Cost Confusion....I need a math minded person to help

[Ln42]

Hi
I am always confused about the conversations about whether DVC is a value or not. This is the way I figured things out. Did I miss something?

I took the cost of a rack rate room and gave it a 40% discount assuming that DIS would not discount more than that. I am happy with that assumption and realize its arbitrary in nature.

Then I compared my DVC cost to that same room at the same travel week and found that I saved around $900 per week.

I figured that for the next 7 years I was essentially locking in the 40% off rate and then eating away at my initial cost which I paid in cash.

At year seven I break even on my initial cost so therefore I my future stays cost the equivalent of my maintence fees which reflect a considerable savings over any discount of 40% or less. We also intend to travel during busy times that will not offer discounts so from an economical standpoint, my savings should improve.

We have 135 points and stay in studios.

Did I miss something? I understand there are many variables that may make DVC less economical but I would love if those math minds out there could comment on my logic and let me know if I missed something.

Thanks! And have great day!

 

[bastraker]

Nothing wrong with your math as far as I can see, I'm pretty much in the same boat except we go twice a year and will count the AP towards our savings now too.

I think most of the people that do the math and find it to not be such a great savings are staying in 1 bedroom villas, which tend to be really point heavy.

 

[jlewisinsyr]

I think most of the people that do the math and find it to not be such a great savings are staying in 1 bedroom villas, which tend to be really point heavy.

But this is because most often they are comparing their old studio/hotel stays, which is unfair comparison.

 

[DVCGeek]

Your math sounds about right to me. I've always had DVC studios cost less than the best discounts I've seen on the deluxes, usually be at least competitive with most discounted moderate rates, and sometimes match or even beat rack rates on values!

And I agree w/ PP that comparing a 1BR to anything less than a suite room at a deluxe (or MAYBE a moderate- do they have them?) is ridiculous.

 

[DebbieB]

Nothing wrong with your math as far as I can see, I'm pretty much in the same boat except we go twice a year and will count the AP towards our savings now too.

I think most of the people that do the math and find it to not be such a great savings are staying in 1 bedroom villas, which tend to be really point heavy.

I bought DVC to stay in 1 bedrooms. Considering 1 bedrooms rack rate is now around $500 it still seems like a great deal to me. When I bought, I planned to stay 5 or 6 nights twice a year. That would be alot of money to be putting out cash every year even with a discount (when I bought in 1999 I don't think 40% discounts were common). I bought 250 points and now pay $111 a month in dues.

Your math sounds about right to me. I've always had DVC studios cost less than the best discounts I've seen on the deluxes, usually be at least competitive with most discounted moderate rates, and sometimes match or even beat rack rates on values!

And I agree w/ PP that comparing a 1BR to anything less than a suite room at a deluxe (or MAYBE a moderate- do they have them?) is ridiculous.

I agree, some people look at what it cost at All Stars or a moderate for comparison. I bought DVC for the luxury accomodations, not just a place to stay.

 

[ToddyLu]

yep I have to agree with the PP.....Value resorts....been there, done that and bought the T shirt. Love my studio (we haven't done a 1 br yet).

 

[dbs1228]

I keep reading about the 40% discounts but I have not really seen that in the home away from home Ft Wilderness cabins. For years we were getting a AAA discount and paying around between 180.00 years ago to 225.00 per night for 10 nights = 2250.00 as recent as 4 years ago. We would always arrive the day before the high season prices came into play so they would "grandfather" us in at the lower rate for all 10 nights. THEN came the promotions pay 4 nights get 3 free. Well the grandfather rates no longer applied and the room rate went from 225.00 one year to 280.00 the next up to 330.00 after that. It still cost us 2310.00 for 10 nights! I guess you could say that it is a discount with inflation but it is not as good a deal as Disney wants you to think.

I really wish Disney would do away with some of these promotions because all they are doing is raising prices everywhere else! Locker rental at the parks used to be 5.00 a day then 7.00 and this year we were shocked they are up to 12.00! I was told that a double stroller rental for the day is 31.00! Good thing my kids are teens! Golf cart rentals went from 27.00 a day up to 57.00 a day. This years rental for us was 600.00!(ok they are very cool) These are some of the reasons we decided to become dvc members, just wish Disney would stop making a day in the park so expensive! I do love Disney but whenever they offer "free dining" prices of food in the park go up! Helps families short term, hurts the rest of us long term. Promo's are good but a double edge sword. Sorry I know totally off subject just a bit of venting!

