Confused about value of points - why do some think it's cheaper to pay cash for DCL?

[zurgswife]

Or if you have a large family there are 6 in our family and points vs cash...cash wins everytime...

a 7night western is 664 points for 2 cat 10's for my family value season

a 7night western in cash is $4914 value season

664ponts is 1 and 2/3 of a years points...

So, for my family it isn't worth that many points to cruise

 

[JimC]

Keep it simple and relevant. The OP is not harmed by using the analysis proposed.

I was told by DVC that point cabins are limited and that if we wanted to be sure of a repositioning cruise to book as soon as they open up with cash. Then try with points and cancel the cash reservation if we get it on points. We decided to stay with the cash reservation because it was less expesive then using points. And we are not inclined to take the time, effort, hassle and risk to rent points -- besides we want our points available for Disney trips.

 

[MCazer]

Our first Disney Cruise we used points, that was the 2001 Halloween Cruise. They had a fall fantasy promotion and we got it for 381 points for 2 adults and 2 children, category 5.

Now, we are booked on a category 6 for January, both eastern cruises, and although I could not get the 2005 point chart I went by the 2004 chart, and the points for cat 6 would run us 542 points. You know that 2005 will be more. These dates are both off season, so a good comparison.

Well, since I booked this cruise almost a year in advance through Dreams, I can get a cat 6 for approx. $3,600 ($100 Rebate). By renting my points at $10 a point, I only need to use 360 points, NOT 542. Thats a wopping 182 point difference!

Why on earth would I use all those points, plus pay $75 (I actually think it went up to $100, but I may be wrong).

Our family also uses our points for Sunday-Thursday and then we stay somewhere close to Universal or Seaworld on the weekends. We like to bring friends down, and the point savings for the weekend nights, will let us bring more friends. NO ONE has complained that they only got 5 nights stay for free, and I don't think I will hear any, any time soon.

For my family, renting the points is the way to go. I think Disney is ripping DVC off with the new points chart, and it is a shame. I love cruising, but not at what they are charging.

 

[Dean]

To me it's very simple. I can rent the points for $10 pp minimum and I can get DCL on cash for $4.50-6.50 pp. Plus, if I use points and cancel, the points are in reservation status. If I change a person going, I have to pay another $75 fee, every time there's ANY change. I can't book until 11 months out and if the price goes down, I don't get a refund. Even if it were break even, I'd rather rent my points and pay cash. The risks and aggravations of renting are far less, IMO, than those associated with using and possibly cancelling a DCL points reservation.

Of course you should look at each situation independently then decide. You may find a specific circumstance where this doesn't hold up. But other than last minute reservations where you've essentially thrown away the early booking discounts, I haven't seen any exceptions yet.

 

[Tiger926]

Great to see all of the different ways that members use points. I guess what I'm learning is that some members consider the intrinsic value to be of more importance (eg. family memories, convenience of not moving resorts on weekends), whereas others consider the extrinsic value (eg. financial value, renting points) to be more important. I do see how people with large families would have to use a large amount of points for cruising - which might possibly mean borrowing from other years - but, if paying cash, these same families most likely will have to buy 2 cabins and plunk down a large amount of cash as well. I guess it all depends on our financial situations and how we "value" our points. Basically, it seems to me that when paying cash for a cruise, or weekend stay, members are paying cash to save points for another use. Technically, isn't this paying twice for those same points (once to purchase, and a second time to pay cash in order not to lose these same points)?

That being said, I still take issue with members who automatically assign a $10 pp value to everyone's points. If I am not renting out points, then that $10 pp value is not relevant to my situation, so my point values then are different from someone else's, such as Dean, who continually rents out points to pay for his cruises. In this respect I guess, these members will for the next little while use the $10 pp value to compare against as this is a constant variable in their vacation costs. Dean - Can you explain your DCL on cash for $4.50 - $6.50 pp (what are you referring to?)

