Breaking Even

[hlhlaw07]

So I have seen a few people mention how many trips it took them to break even, and then I have seen others indicate that it actually likely takes more trips before break even point. So there seems to be different ways that people are calculating break even on DVC (I have noticed the same with calculating the financial sense of DVC). So, I was wondering how does everyone calculate their break even point? What do you take into consideration in your calculations and what do you ignore? Just trying to get an idea how some people break even (at least in their minds) after 2 trips, and some others indicate it will actually take about 10 years.

 

[skippytx]

Everyone probably does it differently. I'm going to go off of the rental price per point I would have paid renting other peoples BLT points , and compare that to the total amount I've spent (including dues) at BLT.

The thing about DVC though is you end up spending more money than you otherwise would at WDW, so it skews things. Like we have a big family trip planned Oct 2018, and then wasn't planning on visiting again until Oct 2021 for the 50th. We're going to have about 100 2019 points we can't use on the big 2021 trip so now we're thinking about a WDW trip we weren't planning on because "we have the points to use". We'll probably end up renting them, but we may book a studio for 5 or 6 nights in the late 2019/early 2020 timeframe. We don't go often enough to buy discounted AP's so I can't use that savings towards the 'break even' total, while others might. Also hard to estimate with the possible increase of point rental prices, and contract resale value.

I definitely know I won't be breaking even in the next 2 or 3 trips thats for sure. I'm using 456 points Oct 2018 though, which would have cost 7800 dollars to rent at current prices, and there's no guarantee I would have gotten the reservations I wanted. I barely got them with an 8AM 11 month advantage.

 

[frabjous]

I highly recommend doing your own numbers, because you can tailor them to exactly your scenario

Things to take into consideration:

1. Comparison to rack rate of the DVC room type you want to book into. You can get these here: https://www.mousesavers.com/2018-disney-world-room-rates-season-dates/
2. Comparison to rental rates, assume $17 a point
3. For both cash comparisons factor in annual price increases (you can use historical data for that)
4. Opportunity cost - determine what else you might do with the money, and what rate of return you are potentially giving up on, over the length of time you hold the property
5. Annualized initial cost for the expected purchase (divide by the number of years left on the deed term) multiplied by the length of time you intend to own
6. Estimated value when you sale if you intend to sale (which you will then subtract from your initial ownership cost, also be sure to adjust this according to 5, so you don't double count)
7. Cost of annual dues, factoring in historical price increases
8. AP, merchandise, and dining discount savings if you intend to buy some portion of points direct (note perks aren't guaranteed but iare a useful data point)
9. Estimated rental income (if you intend to rent points every N years)

 

[CraigInPA]

As skippytx said, it depends upon your metric. For me, I use a two formula approach:
1. If i was renting 200 points to use at $16 per point, I'd be paying $3200 a year for the room.
2. If I am renting my 200 points out, I take the income at $14 per point less the maintenance fees at $6.50 a point less the taxes on the remainder at $500, leaving me $1400.
If I always rent my points, I'm looking at 16 long years to break even.
If I rent my points out every other year, my break even period is 10 years.
If I don't rent out my points, my break even period is 7 years.

When I asked my wife to calculate it, she used a different formula. Her formula took the average CRO price we paid for a room, adjusted it for inflation, and then divided that into the cost of the points. She came up with just under 5 years. However, her formula has a flaw, in that we regularly used to be able to get 30% off a CRO room at the Poly or Contemporary. Recently, it's been tough to get more than 10% off. Going by the new rack rates with 10% off, and adjusting for yearly inflation, gives her payback period of less than 4 years.

Of course, all of these methods are just to make us feel good about our purchase. If we included time value of money and opportunity cost, the number of years would quickly skew upward and it would be obvious that the purchase of a DVC membership is not a quickly recovered investment.

 

[Matty B13]

3 happy little girls........ I'm already way ahead.

