Calculating the real cost/value of your points?

[tgj]

Just trying to see how the rest of you figure the value of your points in light of cruising, other collections, trading with II....even in the home resort....

I know some value it as $10-11/point as that's about the going rental rate.

Some take their initial cost, add in lost investment monies, and add maintenance fees, etc.

When we were buying, our guide gave us his formula, which seems reasonable: He took the inital cost per point, divided by the number of years for the contract, and then added the annual dues (changing each year).

In my case, it was $93 divided by 49 years = $1.90, + $4 maint = $5.90/point.

Then, if I wanted to go the the DL Hotel in CA for a week in Jan for 19 points (30 on F/S), it would "cost" me $112.10/night (and $177/night on F-S). Or a week at a 1 bed at SSR in June would be about $1433 ($5.90 * 243).

I'm not trying to do a statistical cost/benefit analysis for a purchase or anything, just trying to get a general "feel" for how some of you view your costs.

Does this seem reasonable to you more "accountant/mathmatical" folks? Or is this a really flawed way of looking at it? Or something different?

Thanks for your input!

TGJ

 

[browniemtb]

This question has been around for a while. I'm sure you are aware that people will figure the math different. Some look at the lost revenue if there was an investment made rather then buying into DVC. Not me, I invested in DVC and the Kids...My simple math gave me a break even of 8 trips in a one bedroom. After that I feel I'm clear.
Brownie

 

[Anthony1971]

I go with your Math.
If one wee to add in the lost value for investment they would also need to minus out what they would of spent for the Hotel and any perks thye may have taken advantage of.

 

[bradisgoofy]

I would like to offer a easier answer, and I don't mean to offend anyone. I see this type of post from time to time on "value". My thoughts - If you like to go to the Orlando/WDW area every year and you prefer a deluxe/upscale resort, then DVC is the right "value" for you. Even every other year, with banking points, so you can bring friends or extended family members. But, DVC is definitely a luxury. A young family with little disposable income may not see the "value". We didn't buy until our mid 40s and wanted to come to WDW every year and stay in a big room. I and my family love DVC and WDW, we come every year but don't always go to the parks, so I would never tell anyone not to buy into DVC. But, you must decide the "value" of a DVC membership based on your family situation not on the $ value. If we always looked at the $ value, we wouldn't buy anything.

 

[Dean]

Just trying to see how the rest of you figure the value of your points in light of cruising, other collections, trading with II....even in the home resort....

I know some value it as $10-11/point as that's about the going rental rate.

Some take their initial cost, add in lost investment monies, and add maintenance fees, etc.

When we were buying, our guide gave us his formula, which seems reasonable: He took the inital cost per point, divided by the number of years for the contract, and then added the annual dues (changing each year).

In my case, it was $93 divided by 49 years = $1.90, + $4 maint = $5.90/point.

Then, if I wanted to go the the DL Hotel in CA for a week in Jan for 19 points (30 on F/S), it would "cost" me $112.10/night (and $177/night on F-S). Or a week at a 1 bed at SSR in June would be about $1433 ($5.90 * 243).

I'm not trying to do a statistical cost/benefit analysis for a purchase or anything, just trying to get a general "feel" for how some of you view your costs.

Does this seem reasonable to you more "accountant/mathmatical" folks? Or is this a really flawed way of looking at it? Or something different?

Thanks for your input!

TGJ

It isn't reasonable to me. I think the actual cost is more in the $10-12 per point long term for anyone buying now plus why give something away for half it's "value" when using for an exchange. But ultimately you are the one who has to decide how you will use the points and what value you want to place. Do remember that most often when we have this discussion it's in relationship to someone buying in, not someone who owns already. That makes a huge difference in most situations. Enjoy.

 

[tgj]

It isn't reasonable to me. I think the actual cost is more in the $10-12 per point long term for anyone buying now plus why give something away for half it's "value" when using for an exchange.

Another couple of quick questions:

Is the reason you're saying around $10-12 is because of the going rental rate for points? Or is it because of a lower buy-in or maint. cost etc. for other exchanges?

