Cost of Owning DVC through 2042 - Interesting Calculations

[DougEMG]

I'm currently where you are now - in the late phase of a purchase consideration. The scariest calculation I did was the projection of MFs at a 3.6% increase per year over the next 30-45 years. When I do that calculation, i find it more difficult to take the plunge and purchase a contract.

I am trying to justify a purchase by thinking "I'm paying today for something I'll get for the next 30 years". However, the maintenance fees just seem so high when you calculate the cost per per room per night. Of course, who knows what the cost per night will be 30 years from now. That's what makes something like this so hard for me to calculate a true 'value'.

Instead of trying to figure out if owning DVC in 30 years time will still be a good deal, what interests me is, when is the breakeven point on owning DVC. Once I'm past the breakeven point, the risk of owning DVC drops considerably. Worst case I let Disney foreclose on the contract and walk away.

You can figure your breakeven point by comparing to various other options, such as what you would normally have spent going to WDW without owning DVC (ie we use to stay in a moderate with FD), comparing to rack rates with a discount, comparing to renting points, etc.

So when I ran some numbers, it worked out to around 6 years for me to breakeven. So in year 7 if for some reason I couldn't pay the MF, I could just get rid of my contract for $0 and still have come out even or slightly ahead over not owning DVC. That was something I could live with.

So the risk that I worry about is the risk in the first 6 years of my ownership. And it is because this is the way I look at it that makes the upfront costs so important to me. Lower upfront costs means less time to hit that breakeven point.

 

[jkpatrick]

I'm currently where you are now - in the late phase of a purchase consideration. The scariest calculation I did was the projection of MFs at a 3.6% increase per year over the next 30-45 years. When I do that calculation, i find it more difficult to take the plunge and purchase a contract.

I am trying to justify a purchase by thinking "I'm paying today for something I'll get for the next 30 years". However, the maintenance fees just seem so high when you calculate the cost per per room per night. Of course, who knows what the cost per night will be 30 years from now. That's what makes something like this so hard for me to calculate a true 'value'.

A way to kinda offset that 'scary' feeling, is that the 3.6% average increase is in future dollars, not current dollars. So while you are paying $5.50 (or some number) in MF today, you will be paying $11.50 MF in 20 years but in 2032 dollars.

You are buying the contract in today's dollars, so that is set in today's money, unless you are financing.

 

[myxdvz]

Instead of trying to figure out if owning DVC in 30 years time will still be a good deal, what interests me is, when is the breakeven point on owning DVC. Once I'm past the breakeven point, the risk of owning DVC drops considerably. Worst case I let Disney foreclose on the contract and walk away.

This is how I do my calculations as well. I know I paid high since I bought direct... but even so, after 2 years of owning, I have gotten 50% ROI already and I'm on track to get my $$$ back in the next 3-4 years. So yes, to me the breakeven point is 6-7 years. Anything after that is freebie hotel stays as far as I'm concerned - my youngest will be 8.

I even have a spreadsheet where I keep track of the cost of the hotel, had I paid in cash. All our DVC stays, including BCV in June, my total $ cost is $2.93 cents, including all MFs for 2011-2013 less rental $$. Obviously this didn't factor in the original purchase price.

 

[BeachLove]

If I ran numbers all day, I just wouldn't have ever bought. I'm so happy I made the leap and never looked back!

 

[zavandor]

I'm currently where you are now - in the late phase of a purchase consideration. The scariest calculation I did was the projection of MFs at a 3.6% increase per year over the next 30-45 years. When I do that calculation, i find it more difficult to take the plunge and purchase a contract.

I am trying to justify a purchase by thinking "I'm paying today for something I'll get for the next 30 years". However, the maintenance fees just seem so high when you calculate the cost per per room per night. Of course, who knows what the cost per night will be 30 years from now. That's what makes something like this so hard for me to calculate a true 'value'.

You should analyze also how your salary increased in the latet years and compare it to the fees. If you think it will increase on average of 3.7% or more, MF will have less and less impact on your income.

 

[bwang123]

I've discovered I'm rather frugel. Discounting AKV value as not really possible to book since I don't own there, I've previously stayed in OKW, SSR and AKV standard view and my next three trips are all BWV standard view. All the 4 cheapest point cost locations. Will I ever get to BLT?