Since we are a family of 5 that becomes 7 with grandparents that help out with the little ones and enjoy spending time with their grand kids, our math is different than other people. We would need 2 hotel rooms instead of a 2 bedroom to have the same number of beds (minus the kitchen and laundry). So I figure that only after 3-4 trips we have broken even over cash rooms compared to DVC.

 

[Deb & Bill]

After 20 years, I'm not sure we have broken even because I doubt we would have gone as many times as we have without DVC. It might have been a one and done. But we have 44 trips under our belts since 1997 when we first bought in.

 

[frabjous]

3 happy little girls........ I'm already way ahead.

Since we are a family of 5 that becomes 7 with grandparents that help out with the little ones and enjoy spending time with their grand kids, our math is different than other people. We would need 2 hotel rooms instead of a 2 bedroom to have the same number of beds (minus the kitchen and laundry). So I figure that only after 3-4 trips we have broken even over cash rooms compared to DVC.

Thats funny. Our pattern is similar. Many of the trips are a party of 6 with the grandparents in a 2 bedroom, at VGF.

 

[frabjous]

After 20 years, I'm not sure we have broken even because I doubt we would have gone as many times as we have without DVC. It might have been a one and done. But we have 44 trips under our belts since 1997 when we first bought in.

"Break even" is certainly a funny metric. For example, if you plan to eventually sell and not use the contract to term you practically start off at "break even" in terms of initial purchase cost, because you only have opportunity cost, inflation and transaction costs to make up for, since you tend to make most of your money back at sale. If you plan to own the full term, then you are still focusing on what is only ~ 1/3 the total cost to own (dues + initial purchase).

I prefer to compare the expected cost per trip for equivalent value instead.

 

[4luv2cdisney]

My DVC purchase was 10K and came from my normal vacation savings account, so I did not calculate opportunity costs - which is the big point you will see a lot of disagreements on with posters here. Basically, we did not vacation in 2017 and used 2017 and 2018 vacation funds to buy in. If I was forking over 40K up front and it was coming out of an investment account, I'd running some different numbers.

So, I based my break even by comparing to how I would have taken my Disney vacations had I not purchased DVC.

For us, that was 2 rooms at POR with (hopefully) a free dining discount. Basically, we had a budget of 5K per trip and feel that's pretty accurate as far as what the actual cost would be.

Once I add in AP's, dues, and food for our 1st 2 trips to our initial purchase, I figure we are out 15K but after that the per trip cost will drop to only dues for rooms plus tix and food.
Trips should then run us about $3K each (short term calc). I originally thought we'd break even in 3 trips, but it's honestly more like 4....but i think we will be a little ahead by #4 PLUS we will be staying at the Boardwalk. Something we probably would not have done otherwise.

The thing is you have to do a lot of guessing. Hindsight will be 20/20, but for now I am assuming those 2 rooms at POR will increase more than my dues and that there will still be DVC AP's available to buy. That's the best I can do.

 

[icc2515]

Here is what I believe. If I have to calculate how many trips to break even on my DVC purchase, then I should not have bought the DVC to begin with. I know that I am a cheapskate and I know that I am staying in a much much nicer hotel than I would be if paying cash. I am very happy with that. I know that I paid significantly less buying resale than all the people that are buying direct right now. I know that I get to go to Disney 4 or 5 times a year. I know that if I did not own a bunch of DVC points that I would go maybe once and probably stay offsite some times.

Now if you really want the formula you should use: (Cost of points+closing costs+ any finance fees+(yearly maint fees+(yearly maint fees*1.3% per year that you are going to own)-the cost of whatever hotel you were going to stay in (be real here use the all stars not the GF grand villa cash price)* the number of trips per year you were going to go (this number might be .5 or .25) now add back in the number of trips you will be taking because you have a few more points that you need to use up plus the cost of airfare/driving plus the cost of food (not the cheap places you are in the DVC now so we are talking table service and you can deduct the DVC discount from that), plus the annual passes that you are inevitably going to buy, and don't forget the extensions or extra trips because the are having a DVC party in one of the parks, plus the extra points that you will also need eventually, plus the DVC special merchandise you will be buying, plus tipping bell services when you have a split stay because you cannot get a full week the 1st week in December in a standard at BLT and need to go to BWV for 1 nite and then AKL for a nite and heaven forbid SSR for the rest of your trip (of course all on your SSR points) plus the cost of your time stalking the DVC website looking for those extra days every 15 minutes plus the extra luggage you will have to buy because you are going so much that the airlines tear up your current bags, plus the cost of dog, cat, ferret, etc boarding, plus extra sunscreen umbrellas, ponchos, snacks less the cost of renting your points (but seriously you don't have any extra points to rent you need more points)....Well I think you are beginning to see why the calculations are pretty useless.