I'm assuming that other groups like II might be lower cost. In other words, if it's 160 DVC points to get into an II exchange, at $10/point is $1600. But if one were to value it as in the previous example at $5.90 would be $944. Is it really that much cheaper to get into something like II or Marriott? Does it really hold it's value, as DVC --in some cases and at the present time-- does?

Also, yes I agree that we tend to look at things a little different once we've joined - it's less of a money-saving/cost analysis vs. a "how can I enjoy this membership the most without getting ripped off too much?"

Thanks again everyone for your responses - this helps!

TGJ

 

[JimC]

Dean and I differ on this. Dean is using a market value (using rental rates)approach and is correct in asserting it. However to get that you must rent your points, then use the cash to make your other reservations. Dean is an accomplished timesharer and I believe (Dean forgive me if I misspeak) is quite comfortable with the time and effort of renting.

I, like you, use the cost value approach and there is nothing wrong with that either. I consider the points a form of currency that we prepaid to obtain. So your calculation is fine. And we do not need to rent to get it. I just do not want to take the time to do it.

I actually spread the cost over the exact number of remaining points over the term of the contract. This is meaningful in looking at resale contracts where the number of current, banked and borrowed points can affect the calculation.

We also own Marriott Vacation Club to use for non-Disney vacations as the costs are lower. DVC's best value is the DVC resort system. There are even cheaper timeshares that trade well and others here and on TUG can advise on those. We bought MVCI because we wanted quality equivalent to DVC and a large resort system for our use.

 

[Plutofan]

The problem that I see is that you treat a dollar paid now that you can not use for 30 plus years the same as a dollar available now. In order to figure the true cost I run an amortization schedule using my up front payment to Disney and figure out what payment on a yearly basis will have the upfront payment paid off over the term of the lease. Since I can get 5% in a saving account I use 5% or if I have a mortgage I will use the actual mortage interest rate (assuming that I keep the mortgage over the lease term). I then take the yearly payment from the amortization schedule and add in the cost of my maintenance fees to get a better picture of my true costs. I will come out a little better each year since hopefully the yearly increase in MF will be less than the yearly increase in the rack rate. I think that Dean was getting at that there is a cost of money that you should consider in your equation.

 

[Mule2007]

I like browniemtb's analysis using breakeven

My breakeven isaround 7-8 trips also.

Curious - does the OP use this same analysis on a vehicle purchase?


Mule

 

[Plutofan]

I like browniemtb's analysis using breakeven

My breakeven isaround 7-8 trips also.

Curious - does the OP use this same analysis on a vehicle purchase?


Mule

You bet. I figure actual cash flow in any purchase so that I get my true out of pocket costs. If I do not have to finance then I know that there is cost of using the funds now rather than in the future.

 

[Anthony1971]

I think to add in cost of a dollar would be very difficult as you would then need to minus out the cost of a vacation you would have taken in liu of DVC (hotel for Hotel and perks if you use any) if you usually go to a value very year or a moderate etc the people who make out best are the ones who stay in a deluxe form year to year and buy DVC as if you minused the cost of a deluxe from the cost of DVC in your equation you would be far ahead in a short time if you are comfortable with Value or off property than you have a good chance of doing better without DVC.
The real cost of something is the market value so if you can rent a point for 10-12 than that is its true value and this differs to your cost as you are the one who laid out a lrage some of money and made a long term commitment and the easiest way to back this is renting a house obviously no one would rent if they did not make money and everyone would own if they could afford the down paymnet and more so willing to make a long term commitmnet that can have consequences.
I do not look at DVC as an investment I bought enough points to make my family including my parents now as we did an add on. will I rent yes but only to friends when I have extra...did I crunch the numbers before I bought absolutely we did stay in deluxes for years before buying.. and I am the Accounting Manager... so crunching number is part of my life I had a large pad before we bought a house my wife
By far am not an expert but I found something that was comfortable for me and that is an individual choice and something that each family needs to decide for me it was $ but that is me and I do have family that have owned DVC since day one and had free park passes buying becuase you like to go to Disney every year and this fits is fine as well

 

[wonka27]

We are in the process of buying a resale. Based on some factors I accounted for, I figured each point is costs an average about $12-$13 based on what we are paying. I took into consideration the following:

1. The purchase price
2. Interest paid on financing
3. Yearly dues - assuming a 3.5% increase throughout the life of our contract.

