you get to $40-50 per point

 

[Missyrose]

Can you explain how you get to $40-50 per point

I believe they're talking about the difference between direct and resale prices, not the price of actually renting points. Basically you have the same ability to use your points to make a cash reservation when you've bought direct, it just requires a call to David's to find someone to rent your points and pay cash. Skipping that step costs thousands of dollars. But if you're uncomfortable with that option, you don't have to use it. Different strokes.

 

[dmunsil]

I just find it interesting how differently people view timeshares as opposed to their other assets. I agree with you in that I'm sure people share things of value with their friends all the time. I'll go out to an expensive meal with friends and think nothing of picking up the check, just to be nice.

But I think the most direct comparison would be vacations. I would no sooner give my timeshare away as I would call up a travel agent and offer to pay for my friend's vacation, even though they're essentially the same thing. But I think that there are many people who would do the former and not the latter. I just find it interesting the mentality that some people form with their timeshares, specifically pertaining to the thought process that it is "free" each year because it has been paid for at an earlier point in time.

I agree with you that from an economic viewpoint there's little difference, but I think being able to give someone a place to stay is a real tangible benefit. Part of the romance of buying a vacation home is that you will be able to magnanimously say to your friends and relatives, "Hey, why don't you use my condo in Vail next year - we can't use it and it'd be a shame to have it sit empty." It makes you feel good and them feel good, and that's part of the thing you're buying.

It's the same with a timeshare. The idea that other people can use it in the years that you can't is a selling point. Everyone wants to be the kind of person who can give away a valuable thing like a place to stay in a desirable location. Timeshares give everyone a chance to feel like they're a captain of industry with a vacation home in Florida.

So I totally get that. Somehow giving people money doesn't have the same romance. You wouldn't say, "Hey, why don't you stay in Vail next year - I'll give you enough cash to rent a nice condo while you're there." It feels a little weird.

What can I say? People aren't the kind of rational economic actors that they talk about in economics textbooks. This is exactly the kind of thing Kahnemann and Tversky wrote about in their books on behavioral economics. It's fascinating stuff.

 

[dmunsil]

Can you explain how you get to $40-50 per point

That's a rough difference between the resale point prices and the direct point prices. In other words, when you make the resale/direct decision, the only difference between resale points and direct points is that with direct points you can convert your annual point allocation to a cruise, Disney hotel, etc. in one quick step. With resale, you would need to rent the points and pay for the cruise, hotel, etc. with the proceeds and typically the proceeds from the points would be more than the cost of the cruise so you'd end up with money in your pocket.

So financially, direct is just a bad deal at current prices. The extra perks actually cost you money relative to renting the points and paying cash for the thing you want. Heck, by renting points you can pay for a non-Disney hotel or a cruise on Royal Caribbean.

However, as has been pointed out, if you're down to the wire and only have 60 days before your points expire, you would have to rent your points at "distressed" prices and wouldn't get enough money for the same hotel that you could book by converting your points to a hotel room. Again, that's flexibility and convenience. It's worth something. I just can't see it as worth (in my case) $58/point, which is the difference between the $130/point that Disney is charging for BWV and the $72/point I paid resale.

 

[BestDadEver]

That's a rough difference between the resale point prices and the direct point prices. In other words, when you make the resale/direct decision, the only difference between resale points and direct points is that with direct points you can convert your annual point allocation to a cruise, Disney hotel, etc. in one quick step. With resale, you would need to rent the points and pay for the cruise, hotel, etc. with the proceeds and typically the proceeds from the points would be more than the cost of the cruise so you'd end up with money in your pocket.

So financially, direct is just a bad deal at current prices. The extra perks actually cost you money relative to renting the points and paying cash for the thing you want. Heck, by renting points you can pay for a non-Disney hotel or a cruise on Royal Caribbean.

However, as has been pointed out, if you're down to the wire and only have 60 days before your points expire, you would have to rent your points at "distressed" prices and wouldn't get enough money for the same hotel that you could book by converting your points to a hotel room. Again, that's flexibility and convenience. It's worth something. I just can't see it as worth (in my case) $58/point, which is the difference between the $130/point that Disney is charging for BWV and the $72/point I paid resale.

Oh ok that makes sense . I though they were braking down the price per point used to book the room .