 

[dmoore22]

Here is a link to a nice discussion and another spreadsheet analysis that you may find useful: http://www.mouseplanet.com/8739/A_Disney_Vacation_Club_Primer

 

[PrincessDadx2]

Your logic is fine if that is OK for you It seems pretty close - you can rent points for $10 and the dues are ~ $5 so the savings are 135 x $5 = $675 so maybe a little less than $900. So add a year or two to your breakeven and you avoid the hassle of renting, which is worth something.

If you really wanted to be a finance person you could add the "opportunity cost" of the money that you had to pay upfront and subtract the residual value of selling the timeshare after x number of years to get your true breakeven. Or you could just enjoy your vacations

 

[Ln42]

Your logic is fine if that is OK for you It seems pretty close - you can rent points for $10 and the dues are ~ $5 so the savings are 135 x $5 = $675 so maybe a little less than $900. So add a year or two to your breakeven and you avoid the hassle of renting, which is worth something.

If you really wanted to be a finance person you could add the "opportunity cost" of the money that you had to pay upfront and subtract the residual value of selling the timeshare after x number of years to get your true breakeven. Or you could just enjoy your vacations

lol...yes my calculations are quite simple...just the way I think. I went through that "look at it every which way but loose" phase prepurchase and am glad to be out of that!

You make very valid points. In my opinion I can't compare ownership to renting costs as they are two different things and the renting cost is another fluctuating factor that boggles me when looking out x number of years. I also could not deal with the lack of reservation control as a renter for year after year. I need the flexibility of changing if I need to. So ownership fits me better in that regard. I hadn't really sweated out the opportunity cost as the bank is paying me next to nothing so I actually enjoyed grabbing the cash and running! All of these things do effect the true break even point and I thank you for adding them to the conversation. I so appreciate those who are math minded!

Thanks all for your comments. If anyone has more to add, please do. I learn so much from all of you!

 

[Ln42]

Here is a link to a nice discussion and another spreadsheet analysis that you may find useful: http://www.mouseplanet.com/8739/A_Disney_Vacation_Club_Primer

Hi
Thank you for sharing this link. I just started reading it and it looks excellent!

 

[crisi]

And I agree w/ PP that comparing a 1BR to anything less than a suite room at a deluxe (or MAYBE a moderate- do they have them?) is ridiculous.

It isn't ridiculous if THAT IS WHERE YOU WERE HAPPY STAYING.

When someone comes on and says "we like values, we don't mind studios, and we want to travel other places besides Disney using our points - we figure we will only be at a DVC resort every four or five years" the cost comparison is going to come out as DVC is a bad deal for you.

If you say "I love DVC rooms and have been calling CRO and booking two bedroom villas in the Epcot resorts for rack rate for two weeks every year" - then actually owning DVC is a no brainer.

Most of us fall between the two. The ability to stay cost effectively in a multi room unit is a value add, but only a "savings" in the same way that "I wouldn't have bought that cute purse except there was a great sale" is a savings. Which is to say "its a more effective way for Disney to pull money out of your pocket, but that doesn't mean you won't be happy about it."

 

[bom_noite]

I love Math - and can whip out an amortization chart on Excel in under 2 minutes...... But - I really get totally lost with the worth of doing an equation to justify a DVC purchase!

There are so many factors that are never considered: Inflation, current value / future value of a $, the cache and benefits of being an owner etc.

But, the number one fact people forget to factor is that once you buy to DVC you now own an asset that can be sold. Use it 10 years and dump it - as is your right. And, DVC has been an asset that has held it's own pretty well over the years.

You can read my other threads - but - here are the numbers representative of my DVC purchase (we have been lucky - others have been more / less lucky):

1) We bought 150 BCV pts in '03 at $84 per point.
2) We can sell those pts today at about $84 per point.

Two years ago I could have sold my BCV pts for $100 a pt and walked away with cash in hand.

So I basically sell what I bought with $0 out of pocket! Ok - there are things we can add to the equation: What was the opportunity cost on the money I shelled out for our initial purchase ---- easy in our case $0.00 as we would have spent it and not saved it. I may have to pay closing costs on a sale - etc.

During my 7 years of membership I have paid approximately $5K in dues. (Less the tax deductions I got).

