Cost per point, per year broken down...help!

[Sammy]

I’m sure one of you DVC experts can help me out on this one. We are brand new members (Dec. 2003) and we just went “home” for the first time. I am trying to calculate the “value” of our DVC points for our 5-nighr stay at OKW. This would also help me for future reservations.

I think I’ve got the method right, but wanted to check with someone on the boards. Here is what I have so far:

• Purchase price for 175 points, including closing costs = $13,375.00
  
• Calculated dues over 38 years = $40,949.88
  (I used an estimated average increase of 2% per year. Might be wishful thinking on my part that it will be this low!)
  
  <b>TOTAL = $54,324.88 </b>
  
• Cost per year = $1,429.60
  (total divided by 38-year contract)
  
• Cost per point/per year = $8.16
  (cost per year divided by 175 points)
  
• Cost, in points, for our recent 5-night stay at OKW = $710.71
  (cost per point x 87 points)

Any comment or suggestion would be greatly appreciated!

Sammy

 

[DrTomorrow]

I'll leave it to those who have already figured this out to confirm, but your reasoning seems sound to me.

One comment - what you have calculated is your "cost"; the "value" is a different matter. Financially, I'd think that the value is what you could rent the points out for, summed up over the length of your contract. Metaphysically, there's another thread covering the 'priceless' value of DVC points.

 

[joepoe]

Originally posted by Sammy
...
I think I’ve got the method right, but wanted to check with someone on the boards. Here is what I have so far:

• Purchase price for 175 points, including closing costs = $13,375.00
  
• Calculated dues over 38 years = $40,949.88
  (I used an estimated average increase of 2% per year. Might be wishful thinking on my part that it will be this low!)
  
  <b>TOTAL = $54,324.88 </b>
  
• Cost per year = $1,429.60
  (total divided by 38-year contract)
  
• Cost per point/per year = $8.16
  (cost per year divided by 175 points)
  
• Cost, in points, for our recent 5-night stay at OKW = $710.71
  (cost per point x 87 points)

Any comment or suggestion would be greatly appreciated!

Sammy

That's as good a way as any to do it. I think as people realize what their cost per point is, they will ask more than $10 a point to rent.

 

[nuthut]

Originally posted by joepoe
That's as good a way as any to do it. I think as people realize what their cost per point is, they will ask more than $10 a point to rent.

You got that right. Why give away your investment?

 

[Caskbill]

You made a mistake in using a 2% inflation rate to calculate future dues and then using that value for your most recent stay. In 38 years your dues will be more than double what they are now, but your salary could easily be double also. But you calculated your cost using those future dues as if they were 2004 dues values and not 2042 year values.

Let's just say your dues today are $4/point, or $700. Then your cost TODAY is $2.01 for the initial purchase and $4 for dues or $6.01 per point. So your 5-night OKW stay cost you $523.00, not $710.

Now next year dues go up 2%, so next year the same 5-days will cost you $530.00

And in year 38, those same 5-days will cost you $928. But that $928 will be in year 2042 dollars, not in year 2004 dollars.

You basically used the average of the $530 and $928 which is close to your $710, but you don't do it that way.

You also ignored the cost of the initial investment, and maybe you meant to, but if you really want to know your 'cost' you either have to factor in the loss on investment on your initial purchase funds, if you paid cash, or also factor in all the interest you'll be paying if you are financing. And in that case you'd also have to calculate your tax advantages if your interest payments were tax deductible.

By the way, your real estate portion of your dues are tax deductible, and that's not calculated in either. It would tend to lower your true costs by a little bit also. If taxes are $0.80 (just guessing, and you're in a 15% effective tax bracket, then that's 12 cents per point less, so your OKW stay would be another $10.44 cheaper, or about $520.00.

If you're financing, you also have to calculate that on an annual basis. Your interest would be highest the first year so your cost to stay would be higher year one, but lower (interest wise) year two.

Anyway, long story short (oops, too late) , your 5-day stay this year was a lot less than $710.

If you wanted to know exactly year by year, all the figures could be put into a spreadsheet program and easily calculated.

Hope this helps.