So far, we've worked backwards. BLT, AKV savannah, BWV standard (upcoming), AK value (upcoming). I wonder if I can use DVC points to trade into a cardboard box after that.

 

[joelp]

I'm currently where you are now - in the late phase of a purchase consideration. The scariest calculation I did was the projection of MFs at a 3.6% increase per year over the next 30-45 years. When I do that calculation, i find it more difficult to take the plunge and purchase a contract.

I am trying to justify a purchase by thinking "I'm paying today for something I'll get for the next 30 years". However, the maintenance fees just seem so high when you calculate the cost per per room per night. Of course, who knows what the cost per night will be 30 years from now. That's what makes something like this so hard for me to calculate a true 'value'.

Apply that same 3.6% increase per year to an average rack rate room cost at a Deluxe Resort ... it's scary what a night's stay could cost in 30-45 years ...

 

[KingRichard]

If we look at the extreme example of comparing SSR (cheapest price) vrs BLT (best location) and assume no real difference in MF over the long run. Given the increases in MF for 2012 and 2013, it looks like if that trend continues BLT MF will be around the same as SSR MF in about 2-3 more years. So we assume that BLT MF and SSR MF are going to be roughly equal it really is just a matter of looking at your initial outlay.

Buying 160 points at SSR for $55/point will cost you $8,800.
Buying 160 points at BLT for $85/point will cost you $13,600, or $4,800.

So the equivalent options then are

(1) Buy 160 points at SSR and have $4,800 in your pocket.
(2) Buy 247 points at SSR
(3) Buy 160 points at BLT

Point cost for a 1 bedroom Dec 01-08, 2012
SSR is 183 points
BLT, standard view 194 points
BLT, lake view is 222 points

Is having the BLT location worth $4,800 in extra upfront costs worth it to you? For me it isn't, but for lots of other people it is.

Now I did buy BWV which has a higher purchase price and higher MF than SSR, because I wanted that location, so there it was worth it to me. Although I justified it to myself that it was still going to be a good deal because of the standard view point cost at BWV makes those BWV points go further than a SSR point at SSR.

One thing I can't tell is what did you use as the point costs for your stay? The point cost of staying at that resort or the same point cost for every resort. There is a big difference in the number of points to stay in the same sized room depending on the resort and view. AKV Value, OKW and BWV standard are really cheap on points.

So for $100 per year you get a much better location? Seems like a great deal to me!

People spend thousands more for a better location on a cruise ship for one week and the room is exactly the same size.

 

[DougEMG]

So for $100 per year you get a much better location? Seems like a great deal to me!

People spend thousands more for a better location on a cruise ship for one week and the room is exactly the same size.

If it was $100 extra per year and payable at the start of each year, then sure I would do that as well. But it is actually $100 per year left on your contract all payable in one lump sum at the start; hence the $4800 difference in purchase price between buying the equivalent SSR vrs BLT contract.

Lots of people on the cruise ship buy standard rooms yet still enjoy all the ammenities that the cruise ship has.

There is no right and wrong answer here, the whole point is to allow people to make informed decision so they can do what works best for them.

 

[GOOFY D]

If it was $100 extra per year and payable at the start of each year, then sure I would do that as well. But it is actually $100 per year left on your contract all payable in one lump sum at the start; hence the $4800 difference in purchase price between buying the equivalent SSR vrs BLT contract.

Lots of people on the cruise ship buy standard rooms yet still enjoy all the ammenities that the cruise ship has.

There is no right and wrong answer here, the whole point is to allow people to make informed decision so they can do what works best for them.

You're right, there is no right or wrong answer. It is based on personal preference. If paying that $4800 up front basically guarantees (I know there are no "guarantees") that you will be able to stay at a resort that you greatly prefer via the 11 month booking window (in this case BLT), then maybe it is a small price to pay.

 

[jkpatrick]

Right, it all depends on what someone values. As in, what they feel like their dollar is worth to them. Also, it was brought up on a thread, the cost of living where the owner lives and their salary affects what they can buy. Someone living in LA, SF/Silicon Valley, NYC probably would have the extra discretionary income to view that $4800 is pocket change. Also someone who lives in Hawaii, wouldn't care so much for an ocean view room on a cruise ship.