Based on those items I came up with a total amount spent on DVC when the contract ends. I then divided that total amount spent by the number of years I will have DVC. That number gives me the average yearly cost of DVC. Finally I took that average yearly cost and divided it by the number of points I am buying.

 

[tgj]

Curious - does the OP use this same analysis on a vehicle purchase?

Mule

Even though I'm not, my brain is on vacation so I'm trying to not get too technical!!! I'm really mostly concerned with "How many different ways can I use this membership without getting really ripped off??!!!!"

That being said....

I suppose most of us do something similar with a vehicle or any other major purchase, it's just that the numbers are a little "fuzzier." For example, I can guess that my car will last 7 years, but unlike DVC (which I know will expire in 2054), I'm not really sure. (Then again, I'm not really sure when I will expire!) And I can estimate repair, gas, upkeep costs, but don't know for sure. With DVC, you pretty much know exactly what this year's points will be. But, I can still try to figure out if this used Subaru will be a better deal than a new Chevy, or something.

Then there's the nebulous enjoyment factor as well. If I absolutely hate driving a car, I'm not getting it even if it is the best deal. I'll sacrifice a little value for enjoyment. Maybe that's were trading out for a cruise or a II exchange comes in -- maybe not the absolute best value, but a whole lot o'fun!!

I guess it still comes back to not "Is this the absolute best, perfect deal and value for my money" to "Is it a pretty good deal and am I really getting taken????"

I'm still sorting this out -- as if you can't tell by now!

Thanks again everyone!

TGJ

 

[Anthony1971]

I guess it still comes back to not "Is this the absolute best, perfect deal and value for my money" to "Is it a pretty good deal and am I really getting taken????"

TGJ

The answer to this is simply no if you truly enjoy something than it is worth what you pay.
You will far outweight any number you can add up over the life of the contrcat if you use it mostly for the DVC resorts

 

[RobDoc]

When we purchased in 1993, I tracked all costs of DVC ownership - including purchase price, maintenance fees, mortgage interest expense and even amortized the "lost" use of the money paid but not financed. I used the total purchase price and had no concern about the points yet to come for the remaining 48+ years.

From that total of all expenses, I deducted what each stay would have cost us, along with any savings enjoyed thru our DVC membership (free park admission, Water Park discount, TDS discount, etc.).

We purchased in June, 1993 and our total costs were "recouped" by May, 1997 based on the savings found using our DVC points and membership. I did not use full rack rates when computing what we would have spent. Once we passed the breakeven point in 1997, I lost interest in continuing to track costs vs savings since I was very satisfied with the results - but I now wish I had maintained that spreadsheet to see how far ahead we are 10 years later.

Once we reached breakeven our "costs" since that time are only our annual maintenance fees since I no longer have "lost" the use of that purchase price money. If you really want to include the lost use by figuring what you would have earned by investing the purchase price - be sure to deduct from that the costs of vacationing since. Most will find that the "invested amount" including interest earned, will disappear when using those funds for accommodations.

I have used the same thinking as JimC - and since 1997 use the actual maintenance fee paid each year as my "value" of a point. I realize that some enjoy the interaction with others when renting points, but I get much more enjoyment from using our points personally and as gifts to others. At this point in time, using the thoughts outlined above, we actually find reasonable "value" using DVC points for the non-DVC options - even though our preference is to use them at DVC resorts.

YMMV!

 

[Parkhopper13]

Great points, Doc. I think what many people also fail to take into account is that once you have reached break-even and actually begin saving money (for you, Doc, 1997), your savings should also grow at a compounded rate.

If you are going to consider the lost opportunity cost of your upfront investment, once that is made up and money is saved, that savings must compound as well...thus increasing the value of DVC.

