DEAL OR NO DEAL: DVC Contract Extensions

[OKW Lover]

Even though my wife and I will be long gone by then, I'm seriously considering the extension just for the benefit of our children, grand-children and great-grandchildren.

 

[jcf]

There won't ever be a need to hurry - because not everyone is going to take the extension. There are always going to be 2042 contracts available and depending on how DVC is handling ROFRs going forward, you may find that the resale prices on 2042 contracts finally begin to drop (as they rightfully should because less life remains).

I would think as some people would buy 500-600 points for 50pt (guess) and then use them to stay at POLY and GF?

 

[jade1]

DEAL: I'll pay if this offer applies to BCV at $15 per point.

Yea thats about where I'm at as well. BCV is the only one I would be interested in extending, and even then $15 is the max, any more and its going toward 50 years at CRV.

 

[Sabor]

There won't ever be a need to hurry - because not everyone is going to take the extension. There are always going to be 2042 contracts available and depending on how DVC is handling ROFRs going forward, you may find that the resale prices on 2042 contracts finally begin to drop (as they rightfully should because less life remains).

Personally I think DVD will be buying back pretty much all of the 2042's through ROFR and resell them with the 2057 date, unless the selling price is too high (which it wont be)

 

[rsinj]

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[rsinj]

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[beetle64]

rsinj said

As 2042 approaches, the price has to come down until it is ultimately worthless - it cannot keep going up. When the year 2040 comes around, do you think anyone is going to be willing to pay $70 per point for two years remaining on the contract? Of course not. Even DVC won't be buying them back for that price. It will be a matter of supply and demand. Nobody in the market is going to pay $70, or even $60 or $50 for an OKW contract with only 2 years remaining. When 2040 rolls around, OKW contracts expiring in 2042 are going to be selling for maybe $10 per point.

That all depends on what the rental cost of a room is at that time. if you factor even a moderate inflation it could to be well over $2000 a night to stay at a DVC resort hotel (inflation at 5% average would have the cash rate about $1500 a night for rooms currently at $300 a night i.e. a studio). If a room is say $1500 a night paying cash and the same room is 10 points a night it makes an awful lot of sense to buy DVC at $100 per point and you get 2 vacations for less than the price of one. Even if dues increase at the same rate (i.e. go to $20 per point per year).

Pay cash cost $1500 a night

buy into DVC at $100 per point for 10 points = $1000
two years of dues at $20 per point = $ 400
total cost for 2 yrs = $1400
per night cost =$ 700

DVC will be worthless the minute all the points are used up. Until that point they are worth a percentage of whatever the cash rental price is at that particular time. If people can get two vacations for the price of one I think plenty of people will look at this as a viable option.

Many people make the mistake of assuming the cash price for rooms are going to look similar to what they are now. I don't think so.

 

[rayelias]

Here's a question...

As stated, since DVC is a lease-based timeshare, ALL the expirations must end on the same date. DVC is changing that date to 2057.

If I choose not to extend, and somewhere down the line I decide to sell (ain't gonna happen, but just a hypothetical) - will DVC allow a new buyer to have a different end date (2042)? Will they "force" the new buyer to take the extra 15 years (at whatever DVC decises the price du jour is)? Or will I be forced to sell to DVC, where they will tack on the extra 15 years, and resell themselves?

Correct me if I'm wrong, but if you sell back "direct" to DVC (instead of through ROFR), they pay CONSIDERABLY less than what the free-market is paying.

 

[rsinj]

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[Mississippian]

I've posted this on another thread, but it fits here as well.

The present value of 15 extra years 35 years from now is about two or three dollars, at most. $15 dollars invested at nine percent, which is not an unreasonable return, would grow to more than $300 in 35 years. $25 would grow to $510. So take the $25, multiply by the minimum point purchase of 150 to get $3,750, put it in a tax-deferred retirement account, and you will have $76,552 to spend in 35 years. Of course, if you figure 12 percent, which is the historic return of the stock market, that figure grows to $197,998. Both of these figures far outstrip inflation. If you figure inflation at five percent, which is far more than it has been for the past 20 years, then it will take $20,685 to in 35 years to match the buying power of $3,750 today.

This buy 15 extra years scheme is one of the biggest scams I've seen in a long time. The way Disney is forcing the members to opt out or be billed is sure to cause some lawsuits, as well it should. This is as crooked a deal as I've ever seen.