My DH is a banker, and so we went over a bunch of stuff tonight (since we just got our package, we hadn't talked much about point values, etc...), and I showed him this thread. Even as a banker, he said that there is no possible way to accurately assign a point value until after our membership is expired as we have no way of knowing how much maintenance fees will increase or how much memberships will be in the future to do add-ons, etc... So, we are using the basic formula (which we know is incorrect, but there is nothing we can do about that as we don't have a crystal ball in front of us) that I mentioned in my original post as a way of comparing our prepaid vacations for the next 50 years to the old way that we used to vacation to Disney - paying hotel rates that increased each year!

The whole concept of point values is very interesting to me, as in my opinion, many members seem to analyze their memberships to death (this is something that I normally do with most everything in my life, but not this time!) and so after I read a million posts last night, I started second guessing our usage of points, which is why I posted in the first place. It's great to read everyone's opinions and see just how many creative ways there are to use one's points to suit his/her family's needs!

Tiger

 

[DrTomorrow]

Well, since you are soliciting opinions:

I guess what I'm learning is that some members consider the intrinsic value to be of more importance (eg. family memories, convenience of not moving resorts on weekends), whereas others consider the extrinsic value (eg. financial value, renting points) to be more important. I'm not sure that's either a fair or valid distinction. People may be renting points in order to afford to have more family members participate in a cruise - that covers both intrinsic and extrinsic. The motivation to rent does not necessarily correlate with the method of point valuation.


That being said, I still take issue with members who automatically assign a $10 pp value to everyone's points. If I am not renting out points, then that $10 pp value is not relevant to my situation, With all due respect, that's not really accurate. It's like saying "I can sell my 100 shares of IBM stock for $50 / share, but until I sell them, their value is much less". If you can rent points for $10 pp, then it is extremely reasonable to value them at such a rate. Heck, you can value them at a buck a point or $100 pp, but the market seems to have settled on (approx) $10 pp, so using that value in any analyses is a valid approach.

Even as a banker, he said that there is no possible way to accurately assign a point value until after our membership is expired as we have no way of knowing how much maintenance fees will increase Woo, I wish I could borrow some money from his bank! Most other bankers and financial analysts can take a look at past trends in MF increases, room cash rates, inflation, etc. and come up with a reasonably accurate projection of value. But to use only the cost and not even attempt to estimate MF increases, is (IMHO) bizarrely conservative. Along those lines, no one know "exactly" when someone will die, but insurance companies and actuaries still seem to be able to make acceptable projections.

Basically, it seems to me that when paying cash for a cruise, or weekend stay, members are paying cash to save points for another use. Technically, isn't this paying twice for those same points (once to purchase, and a second time to pay cash in order not to lose these same points)? Well, we're really talking about renting the points, then using the cash to pay for the cruise. They purchased the points, then sold them, and used the proceeds for the cruise. Even your scenario, though, has no "double pay" - if they pay cash for the cruise, the points aren't even an issue, and they are still as available as they were before.

The whole reason I'm taking the time to respond in this manner is that someone else said, "The OP is not harmed by using the analysis proposed." I disagree; that's like saying that someone who keeps all their cash in a mattress instead of a guaranteed CD isn't harmed. By valuing points at cost (and a lowest.of.the.low cost, at that) they stand to lose a significant benefit of ownership, which will get worse over time. I'll gladly sign a contract now - with Tiger, or anyone - guaranteeing me that they'll rent me points at $10 point in 2030

People look to these boards to learn things, and sometimes the financial stuff is kind of deep. But the time value of money, projection of membership fees, and the market value of a point are valid topics. But Tiger, please know this - it is possible to be concerned about these financial topics, and discuss/debate them, and still have a true belief in the Magic, and the Pixie Dust, and the true joy of a Disney vacation and the memories - of families, of friends old and new - that are made.

Submitted in the spirit of knowledge.

 

[zurgswife]

Basically, it seems to me that when paying cash for a cruise, or weekend stay, members are paying cash to save points for another use. Technically, isn't this paying twice for those same points (once to purchase, and a second time to pay cash in order not to lose these same points)?