 

[frank808]

I see the $40 - $50 a point a little differently. Lets say you buy resale at VGC that costs $100 a point. Over the 46 years left on a contract you are paying a little over $2.17 a point. Buying direct is $165 which works to about $3.58 a point. So if I use my points that year for booking a room at dl hotel I would say the difference is not $40 a point but closer to $1.40 a point. I can see $40 a point if you are using it for dl hotel every year.

 

[ELMC]

In a sense, this is all a luxury purchase. It's like one group is saying, "My Rolex is fantastic! Look at the detail and workmanship!" And the other group is saying, "A Timex tells time just as well, and costs thousands of dollars less. Objectively, the Rolex is a bad bargain." Neither is wrong.

I always love reading the analogies on here. Most compare direct/resale to new/used cars. This is an interesting one. The problem is, I don't think there is an exact analogy because timeshares are so unique. So anytime we try to talk about DVC in terms of something else, a little bit is lost in translation. But interesting point of view.

I agree with you that from an economic viewpoint there's little difference, but I think being able to give someone a place to stay is a real tangible benefit. Part of the romance of buying a vacation home is that you will be able to magnanimously say to your friends and relatives, "Hey, why don't you use my condo in Vail next year - we can't use it and it'd be a shame to have it sit empty." It makes you feel good and them feel good, and that's part of the thing you're buying.

It's the same with a timeshare. The idea that other people can use it in the years that you can't is a selling point. Everyone wants to be the kind of person who can give away a valuable thing like a place to stay in a desirable location. Timeshares give everyone a chance to feel like they're a captain of industry with a vacation home in Florida.

So I totally get that. Somehow giving people money doesn't have the same romance. You wouldn't say, "Hey, why don't you stay in Vail next year - I'll give you enough cash to rent a nice condo while you're there." It feels a little weird.

What can I say? People aren't the kind of rational economic actors that they talk about in economics textbooks. This is exactly the kind of thing Kahnemann and Tversky wrote about in their books on behavioral economics. It's fascinating stuff.

Thanks for explaining a different point of view on this, I appreciate it. But tying back to an earlier post of yours, the fact of the matter is that if I'm not using my points, I am going to rent them for $11-13 a piece. So to me, giving points away is giving away $11-13 each, and I can't seem to get past that. To me I don't own 100 BLT points, I own $1,300 a year in potential gross revenue. The only questions is whether or not I choose to spend it on a vacation or take it in cash. But I think I'm in the minority with this level of rigidity in my thinking.

I see the $40 - $50 a point a little differently. Lets say you buy resale at VGC that costs $100 a point. Over the 46 years left on a contract you are paying a little over $2.17 a point. Buying direct is $165 which works to about $3.58 a point. So if I use my points that year for booking a room at dl hotel I would say the difference is not $40 a point but closer to $1.40 a point. I can see $40 a point if you are using it for dl hotel every year.

The problem with this analysis is that you are not paying the extra money over the course of 46 years, you are paying it now. So while it might make you feel good to amortize it over the life of the contract, it's not an accurate reflection of how you are impacted by the extra cost.

 

[dmunsil]

I see the $40 - $50 a point a little differently. Lets say you buy resale at VGC that costs $100 a point. Over the 46 years left on a contract you are paying a little over $2.17 a point. Buying direct is $165 which works to about $3.58 a point. So if I use my points that year for booking a room at dl hotel I would say the difference is not $40 a point but closer to $1.40 a point. I can see $40 a point if you are using it for dl hotel every year.

Sure. But say you have 200 points. Even with your analysis, you're paying $280/year for an option that most years expires worthless, and that in the years you use it allows you to forgo the 30-60 minutes of work it might require to rent out your points (assuming you use a broker; if you do it yourself it's much more work).

The years you stay at DVC resorts, which you will be most years, that $280 bought you exactly nothing. In the years you convert the points to a non-DVC hotel room, you pay not only the $280 extra for the points for that year (and the $280 for every year you didn't use your option), but also the difference in price between the cash value of the room and what you could get for the points via renting.

Basically it's like buying overpriced insurance. Say you didn't buy direct. What's the worst that could happen if you can't do a DVC stay and you're worried your points are going to expire? If you know about renting, you might have to actually rent your points, which could be a hassle. If you don't know about renting, your points might expire, losing you the entire value of those points for that year. In a situation where your points expire because you couldn't or didn't want to stay at a DVC resort, what are the chances that you have the desire to stay in some other Disney hotel or want to take a cruise (and can get a booking)?