 

[beetle64]

I dont think it's a scam, however it's such a long time away it's very hard to decide what is "fair value" which is why I don't think there will be a majority of current members deciding to take up the offer. I don't think that when people look back 35 years from now they will say that it was a bad investment, but with the current economic situation and the spiraling debt here it may be difficult for large numbers of people to justify spending a sizable chunk of their (not so)spare cash for a product they may never live to enjoy. I love my kids, but I have plenty of immediate issues that need dealt with so I can enjoy my life in the present.

It will however be a big help to Disney who undoubtably would like to shift the OKW inventory they seem to have accumulated. Trying to sell OKW with a 2042 expiration they are competing against a small in %age but still fairly sizable market. The only question, when it's the same product, is do I buy from Disney and pay a small premium for the sake of my peace of mind or do I buy from a private seller and risk ROFR,the contract getting stripped,dues not being current or a number of other potential issues. By extending the expiration date to 2057 they present potential buyers with a different question. Do I want 35 yrs duration at $X (with all the inherant risk above) or do I pay a little more and buy 50 yrs contract from Disney. When you already have the 35 yrs that you're looking forward to enjoying paid for, it's a very different argument than if you're deciding to purchase a 35 yr or a 50 yr interest


Missisipian says

The present value of 15 extra years 35 years from now is about two or three dollars, at most. $15 dollars invested at nine percent, which is not an unreasonable return, would grow to more than $300 in 35 years. $25 would grow to $510. So take the $25, multiply by the minimum point purchase of 150 to get $3,750, put it in a tax-deferred retirement account, and you will have $76,552 to spend in 35 years. Of course, if you figure 12 percent, which is the historic return of the stock market, that figure grows to $197,998. Both of these figures far outstrip inflation. If you figure inflation at five percent, which is far more than it has been for the past 20 years, then it will take $20,685 to in 35 years to match the buying power of $3,750 today

nothing wrong with your ideas other than your not taking into account what the actual cost of those accommodations are going to be in 35 years time. Using your middle figure $76k might be a very reasonable price for 15 years of vacations. If you figure that hotel prices in the next 35 yrs will rise at the same rate they have in the last 35 years.Please someone correct me if I'm wrong but I seem to remember that the Contemp when it opened 35 yrs ago was $50 a night it's now (including taxes close to $400) an 8 fold increase. If a $300 a night room ( and most DVC rooms are over that figure) increases by the same amount in the next 35 yrs those rooms are going to be over $2400 a night. A 10 night stay is likely to run $24k FOR ONE YEAR making a $76k investment for 15 yrs look a decent investment.

Using your numbers but scaled down for todays cost to buy into Disney, how many people wish they could go back 35 years and invest just $50 a year ( using your tax defered retirement account) in order to give them the funds to buy a DVC membership now.

Value for DVC is tied to the future cost of Disney hotel rooms, any price calculation that doesn't include the likely cost of those hotel rooms is both incomplete and inaccurate.

This buy 15 extra years scheme is one of the biggest scams I've seen in a long time. The way Disney is forcing the members to opt out or be billed is sure to cause some lawsuits, as well it should. This is as crooked a deal as I've ever seen.

I think you have your facts wrong, the opt out is for the vote to have the option to extend your contract. My understanding is then Disney will send you a contract giving you the option to pay to extend or to sign over your rights to that extention to Disney (for no cost). I believe that was laid out earlier in this topic

 

[bobbiwoz]

I'm guessing it's a "no deal, no way" for us. We don't own at OKW, and I will be keeping an eye on how things go there if it's ever going to be offered to the earlier resorts we do own at. We bought AKV partially to have something that has a longer life and thus hopefully a better resale value if we want to sell something in a few years.

Bobbi

 

[dianeschlicht]

I'm guessing it's a "no deal, no way" for us. We don't own at OKW, and I will be keeping an eye on how things go there if it's ever going to be offered to the earlier resorts we do own at. We bought AKV partially to have something that has a longer life and thus hopefully a better resale value if we want to sell something in a few years.

Bobbi

Your thinking is exactly like ours. We WERE thinking of selling one OKW contract for that very reason, but now we might hold on and "just see".

 

[bobbiwoz]

Your thinking is exactly like ours. We WERE thinking of selling one OKW contract for that very reason, but now we might hold on and "just see".