 

[jaysue]

We do it slightly differently - our way does not include any opportunity costs of the money invested in DVC and it treats the upfront as a straight line depreciating asset:

$ paid per point/remaining life of contract

+

$ mtce pair per point for current year

= cost per point for current year

So for 2004 for example

$84 paid for SSR points - 50 years to go

2004 depreciation is $84/50 = $1.68/point

2004 mtce estimated at $3.80/point

Cost per point for 2004 - $5.48/point

Since we used SSR points for VB, one of our weekday 1BR nights at VB will be 19 points X $5.48 = $104.12/night

Reality is with any financial model, you would need to figure in a reasonable return on your capital invested and you would probably value the points from early years more than late years - mentally I think this would get to a cost of about $8pp

thanks
jaysue

 

[Caskbill]

Originally posted by nuthut
You got that right. Why give away your investment?

No, actually you've all got it wrong. Figuring the cost of future dues (after inflation) 38 years from now and then using that to figure today's cost would be similar to me renting you my automobile on a per mileage basis and saying that today gasoline is about $1.90/gallon but in 38 years it'll be about $10/gallon, so I'm going to rent you my car based on a cost of about $6.00/gallon.

Nuthut, if you're going to calculate rental price based on future dues increases, then that can only be done if you never raise your price, as you are charging ahead today, on those future increases. So if you never charge more than $10/point for the next 38 years, then you have averaged your charge against the average dues price over 38 years and all is well. But if you raise your price a penny during the next 38 years, then you have made a false statement about the 'cost' TODAY.

 

[Sammy]

Originally posted by Caskbill
You made a mistake in using a 2% inflation rate to calculate future dues and then using that value for your most recent stay. In 38 years your dues will be more than double what they are now, but your salary could easily be double also. But you calculated your cost using those future dues as if they were 2004 dues values and not 2042 year values.

Hmmmm...hadn't thought of it that way, but I see your point. I'll have to make a few adjustments to my spreadsheet.

I pretty much understand everything else you pointed out in your post and I really appreciate the detail!! You gave me a few more things to think about.

Whatever way I slice it, its not going to change the way I feel about our DVC purchase. I'm just a type-A who wanted that final confirmation (in my mind, anyway), that I'm not throwing $$ away.

And as someone else posted, the "value" for us goes way beyond dollars and cents. When you can go to a vacation destination that the entire family enjoys....so much so that your 14 year old, typically cynical teenager even acts like a little kid...its worth every penny.

Thanks to everyone for their comments...I love these boards!

Sammy

 

[joepoe]

Originally posted by Caskbill
No, actually you've all got it wrong. Figuring the cost of future dues (after inflation) 38 years from now and then using that to figure today's cost would be similar to me renting you my automobile on a per mileage basis and saying that today gasoline is about $1.90/gallon but in 38 years it'll be about $10/gallon, so I'm going to rent you my car based on a cost of about $6.00/gallon.

My bad. It would be more accurate to calculate the present value of the annual dues over 40 years to get the true dues cost per point. But using today's dues per point is accurate enough for government work.

 

[RoyalCanadian]

How about using the price CRO would charge for the same accommodations as the monetary "value"?

 

[Sammy]

Originally posted by RoyalCanadian
How about using the price CRO would charge for the same accommodations as the monetary "value"?

LOL! Good point. Let's see.....using Caskbill's calculations, our 5-night stay in a studio at OKW cost $523 in points "value".

Rack rate for the OKW studio for that time of year (regular season - don't know if there were any discounts offered) is $284/night or $1,420 - not including taxes.

I like that "value" a lot!!

 

[ArnyVee]

I've always found this particular DVC 'topic' interesting. Does anyone have anything on a spreadsheet already that can calculate these numbers for me?

 

[Richyams]

Its actually way more simple than any of that for me.

It cost us 11k or so to join, we got two years of points for our first trip, 12 nights in a GV. The GV was near $1,000 a night cash, so we broke even one our first trip.

During that first trip, we realized that we were going to need the GV every year, so we added on an additional 200 points for another 11k so that we could get the GV every year. Our second trip was another 12 nights in the GV, so we broke even again on that trip.

Really, we had nothing to amoritize, so our trips only cost us dues.

If you count all the free passes, 70 nights times 6 passes, 420 pass/days times $40+ each, it just makes it silly.

My points cost me dues and only dues now, there is just no other way to look at it.