Take solace in knowing that you are going to have some really really nice vacations.

Now I have to go see if I have enough points to squeeze in another trip some time this year.

 

[mustinjourney]

I figured that if we stayed in deluxe hotel rooms like we had been previously, we were dropping about $4500-$5000 a week just for the room. I amortized the upfront cost of our VGF points and I think it came out to be around $5 or $6 a point...so with the MFs, our points, in today's dollars, cost about $11-$12 a point. I then multiply that by number of points used for our stay and then calculate the difference between what our trip would have been had we stayed in the hotel.

With that said, we actually haven't even stayed in a studio room yet. Rather, we have done two weeks in the 2 BR units since we have used DVC to bring each set of grandparents on a trip. Even at 350 points for the week, that is still cheaper than paying for a hotel room at GF. If you compare it to the cost of what a 2 BR cash rate is, I've practically already broken even since those go for like $2000 a night. 14 nights * $2000 is $28000. Our costs were around $40000 in total, so after just two trips, I'm not far off if you calculate it that way. Of course, there is no way we would ever drop $2000 per night on a single 2 BR unit -- so it's a little disingenuous to base it on that.

We have also used the AP discount, which has already saved us $600 on park tickets.

 

[disneynutz]

No such thing as breaking even, only other ways for Disney to get your money!

Bill

 

[DougEMG]

I've used a number of different methods to guestimate my break even point. The most basic one was to take my total purchase price per point and divide that by rental rate less the annual MF. So if purchase cost is $100, rental rate is $15 and MF are $6, then $100/($15-$6) = 11, so it would take me 11 years to break even (i.e. get my $100 back).

With prices now over $200, it is going to take a long time for someone to break even. Realistically you are now going to have to start assuming that your timeshare is going to have a decent resale value to make buying at these prices work out.

 

[4luv2cdisney]

I've used a number of different methods to guestimate my break even point. The most basic one was to take my total purchase price per point and divide that by rental rate less the annual MF. So if purchase cost is $100, rental rate is $15 and MF are $6, then $100/($15-$6) = 11, so it would take me 11 years to break even (i.e. get my $100 back).

With prices now over $200, it is going to take a long time for someone to break even. Realistically you are now going to have to start assuming that your timeshare is going to have a decent resale value to make buying at these prices work out.

Ah yes...trying to make sense of a DVC purchase by comparing to point rental. It's really gonna be tough!!!
I feel like rental prices have to move upward soon, don't you? Or have they already recently? For the price of a discounted moderate, you can stay in a studio at OKW or SSR...same for BWV if you can get a standard....not much more for many of the others. It really is a good deal. I just happen to be an untrusting control freak that likes to have the option to change my mind and could never handle renting points. lol

 

[frabjous]

I've used a number of different methods to guestimate my break even point. The most basic one was to take my total purchase price per point and divide that by rental rate less the annual MF. So if purchase cost is $100, rental rate is $15 and MF are $6, then $100/($15-$6) = 11, so it would take me 11 years to break even (i.e. get my $100 back).

With prices now over $200, it is going to take a long time for someone to break even. Realistically you are now going to have to start assuming that your timeshare is going to have a decent resale value to make buying at these prices work out.