My answer would be NO....as I purchased my points for stays at DVC resorts in WDW...just because I'm able to us them to "purchase" a cruise doesn't mean that I ever intended to do that....So, paying cash is the only option I would look at if purchasing a cruise..

 

[Dean]

Originally posted by Tiger926
Dean - Can you explain your DCL on cash for $4.50 - $6.50 pp (what are you referring to?)

There are many variations on how to figure points value. The four main variation I believe are:

• dues plus a yearly return of principle investment.
• Dues, principle plus lost income on investment (and/or interest paid).
• Generic standard rental price.
• Rack or discounted cash rate divieded by the number of points required for that reservation.

Each will return a different number and even each will vary itself depending on the specifics. The cruise value I was refering to is very simple. It's the cheapest cash cost for a cruise, subtract the $75 fee then divided by the number of points it'd take for the same cruise. Assuming one were in the early booking discount phase, I've yet to see a return of even $7 pp, usually much less. For FL resident rates, it's usually between $4-5 pp return.

 

[Skip Wiley]

I believe you have to report the income you receive from renting points, so depending on your tax bracket wouldn't that drop the value per point for renting to 6.50 to 7.20 per point? I realize most people don't report the income to the IRS, but I found it interesting in some of the threads where people had bad experiences renting points there were posts suggesting the renter report the seller to the IRS. Although I doubt that would do any good, I would guess there is some risk of getting caught for not reporting the income.

 

[crisi]

Basically, it seems to me that when paying cash for a cruise, or weekend stay, members are paying cash to save points for another use. Technically, isn't this paying twice for those same points (once to purchase, and a second time to pay cash in order not to lose these same points)?

In my mind, its the opposite.

I bought points to stay at WDW, which we do every other year (we have a small, 150 point contract). In the alternate years we do something else - last year we cruised DCL, and we intend to do that again.

To be able to cruise DCL and still go to Disney, I'd need a lot more points. But where I'm relatively sure I'll be able to use 150 points regularly until the contract expires, I'm not so sure I'd be able to use a large number of points. It would be easy now, while my kids are young and enjoying Disney and cruising is an easy option, but when they are teenagers and its difficult to pull them from school and activities, it will be harder. So a larger contract (while not out of the question) may not be wisest.

So to use points to cruise, we then need to pay cash for WDW.

Same with weekends. As weekends are expensive in terms of points, people stretching points (especially if the stretch is a temporary situation in order to "save" points to get a second room for guests, or to take an extra trip while the kids are a certain age, or to get them through until they are empty nesters and don't need a two bedroom anymore) may elect to stay somewhere else on the weekend rather than take a long term committment on more points.

If you have enough points to do both, lucky you! If you decide to cruise instead of going to WDW, than you may elect to use points.

 

[pumpkinboy]

Originally posted by DrTomorrow
...it is possible to be concerned about these financial topics, and discuss/debate them, and still have a true belief in the Magic, and the Pixie Dust, and the true joy of a Disney vacation and the memories - of families, of friends old and new - that are made...

Amen!

I do love the magic, the pixie dust and all that! I love it when my family is there and we're all swept away by the magic and the great environment.
Doing the financial analysis, and discussing it, is just how my brain works

 

[Tiger926]

DrTomorrow - Thanks for taking the time to reply. I showed my DH your response and he said that for us, we are looking at things differently, and the only proper way to accurately assess our point value today, is to use the current values of today, and then only use the $10 pp rental amount if applicable - for us, this doesn't apply. We bought our points to use and not to rent out, and each year we are going to re-evaluate the cost of our points based on the new maintenance fees that we will be charged, and then and only then will we have an accurate current cost of points for that year. Therefore, I don't think that by valuing points at cost, we are losing a benefit of our ownership - if we didn't re-calculate each year's new maintenance increases or decreases (we can hope!) into the equation, then we would be looking at things inaccurately.