I mean, that's the most expensive, least useful trip insurance I've ever heard of.

Then on top of that, dividing by the number of years is not a good way to analyze a lump sum payment for a benefit that accrues over years. You need to essentially do an annuity calculation.

For the 200 point hypothetical, the $65/point difference is $13,000. If you use 5% interest as your time value of money (a very reasonable number), that's worth $720/year. In other words, you could put that $13,000 in a mutual fund that pays 5%, take $720 per year out of it, and the fund would run out in 46 years.

Let's say you're more pessimistic about the time value of money. You don't think you can get more than 3%. Then your $13,000 is worth $520/year.

You get the picture. Financially, buying direct does not work in your favor. Convenience-wise, you're getting a small benefit for a lot of money.

 

[dmunsil]

I always love reading the analogies on here. Most compare direct/resale to new/used cars. This is an interesting one. The problem is, I don't think there is an exact analogy because timeshares are so unique. So anytime we try to talk about DVC in terms of something else, a little bit is lost in translation. But interesting point of view.

Thanks! Yes, a Rolex vs. a Timex is not a really good comparison. It's more like buying a plane ticket direct from the airline versus from a discounter. And some folks say, "When I buy from the airline I get double frequent flyer miles and a free drink coupon!" And we're saying, "the frequent flyer miles are worth $40 for a 2000 mile flight and the drink is worth $6, and the discounter is saving you $300."

Thanks for explaining a different point of view on this, I appreciate it. But tying back to an earlier post of yours, the fact of the matter is that if I'm not using my points, I am going to rent them for $11-13 a piece. So to me, giving points away is giving away $11-13 each, and I can't seem to get past that. To me I don't own 100 BLT points, I own $1,300 a year in potential gross revenue. The only questions is whether or not I choose to spend it on a vacation or take it in cash. But I think I'm in the minority with this level of rigidity in my thinking.

I think most people think that letting people use their vacation home is super cool because they are sticking it to The Man (which in this case is the hotel owners). Now, you're The Man.

If you own a B&B and you know you can rent it during peak season for $200/night, it's going to feel very different letting your hairdresser's aunt's best friend stay there for free than it does if you own a vacation cabin that most of the time sits empty gathering dust. For most people, their timeshare is more like a vacation cabin in their mental accounts than a money-making B&B. This is in one sense a flaw in their mental accounts. There are lots of those; we all have them.

 

[ELMC]

Thanks! Yes, a Rolex vs. a Timex is not a really good comparison. It's more like buying a plane ticket direct from the airline versus from a discounter. And some folks say, "When I buy from the airline I get double frequent flyer miles and a free drink coupon!" And we're saying, "the frequent flyer miles are worth $40 for a 2000 mile flight and the drink is worth $6, and the discounter is saving you $300."

You're getting closer...

I think most people think that letting people use their vacation home is super cool because they are sticking it to The Man (which in this case is the hotel owners). Now, you're The Man.

If you own a B&B and you know you can rent it during peak season for $200/night, it's going to feel very different letting your hairdresser's aunt's best friend stay there for free than it does if you own a vacation cabin that most of the time sits empty gathering dust. For most people, their timeshare is more like a vacation cabin in their mental accounts than a money-making B&B. This is in one sense a flaw in their mental accounts. There are lots of those; we all have them.

I think a lot of timeshares fall into the dusty cabin category. But the rental market for DVC is so robust and so easy to engage in, that I would have to put it squarely in the B&B category. I think my flaw is on the opposite end of the spectrum. At times I wish I would be able to look at my DVC ownership with a little more focus on the aspects of usage and a little less on the dollars and cents. Perhaps not to the point where I buy DVC and then look at the remainder of my vacations as free, but certainly a little more than I do now. But until I learn how to do that, my BWV trips are still costing me $13 a point, despite the fact that my maintenance fees and purchase price combined only total $7.12.

 

[frank808]

Sure. But say you have 200 points. Even with your analysis, you're paying $280/year for an option that most years expires worthless, and that in the years you use it allows you to forgo the 30-60 minutes of work it might require to rent out your points (assuming you use a broker; if you do it yourself it's much more work).

The years you stay at DVC resorts, which you will be most years, that $280 bought you exactly nothing. In the years you convert the points to a non-DVC hotel room, you pay not only the $280 extra for the points for that year (and the $280 for every year you didn't use your option), but also the difference in price between the cash value of the room and what you could get for the points via renting.