Here is another way to look at a simplified generic model like this. The annual rate for DVC is ~ $9/pt accounting for both dues and initial cost. The 11 month rental rates are $17 per point. That equates to a 47% savings ratio. Assuming a 50 year term, if you go every year, after 26.5 years, the remaining 23.5 years of your 50 year term are fully paid for by the savings of the previous years. If you only hold the contract for 20 years, and only make the depreciated amount back, your last 9.4 years are paid for in savings. If you hold the contract for 10 years, the last 4.7 are paid for in savings. If you hold the contract for 5 years, the last 2.3 years are paid for.

 

[SherylLC]

Here is what I believe. If I have to calculate how many trips to break even on my DVC purchase, then I should not have bought the DVC to begin with. I know that I am a cheapskate and I know that I am staying in a much much nicer hotel than I would be if paying cash. I am very happy with that. I know that I paid significantly less buying resale than all the people that are buying direct right now. I know that I get to go to Disney 4 or 5 times a year. I know that if I did not own a bunch of DVC points that I would go maybe once and probably stay offsite some times.

Now if you really want the formula you should use: (Cost of points+closing costs+ any finance fees+(yearly maint fees+(yearly maint fees*1.3% per year that you are going to own)-the cost of whatever hotel you were going to stay in (be real here use the all stars not the GF grand villa cash price)* the number of trips per year you were going to go (this number might be .5 or .25) now add back in the number of trips you will be taking because you have a few more points that you need to use up plus the cost of airfare/driving plus the cost of food (not the cheap places you are in the DVC now so we are talking table service and you can deduct the DVC discount from that), plus the annual passes that you are inevitably going to buy, and don't forget the extensions or extra trips because the are having a DVC party in one of the parks, plus the extra points that you will also need eventually, plus the DVC special merchandise you will be buying, plus tipping bell services when you have a split stay because you cannot get a full week the 1st week in December in a standard at BLT and need to go to BWV for 1 nite and then AKL for a nite and heaven forbid SSR for the rest of your trip (of course all on your SSR points) plus the cost of your time stalking the DVC website looking for those extra days every 15 minutes plus the extra luggage you will have to buy because you are going so much that the airlines tear up your current bags, plus the cost of dog, cat, ferret, etc boarding, plus extra sunscreen umbrellas, ponchos, snacks less the cost of renting your points (but seriously you don't have any extra points to rent you need more points)....Well I think you are beginning to see why the calculations are pretty useless.

Take solace in knowing that you are going to have some really really nice vacations.

Now I have to go see if I have enough points to squeeze in another trip some time this year.

I love this post. Seriously, laughing out loud.

 

[kmorlock]

Here is what I believe. If I have to calculate how many trips to break even on my DVC purchase, then I should not have bought the DVC to begin with. I know that I am a cheapskate and I know that I am staying in a much much nicer hotel than I would be if paying cash. I am very happy with that. I know that I paid significantly less buying resale than all the people that are buying direct right now. I know that I get to go to Disney 4 or 5 times a year. I know that if I did not own a bunch of DVC points that I would go maybe once and probably stay offsite some times.

Now if you really want the formula you should use: (Cost of points+closing costs+ any finance fees+(yearly maint fees+(yearly maint fees*1.3% per year that you are going to own)-the cost of whatever hotel you were going to stay in (be real here use the all stars not the GF grand villa cash price)* the number of trips per year you were going to go (this number might be .5 or .25) now add back in the number of trips you will be taking because you have a few more points that you need to use up plus the cost of airfare/driving plus the cost of food (not the cheap places you are in the DVC now so we are talking table service and you can deduct the DVC discount from that), plus the annual passes that you are inevitably going to buy, and don't forget the extensions or extra trips because the are having a DVC party in one of the parks, plus the extra points that you will also need eventually, plus the DVC special merchandise you will be buying, plus tipping bell services when you have a split stay because you cannot get a full week the 1st week in December in a standard at BLT and need to go to BWV for 1 nite and then AKL for a nite and heaven forbid SSR for the rest of your trip (of course all on your SSR points) plus the cost of your time stalking the DVC website looking for those extra days every 15 minutes plus the extra luggage you will have to buy because you are going so much that the airlines tear up your current bags, plus the cost of dog, cat, ferret, etc boarding, plus extra sunscreen umbrellas, ponchos, snacks less the cost of renting your points (but seriously you don't have any extra points to rent you need more points)....Well I think you are beginning to see why the calculations are pretty useless.