In regards to the $10 pp thing, my DH and I think that this is really low, as we value our vacation time at a much greater value than $10 pp as the intrinsic value is much higher to us than $10 pp. Plus, based on current rack rates of DVC hotels, renting points at $10 pp is low. Eg. studio weekly - 123 points, cash rack rate - approx. $200/night, plus tax. Your $10 pp is then too low, since paying cash is going to cost more - Where did $10 pp come from? I am confused!

As well, we looked at a point trend chart on this board the other day, and in 13 years, points have doubled. So, there really isn't a specific trend here. Some years it went up a couple of dollars, and other years it went up $10.00 pp. Therefore, if we look at past trends in respect to rate increases, how are we going to get an accurate future projection when there doesn't seem to be a constant variable in place? We don't notice any consistent rate increases over the past 13 years. My DH's bank bases transactions on current rates, and can't lend at a future trend, as everything is based on current market value. Based on your analysis, if you were to go into my DH's bank, he should then forecast that rates are going to increase next year, and charge you 2% more on your mortgage! You would not accept this mortgage as these rates aren't relevant to today's current trends. So, why then are you insisting that we try and figure out future rate increases, etc... to figure out what our points are worth? I guess we can agree to disagree on this one!


Thanks for explaining the double pay thing to me - my DH laughed and reminded me why I don't teach math!

Thanks for sharing your knowledge, Tiger

 

[joepoe]

Originally posted by Tiger926
I guess I'm wanting to make sure that there are different ways of looking at it, and that we aren't making a mistake by calculating something wrong since we are just new to the club.
.....
I guess then based on your replies, that my DH and I are looking at things in the right way - we bought into DVC as a means of securing prepaid vacations in superior accommodations for the next 50 years! We look at it not as a financial investment in which we are going to make money, but as investment in making memories with our family for years to come.

Thanks for your thoughts, Tiger

I think your thoughts are completely correct. If someone is interested in "maximizing" value, they can choose to do so. I dont squueze every dime out of my points. We always stay weekends, unless really strapped for points to do so. When we go to BWV or OKW we "move in" for 9 or 10 nights many times. Having said that I also think there are some hotel rooms in the Disney or Concierge Collection that are extremely high priced points-wise, and we avoid them.

We have never used our points for a cruise (well, maybe SOME day) or anything else but to stay at our home resorts. We don't pool hop. We are boring, I know.

 

[joepoe]

Originally posted by Tiger926
...
In regards to the $10 pp thing, my DH and I think that this is really low, as we value our vacation time at a much greater value than $10 pp as the intrinsic value is much higher to us than $10 pp. Plus, based on current rack rates of DVC hotels, renting points at $10 pp is low. Eg. studio weekly - 123 points, cash rack rate - approx. $200/night, plus tax. Your $10 pp is then too low, since paying cash is going to cost more - Where did $10 pp come from? I am confused!

...

Points have gone for $10 a point for as long as I've been on these boards, sometimes less. I think there are enough "distress" rentals, where people are afraid of losing their points because they can't use them, to keep the market value at that level. Plus, as more members join and SSR expands, the rental market will probably be flooded further, keeping the rental price around $10. JMHO

 

[Johnnie Fedora]

Disney assigns a very low value to the DVC point traded in for DCL, DC and CC. Looking simply at the numbers, a studio at BCV is $325.00 and costs 19 points (weekly points rate magic season divided by 7). That equals $17/point. Now...does CRO rent all the rooms at rack rate...no. However, they could easily rent the room for a the 40% AP discount of $195.00 or $10.00/pt. Why then does Disney have to make a 50% profit by then giving a DVCer an approxiamte $5/point value? The answer is because they can and many members are are willing to do it. That's their choice. I understand Disney's need to make some handling fees, but 50%+ seems a little much, IMO. Most members would likely have to bank and/or borrow for the cruise, especially the 7 day. I'm not willing to bank and borrow three years of points just to take a cruise once in a three year timeframe. Part of the reason we purchased DVC is to be able to vacation more frequently than we otherwise would. Paying for DVC options directly with points defeats that motive and allows Disney to much profit at my expense. Plus, as others have mentiond, cancellation policies for traded points are a real problem.