During my 7 years of membership my family and I have stayed in hotels that would have cost me 30K to 35K at rack rate! Factor in the DVC perks - and it increases! Factor in we had kitchens (and were not required to pay inflated food costs) and washer / dryer and it increases more.

As I see it: I am about 30 to 35K+ (or more) to the good. Had I stayed 5 days (p/year) for 7 years at the Poly - I would be minus 10K or more. If I planned to stay at Poly another 7 years - I would be out an additional 12 to 15K.

In my humble opinion: It is simple: If you LOVE WDW, and, you plan to go repeatedly for 5 to 30 years it makes perfect economic sense.

 

[bumbershoot]

The ability to stay cost effectively in a multi room unit is a value add, but only a "savings" in the same way that "I wouldn't have bought that cute purse except there was a great sale" is a savings. Which is to say "its a more effective way for Disney to pull money out of your pocket, but that doesn't mean you won't be happy about it."

Love it!

 

[dbs1228]

Since I am new to dvc this is interesting to me. I was wondering if the resale market took a hit with this economy. I assumed it did to some extent but BCV at 100.00 a point 2 years ago is great to know. My guide keeps telling me that the prices will only go up but unforunatly since we bought BLT they have come down with new promos! That is laways our luck though lol! Got a great deal resale SSR so all is good.

 

[bom_noite]

Since I am new to dvc this is interesting to me. I was wondering if the resale market took a hit with this economy. I assumed it did to some extent but BCV at 100.00 a point 2 years ago is great to know. My guide keeps telling me that the prices will only go up but unforunatly since we bought BLT they have come down with new promos! That is laways our luck though lol! Got a great deal resale SSR so all is good.

I am not as much an expert as others.

I think you are correct - the economy did affect prices. But, two other factors (imho) affected things: 1) BLT - it is the new hot property and I can see many people selling their BCV points (or add-ons) to finance the BLT purchase. 2) I think some folks who bought in 7 to 10 years ago have run their natural WDW life-cycle (kids are in college, health issues, divorce, etc.)

I think the original folks who bought in at OKW can sell at a $15 to $20 profit. Other resorts have not fared as well I am afraid, and those folks are not as fortunate, but, I don't know.

Also, the prices are also supported by DVD selling new resorts and add ons at $100 a pop and through exercising ROFR.

I will say this: The "spread" between resorts has always stayed pretty consistent. I know this as we have considered selling our BCV and buying in at OKW (where we really love) for 5 years. What I have seen is this: I was no better off selling my BCV in exchange for OKW 2 yrs ago (when it was $100 per pt) then I am today at $84. This is because OKW was selling at a higher price at the time - thus - the spread between resorts has remained fairly constant. Or, at least in the example I am citing.

The real interesting thing, in my opinion, is the rental market. When I first joined I think I saw rental pts going for $11 or $12 per point. That has slowly eroded to about $9 to $9.50.

You also have to think that there are ton of people like me: I bought when my kid's were 9 and 11 (perfect WDW age) and are now in or near college. I see no grandkids arriving in the near term (I pray!!). At this point a yearly trip to WDW may take a back seat to tuition or because everyone is so busy. So, why not rent?

And, each year another 10K (or more) members who are potential renters are added.

My point / question is this: I am not so certain the erosion in the rental price was 100% affected by the economy - it started to erode before Wall Street did. It seems it has eroded with every new DVC room being built. So, will we see the day where you can rent points at $8 or lower?

And, with the WDW resorts continually increasing in price, at what point does WDW have a problem renting rooms during slow times as everyone has rented points to stay at DVC resorts?

 

[dbs1228]

Yes all good points. Just like any other realestate once you own and want to sell/buy something else pricing is all in line to the current market. When we sold our 1st home after owning for 10 years we lost a little bit of money but the house we bought (more expensive and newer) was quite the deal.

I found the pricing interesting more because if we do decide to sell some of our points down the road we will watch the market.

You say you bought when your kids were younger and I had to read that to DH because we looked into dvc when our daughters were 8, 10 and 12 and decided not to buy. They are now 15, 17 and 19 not only did we just buy we also have added on the resale! lol It took us that long to realize we all like to go to Disney and we keep going back. Maybe this is my way of making sure even if it is a long weekend that we all get together once a year through the college years and hopefully beyond.

 

[Mickey'sApprentice]

I am not as much an expert as others.