Hi! And meanwhile, we get to enjoy the specialness of being AKV owners!!! You have a Concierge level booked, don't you? Our maiden trip is coming up, savannah view, and I am psyched!!!

Bobbi

 

[OneMoreTry]

I've posted this on another thread, but it fits here as well.

......
This buy 15 extra years scheme is one of the biggest scams I've seen in a long time. The way Disney is forcing the members to opt out or be billed is sure to cause some lawsuits, as well it should. This is as crooked a deal as I've ever seen.

 

[robinb]

My problem with it is what happens to the resale market. IF it means the value would hold or increase, I MIGHT do it, but if it appears the value stays the same, I see no real reason to extend, since I'll be well into my 90's at the end of the first contract.

I will also be in my 90's when my BWV contract expires now. I am not willing to pay extra to lengthen the contract as I already have a longer one at AKV.

 

[FLYNZ4]

I voted "other" because I purchased SSR... and hence none of the options pertain to my situation. I purchased SSR primarily because of the longer contract life.

I have also been predicting that contract extensions would occur... and the vast majority of you have been saying that I am wrong. To me it was always obvious that this would occur... the only variable was when DVC would offer this.

I personally think that the predominate reasoning of --- "I will be pushing up daisies in 2042" is based on emotion rather than analysis. None of us know for sure what the financial results will be... but I think that it is highly likely that your asset will be worth more than the "extension fee" if you decide to extend... as compared to an un-extended contract.

I also realize that most are feeling --- "I did not buy this as an investment". Once again... I personally feel this rationale is flawed. Regardless of why you purchased DVC... it is an asset that you own... and it is to your (and your heirs) benefit to have that asset be worth as much as possible... regardless if you plan to sell or not. You never know what your situation will be... so why do you want to have something that is worth less?

I believe that the reason that an extended contract will be worth more than one expiring in 2042 has little (or nothing) to do with the value of your ownership actually increasing in value. However... I do believe that all contracts that are not extended will decline in price. Slowly at first and then accelerating as the number of years decrease. There are currently about 35 years left in the current contracts. In 10 short years that will be down to 25 years. My belief is that anyone wishing to purchase a DVC contract at that time will find such a contract very unfavorable... because most of us view our mortality... and that of our children to be longer than that. Yes... us old folks will die off... but anyone interested in purchasing our memberships are likely to view our contacts as "damaged goods".

The reason that I always thought that DVC would offer these extensions is because it virtually allows them to "print money". The executives making this decision now will get credit for generating revenue... yet they will be long gone in 35 years when the contract extensions kick in. The other reason that I felt it would happen is because it has been obvious that the ROFR cannot continue to artificially keep resale prices high indefinitely. Hence... I suspect that DVC will pull the plug on ROFR at some point allowing resale prices to plummet. It will be easy to market against resale product once the useful life of the contract gets lower... IE: my 25 year example above. If you don't think it will happen at 25 years... then what about 20... or 15? How many of you would have honestly spent $20K (or whatever you paid) for a membership that would not outlive your expected lifespan? Furthermore, how many of you considered your children when deciding to purchase DVC. I suspect the majority of you did... afterall... Disney is marketed very effectively to trigger your parental needs to provide for your children.

I have no idea if everything will pan out exactly as I predict... in fact, I am sure that it will not. However, I am relatively sure that at the macro level... my analysis is fairly accurate. To believe otherwise would indicate that Disney does not understand effective marketing.

/Jim

 

[durango kid]

Absolutely I would pay it! We love the idea that our children can use our membership some day as well! I hope they do extend!

 

[MOM POPPINS]

http://www.wdwinfo.com/disney-vacation-club/faq.shtml#okw

 

[karrit2000]

I prefer at this time to invest my money in the newly announced GCV at DL. If they were offering this for BWV I would probably jump on it. The $15 seems somewhat reasonable at this point but I know that down the road I would get more mileage out of BWV & GCV. I've been asking for CA availability since I originally bought in. I'm figuring that it will be offered for sale sometime around when this extension is due so I need to decide which one is a better use of my $$$. Since I will be 98 in 2057 I seriously doubt that I will be taking as many Disney trips as I do now. I'd need to come up with or finance $3300 just to extend OKW and I'd rather put that money on a newer property that I have been wishing for for over 10 years already.