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

[Skip Wiley]

Originally posted by dcfromva
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

Good point, plus the travel expenses of going to the DVC member meetings to keep up-to-date on your investment

 

[Tiger926]

Thanks again to everyone for your input. There is a lot to learn since there are so many variables in place! I really am trying to learn as much as I can since we are new members and so I'm definitely getting a better handle on what is a good usage of points for our family situation.

Tiger

 

[aggiemullins]

Thank you mydogdrew for chiming in here before I had to drag out my "time value of money" lesson.

As a finance wonk by profession, I had to run spreadsheets to figure out what each year's points were costing us at thye time of purchase, and since DVD was offering us $10 a point for the first year's points, that seemed like a good starting point. So in 2003, our current points cost us $10, 2004 points cost $7.55, 2005 cost $6.80... ... and the final year about 2 cents. Of course this was for BWV points at $84 per point. Add in opportunity costs, and out 2004 points should be worth us$7.55 times the cost of money (prevailing interest rates, we use the cost of our mortgage), so maybe us$8 each on a cost basis, plus maintenence fees; it could be that you're losing money if you were to rent them out at us$10 per pt. There are all sorts of ways to figure it, but it is important to include the time value of money.

As I am still quite extremely new to this forum, I don't know if this has been said and beat to death in the past, but in my search of complete financial analysis bliss, I came across this "Timeshare Cost Calculator" that takes into account of the "Time Value of Money" and lets you tinker with the numbers to truly compare your cost of ownership versus just paying cash for a comparable resort over a span of 20 years. It takes into account dues, inflation and your possible selling price at the end. It's quite eyeopening. You can even input a possible scenerio of renting points every year by placing a negative number in the "add-ons" area.

Detailed Cost Calculator Instructions (Adobe Acrobat Reader Required)

 

[Tiger926]

Thanks, but that makes my head hurt ! All I know is that when I am lying by the pool at SSR, I am definitely not going to be thinking about all of this number stuff!

Since my DH is the numbers guy I am going to show it to him as he was looking for something like this last night as he was trying to explain to me what some of the other posters meant in terms of the heavy financial stuff that I didn't understand. I'm specifically still confused about the time value of money concept - I can teach Shakespeare to anyone, but numbers just hurt my brain too much!

Thanks, Tiger

 

[IndyScott]

I'm specifically still confused about the time value of money concept

The math is complicated, but just think of it this way:

Several posters offered up their Use Year 2042 in trade for Use Year 2004 points. Using the simple valuation method, this would be an ok trade because you would be trading equal "dollar value". But did you see anyone jumping at this offer? Nope. That's because something you can use right now is much more valuable than the same exact thing 40 years from now.

What if the offer was 100 2042 points for 10 2004 points?

Or even 100 2042 points for 1 current point?

You would probably get some more takers with these offers. So everyone has the "Time Value of Money" somewhat built into their head, but it isn't always easy to put numbers to it...

 

[LakeAriel]

I make my reservations 11 months out. My Easter 2004 at AKl was booked already when I needed to downsize my August 2003 stay at VWL. It left me with 50 extra points I figured I could put toward AKL the following year. Not so fast! You cannot change the reservation points! So unless I could use the 50 by Nov 30, 2004, I would lose them. Ridiculous! Thank God I was able to rent most of them. Now a lovely family gets a great deal and I can use that money to pay for my sleeper car on Amtrak from NY to Fl. All I need is meal money!
So no, as a rule I wouldn't rent out but in a pinch it was great.

 

[Tagrel]

With points to cruise SO high, it was a no brainer for us.

We saved enough points by paying cash to add on 6 days in a BWV, Boardwalk View one bedroom for after our cruise. The 'hassle' of renting is MORE than worth that extra WDW time for our family.

And we got to book at about 18 months out instead of 11 which gave us first choice of cabin. No $75 tranfer fee. And we could have cancelled up to a couple months prior and gotten all our money back. (SO glad we didn't have to!)

It just made sense. Some people pay rack rate, go, and have a great time. Others like to work to find the best deal. Its a personal thing... If you are happy paying for a cruise with points, then that is all that matters.

 

[TnRobin]

Thanks, but that makes my head hurt ! All I know is that when I am lying by the pool at SSR, I am definitely not going to be thinking about all of this number stuff!

EXACTLY Now if I just could get some pool time I will test it out.