 

[DVC Dude]

This is always a hotly debated issue.

Some issues:

1. You MUST account for financing costs if you take a loan to buy DVC
2. You MAY account for lost opportunity costs if you pay in cash (5% is reasonable)
3. Early adopters such as those who bought early got lots of bennies that are no longer offered like free tickets. That alone was a huge bonus.
4. The longer you own, the cheaper your original purchase becomes
5. There is NEVER a bad time to buy DVC

My only "rule" is to try to avoid financing.

 

[JimC]

The problem that I see is that you treat a dollar paid now that you can not use for 30 plus years the same as a dollar available now. In order to figure the true cost I run an amortization schedule using my up front payment to Disney and figure out what payment on a yearly basis will have the upfront payment paid off over the term of the lease. Since I can get 5% in a saving account I use 5% or if I have a mortgage I will use the actual mortage interest rate (assuming that I keep the mortgage over the lease term). I then take the yearly payment from the amortization schedule and add in the cost of my maintenance fees to get a better picture of my true costs. I will come out a little better each year since hopefully the yearly increase in MF will be less than the yearly increase in the rack rate. I think that Dean was getting at that there is a cost of money that you should consider in your equation.

Fair enough. But you then need to discount the value of the future cash flows back to the present and you generally end up with the pretty much the same analysis.

A slightly different perspective that I expect will be or already has been presented is the break-even analysis that looks at the forgone income (opportunity cost) on the savings used to pay the purchase price. The results vary based on the assumptions used. The assumption that seems to have the greatest variability is the rate of forgone earnings -- some use a money market rate, some inflation, some 8% which approximates a blended investment rate, some 11% which approximates long term stock returns. That range of rates gives you an AKV break-even from 9 to 13 years against the AAA discounted rate of an AKL SV room in the comparable season using historical changes in resort rates and dues. I favor the lower lost earnings as that is where my money came from when I purchased. Each of us should use what is appropriate for their own situation.

If you finance the purchase then you need to include the finance charges in the analysis.

By the way if anyone wants the spreadsheet I used send me a PM with your email and I will send it to you.

 

[JimC]

Just read Docs reply. He and others were smart enough to buy early and enjoy the program longer. On the other hand we waited, so we paid more and have fewer years to enjoy it. Yet the value is still there. So better late than never!!

To the OP, my take is that DVC is great if you vacation at WDW often (you can sell it later if conditions change), can plan in advance, can afford to buy and use, and you primarily stay at DVC resorts.

The value declines in my view as you move away from the DVC resorts. I do not think you get ripped off in any way you can use your points. Actually the exchange options make the program more attractive to a larger potential membership. However, I do believe that there are less expensive ways to get the equivalent vacation experience outside of Disney or taking a cruise then using DVC points.

 

[Dean]

Another couple of quick questions:

Is the reason you're saying around $10-12 is because of the going rental rate for points? Or is it because of a lower buy-in or maint. cost etc. for other exchanges?

I'm assuming that other groups like II might be lower cost. In other words, if it's 160 DVC points to get into an II exchange, at $10/point is $1600. But if one were to value it as in the previous example at $5.90 would be $944. Is it really that much cheaper to get into something like II or Marriott? Does it really hold it's value, as DVC --in some cases and at the present time-- does?

Also, yes I agree that we tend to look at things a little different once we've joined - it's less of a money-saving/cost analysis vs. a "how can I enjoy this membership the most without getting ripped off too much?"

Thanks again everyone for your responses - this helps!

TGJ

Actually it's two reason's. One is the rental price is IMO a good marker. The other is that not figuring in the interest paid and the lost time value of money is a major mistake and should give you around the same value depending on price and resort. I know some have money coming in and make a move ahead of that like a large tax refund but otherwise I don't think financing is a reasonable move. If you can't save up the money to do so you likely shouldn't go on vacation, but I know many here will diagree.

IMO, the cost of owning for those that bought early on has nothing to do with the cost of owning now. The cost, benefits and return are dramatically different, esp for those of us that got years of free passes.