If you look at the recent history of points charges for DC, DCL and CC, you'll note the large point increases. It may help you put paying directly with points vs. paying with cash in perspective.

Good luck with your decision.

 

[Mike Bartenhagen]

"I can sell my 100 shares of IBM stock for $50 / share, but until I sell them, their value is much less". If you can rent points for $10 pp, then it is extremely reasonable to value them at such a rate."

Is this really a valid comparsion? I have never rented points so therefore this is more of a question than a disagreement. My concern (or question) would be this. If I have 100 shares of IBM stock I can log on to my Wells Fargo Brokerage Account and sell these shares and have the money in my bank account almost instantly with little risk, time, or cost involved. On the other hand if I rent points I am sure there is some risk involved (not getting paid, bad check) and time (making reservations, finding someone to rent the points). What is the value of this? Is $10.00 really $10.00?

Mike

 

[dcfromva]

I believe you have to report the income you receive from renting points, so depending on your tax bracket wouldn't that drop the value per point for renting to 6.50 to 7.20 per point? I realize most people don't report the income to the IRS, but I found it interesting in some of the threads where people had bad experiences renting points there were posts suggesting the renter report the seller to the IRS. Although I doubt that would do any good, I would guess there is some risk of getting caught for not reporting the income.

Skip Wiley,
When you are figuring how much to report, you have to report your gain. There are expenses (like your yearly cost of points plus your maint fee minus your property taxes which would have been deducted elsewhere on your tax form). Some other expenses might be advertising costs, postage costs, phone costs, escrow services (if used) that would offset the gain.

(Just trying to figure out this part is enough to discourage me from wanting to rent out my points )


-DC

 

[MCazer]

On the other hand if I rent points I am sure there is some risk involved (not getting paid, bad check) and time (making reservations, finding someone to rent the points). What is the value of this? Is $10.00 really $10.00?

Well, if you go the way I did, you only rent to a DVC owner to whom you can just transfer the points to after you have received and cleared their payment.

Yes, you still have to have some worries. But once those points are transferred, that is it. I as the seller have no more worries, the buyer has complete control over those points, and does not have to worry about me cancelling his reservation and not having one upon checking in.

This is the only way I will go now. I tried the other way, but when making a reservation for people that are not familiar with DVC, it becomes quite annoying. ie... can we put 5 people into a studio? NO, only 4. Then can you take a partial payment and let me pay you off as it gets closer to our vacation date? NO, the reason I am renting in the first place is to get the money to pay for my vacation. I am sorry, I am not a bank or credit card company! Thanks for letting me vent!

 

[TnRobin]

Ladies and Gentlemen - Do not make this thread personal. Everyone has the right to value his/her investment as he/she sees fit. Only when you are dealing with someone like the IRS does value matter.


Tiger926 - as for where did the $10 come from. Well in the beginning, DVC offered new members the option of selling back thier first years points for $10 each to assist in the down payment. This amount seems to have stuck as the appropriate amount. In essence - DVC set the $10 price.

While I do agree that my points only cost me approx $5.50 and this is what I "value" them at when comparing options. I do not necessarily agree with your comments on Fair Market Value. Fair Market Value is determined by two things - What the buyer is willing to pay and what the seller is willing to accept. That is currently $10 (+/- $2). The fact that the renters are still getting an excellent price for a room or that I only paid $5.50 for those points is not relevant.

Still it is a win/win situation. The Renter is getting a great room at a great price. The Seller is making a profit on his investment and then using it to do other things - like take a cruise.

 

[zurgswife]

Ladies and Gentlemen - Do not make this thread personal. Everyone has the right to value his/her investment as he/she sees fit. Only when you are dealing with someone like the IRS does value matter.

something must have gotten deleted...I thought that everyone was being exceptionally corgial on this thread. I'm really confused.