Basically it's like buying overpriced insurance. Say you didn't buy direct. What's the worst that could happen if you can't do a DVC stay and you're worried your points are going to expire? If you know about renting, you might have to actually rent your points, which could be a hassle. If you don't know about renting, your points might expire, losing you the entire value of those points for that year. In a situation where your points expire because you couldn't or didn't want to stay at a DVC resort, what are the chances that you have the desire to stay in some other Disney hotel or want to take a cruise (and can get a booking)?

I mean, that's the most expensive, least useful trip insurance I've ever heard of.

Then on top of that, dividing by the number of years is not a good way to analyze a lump sum payment for a benefit that accrues over years. You need to essentially do an annuity calculation.

For the 200 point hypothetical, the $65/point difference is $13,000. If you use 5% interest as your time value of money (a very reasonable number), that's worth $720/year. In other words, you could put that $13,000 in a mutual fund that pays 5%, take $720 per year out of it, and the fund would run out in 46 years.

Let's say you're more pessimistic about the time value of money. You don't think you can get more than 3%. Then your $13,000 is worth $520/year.

You get the picture. Financially, buying direct does not work in your favor. Convenience-wise, you're getting a small benefit for a lot of money.

So some people like whole life insurance and some will buy term life insurance. Different strokes for different folks.

I am not trying to start a war but just trying to put a different perspective on things.

 

[dmunsil]

So some people like whole life insurance and some will buy term life insurance. Different strokes for different folks.

See, now that's a great analogy, because whole life is a terrible deal.

But you're right; in a sense it's all about what feels right to each person. I think for many folks it just plain feels better to buy direct and know that you're not missing out on any perks, and won't ever miss out on any perks. That's worth a lot. It's not really a financial decision.

Us green eye-shade folks keep trying to get folks to look at the adding-machine tape and they just want to enjoy their DVC membership.

I am not trying to start a war but just trying to put a different perspective on things.

Absolutely. But, you know, you start throwing around numbers and I get all excited. I'm an engineer - I live for this kind of analysis. I hope it never feels like I'm attacking folks.

 

[BestDadEver]

So some people like whole life insurance and some will buy term life insurance. Different strokes for different folks.

I am not trying to start a war but just trying to put a different perspective on things.

And some people get both

 

[JWG]

And some people get both

In both life insurance AND DVC...
We have term and VUL policies AND direct and resale points...

That term & resale purchase sure is a cost savings over the other options. But that VUL and direct is letting me pay for some DDs college someday / travel more broadly.

 

[Iceman93]

But you're right; in a sense it's all about what feels right to each person. I think for many folks it just plain feels better to buy direct and know that you're not missing out on any perks, and won't ever miss out on any perks. That's worth a lot. It's not really a financial decision.

Us green eye-shade folks keep trying to get folks to look at the adding-machine tape and they just want to enjoy their DVC membership.

Absolutely. But, you know, you start throwing around numbers and I get all excited. I'm an engineer - I live for this kind of analysis. I hope it never feels like I'm attacking folks.

The first paragraph described me to a T.

The second paragraph made me think that maybe the folks in the direct-buy camp are like Walt while the folks in the resale camp are like Roy. In reality, it took both of them to make the magic happen!

And then I had to chuckle at the third paragraph because I'm an engineer too, but one who loves analysis only to the point where my gut takes over and tells me there's been enough number-crunching and now it's time to make a decision and move on! You definitely don't come across as attacking; on the contrary, I really enjoy your posts!

 

[JWG]

What happened to the OP? I want to know how the tour went and what they're thinking?

 

[BestDadEver]

What happened to the OP? I want to know how the tour went and what they're thinking?

They didn't go to the tour , are doing more research . It somewhere in all this mumbo jumbo .

 

[nyck]

The first paragraph described me to a T.

The second paragraph made me think that maybe the folks in the direct-buy camp are like Walt while the folks in the resale camp are like Roy. In reality, it took both of them to make the magic happen!

And then I had to chuckle at the third paragraph because I'm an engineer too, but one who loves analysis only to the point where my gut takes over and tells me there's been enough number-crunching and now it's time to make a decision and move on! You definitely don't come across as attacking; on the contrary, I really enjoy your posts!

This is soo true. I do think that some of us think like Walt and Roy. That is what makes Disney great, and I am glad they have options for everyone, those who can buy with cash out right and others who need to finance. In the end folks just need to do what feels right for themselves