Take solace in knowing that you are going to have some really really nice vacations.

Now I have to go see if I have enough points to squeeze in another trip some time this year.

Here's my two cents: my break even is knowing we can plan 11 months out, not deal with 15 calls to Disney Resort Reservations line to see if every pin code, or posted deal applies to our dates. That alone is pretty priceless. Knowing our family will get to return every year or even multiple trips per year and build some fantastic memories, is icing on the cake. The break even for us isn't in the numbers. We know it was an investment in family time and something that allows us to share what we love with those we love.

 

[com_op_2000]

Original purchased in '93, added on in '98 and '11.
Average @7 trips per year from 1 - 14 nights including 37 * 2 people nights on DCLs with points, two 7 night RCI exchanges, and two 3 night Concierge Collection exchanges.
The family time, travel, vacations I never would of paid OOP for, entertainment, the free stuff obtained(multiple upgrades on DVC/DCL and give away (wine, chocolates, toys for DGKs, etc) that we have received), and food/eats on DCLs and Concierge Collection trips.
How do you calculate for all that?
Sometimes you have to just throw out the numbers and go with your heart.

 

[ClosetDisMom]

As skippytx said, it depends upon your metric. For me, I use a two formula approach:...


When I asked my wife to calculate it, she used a different formula. Her formula took the average CRO price we paid for a room, adjusted it for inflation, and then divided that into the cost of the points. She came up with just under 5 years. However, her formula has a flaw, in that we regularly used to be able to get 30% off a CRO room at the Poly or Contemporary. Recently, it's been tough to get more than 10% off. Going by the new rack rates with 10% off, and adjusting for yearly inflation, gives her payback period of less than 4 years.

Of course, all of these methods are just to make us feel good about our purchase. If we included time value of money and opportunity cost, the number of years would quickly skew upward and it would be obvious that the purchase of a DVC membership is not a quickly recovered investment.

This!

When we bought out resale, I had my husband (who is a math teacher) run the analysis for break even to make sure it made sense for us. He did it much like your wife. We came to the agreement that after 5 trips (which was originally every other year), we would break even. So, we went in knowing that it was 10 years for us. HOWEVER, since receiving our points, we fell prey to what most DVC Disboard posters told us we would. We now have plans to do more trips than we originally thought... So, in the end, the discussion on "break even" is easily skewed and is just an exercise to help us justify a luxury purchase. But, I am still feeling good about the purchase.

 

[Bing Showei]

For most people buying into DVC, the intent of "saving money" or "breaking even" is a proposition made possible only by way of Mickey Math.

If you plan to use your DVC points to actually travel to disney every year, an honest "savings" calculation would take into account the average dollar amount you spent per year over the past five years on WDW trips. That's the "spend rate" you should be comparing a DVC cost to; certainly not a CRO rate, discounted or otherwise. I would even argue comparing it to renting points is misleading.

Looking historically at your WDW trips gives you an accurate sense for how much you actually could save.

If you're a family that has bought annual passes and has gone to Disney every year (multiple times, maybe?) for the last 5 years. Great, DVC may save you money.

If you've been renting points every year for the past five years to stay in deluxe resorts, fantastic! Buying into DVC could save you money, too.

But if you're like most people, you'll spend the next several years traveling much more than you ever would have otherwise to see a fake castle... and if you can honestly afford it, you're going to love it.

You're not going to look back and regret the money you locked into the contract, the MFs that hit you this time every year, the 6:45, 5:45, 4:45, 3:45 wakeup to book fastpasses, the countless hours you spend stalking the RAT, or the endless discussions you'll have with your partner about how you need more points.

You may even find yourself arguing how buying more points could save you even more money, courtesy of Mickey Math.