I think you are correct - the economy did affect prices. But, two other factors (imho) affected things: 1) BLT - it is the new hot property and I can see many people selling their BCV points (or add-ons) to finance the BLT purchase. 2) I think some folks who bought in 7 to 10 years ago have run their natural WDW life-cycle (kids are in college, health issues, divorce, etc.)

I think the original folks who bought in at OKW can sell at a $15 to $20 profit. Other resorts have not fared as well I am afraid, and those folks are not as fortunate, but, I don't know.

Also, the prices are also supported by DVD selling new resorts and add ons at $100 a pop and through exercising ROFR.

I will say this: The "spread" between resorts has always stayed pretty consistent. I know this as we have considered selling our BCV and buying in at OKW (where we really love) for 5 years. What I have seen is this: I was no better off selling my BCV in exchange for OKW 2 yrs ago (when it was $100 per pt) then I am today at $84. This is because OKW was selling at a higher price at the time - thus - the spread between resorts has remained fairly constant. Or, at least in the example I am citing.

The real interesting thing, in my opinion, is the rental market. When I first joined I think I saw rental pts going for $11 or $12 per point. That has slowly eroded to about $9 to $9.50.

You also have to think that there are ton of people like me: I bought when my kid's were 9 and 11 (perfect WDW age) and are now in or near college. I see no grandkids arriving in the near term (I pray!!). At this point a yearly trip to WDW may take a back seat to tuition or because everyone is so busy. So, why not rent?

And, each year another 10K (or more) members who are potential renters are added.

My point / question is this: I am not so certain the erosion in the rental price was 100% affected by the economy - it started to erode before Wall Street did. It seems it has eroded with every new DVC room being built. So, will we see the day where you can rent points at $8 or lower?

And, with the WDW resorts continually increasing in price, at what point does WDW have a problem renting rooms during slow times as everyone has rented points to stay at DVC resorts?

I don't see people selling BCV villa points to buy BLT. That's just my opinion though. Yes, my boardwalk points did take a hit on price. I bought 100 points for $84, and could probably only get $75-$78 now, and it would be less if I had a larger contract. However, I've also taken several trips with great discounts in that time as well.

I got a transfer for my sis & bil several months ago and would have been thrilled to find a $9 rental that I felt good about. (I'm pretty skiddish about the rental market.)

I think the erosion of prices are due to 4 issues. 1) The 2042 resorts now only have 32 years left. 2) Disney has built a lot of DVC rooms, and 3) the economy, real estate, and credit markets have not been good. 4) Disney has really discounted regular rooms.

I also believe that some parents become less interested in Disney when the kids become teenagers and go off to college. I understand this thinking, but think its short sighted of these parents. Disney is a lot of fun if you have kids with you or not.

I don't think rental points will go to $8 except for fire sales.

 

[crisi]

I also believe that some parents become less interested in Disney when the kids become teenagers and go off to college. I understand this thinking, but think its short sighted of these parents. Disney is a lot of fun if you have kids with you or not.

Why is it shortsighted? We are actually fairly likely to sell in the next ten years. Our kids - who are only ten and eleven, enjoy other vacations more now. And we do as well. We might arrange to keep a small number of points for us for later. But I don't intend to finance my adult children's trips anyway - when they have families of their own, their family vacations are their responsibility, not mine. We thought we'd keep it to play golf when our kids were in college, but the food at Disney has gone downhill so much, we now have no interest in that plan right now.

We have a few more promised trips in the hopper. Friends are expecting a baby and its the sort of situation that we will hang onto our points until we get that baby to Disney as a toddler or preschooler.

 

[dmoore22]

I also believe that some parents become less interested in Disney when the kids become teenagers and go off to college. I understand this thinking, but think its short sighted of these parents. Disney is a lot of fun if you have kids with you or not.

Totally agree. We find that as the children grew older their interests matured/changed which made each visit to WDW a new and unique experience. Now that we are down to our youngest out of our six, still living at home, and I'm in semi-retirement, the experiences continue to be varied and never repetitive -- and that is visiting WDW twice a year! Being a senior citizen I don't want to have to think, plan, or stress. I don't want to have to use my brain or worry about logistics in planning a trip. I want to be a spontaneous, lazy, no-brainer slob. DVC allows me to do that, in spite of the 11/7 month booking windows.

Of course when the kids go off to college that creates more interesting opportunities for us as travelers to Disney properties when they participate in the Disney College Internships! Suddenly there are more perks as family members of a CM!!! Woo Hoo!!!