Do you ever think of it this way?

[sconnell]

We're getting ready to make our first DVC purchase (still in the strategizing phase and waiting for AKV). I was just thinking about numbers one day and wondering what we end up paying per night for a room. (when using DVC) Tell me, does this make sense? (Other than dues...)
(Now, I'm just throwing some numbers out as examples...)
Say you buy in at $86 for 150. That's $12,900.
But, you are really getting (say for the 50 years, assuming that you use all of your points without loosing them) 7,500 point in all.
That's $1.72 per point? (Of course, I'm leaving out dues and reality, but just to get an idea of the overall savings it might bring?) Am I WAY off base here?

ETA: So, if you are staying at 12 points a night, that's just over $20 a night?

 

[mikron]

HAPPY HOLIDAYS, sounds good to me.

 

[DVC Grammy]

Are you aware of the possible extra cost that the "Dis-nease" of addonitis" can bring? It's extremely contagious, especially if you're repeatedly exposed to the Disboards!

 

[dianeschlicht]

But remember that you aren't going to likely pay just $86 a point if you wait for AKV, and you really DO have to include maintenance fees, since that is the far greater cost of DVC than the purchase price.

 

[rahrah]

We're getting ready to make our first DVC purchase (still in the strategizing phase and waiting for AKV). I was just thinking about numbers one day and wondering what we end up paying per night for a room. (when using DVC) Tell me, does this make sense? (Other than dues...)
(Now, I'm just throwing some numbers out as examples...)
Say you buy in at $86 for 150. That's $12,900.
But, you are really getting (say for the 50 years, assuming that you use all of your points without loosing them) 7,500 point in all.
That's $1.72 per point? (Of course, I'm leaving out dues and reality, but just to get an idea of the overall savings it might bring?) Am I WAY off base here?

ETA: So, if you are staying at 12 points a night, that's just over $20 a night?

You need to remember that over the life of the DVC membership you will pay more in dues than in your original membership cost. So if the fees are 4.25 a point (not actual value) then you are paying an additional $31,875 over the life of the membership.

If you are thinking per point that is aprox $6 a point (1.72 + 4.25) or $72 for the room.

Of course all of this ignores the future value of money. (ie the money $12,900 would earn if it was invested).

So lets ignore inflation (which means we do not raise our dues each year) If we invest the money we will get about 2% in a simple annuity after inflation (after inflation numbers lets us continue to ignore inflation). This means we would get a payout of about $400 a year for 50 years with a final balance in the annuity of zero dollars. Add in the dues on 150 points (call it 4.25) and you get $1037.50. This is essentially your annual cost of owning a DVC membership.

So just ask yourself, where else can I stay in Orlando for $1037 (or $6.91 a point), and how does that compare to staying at a DVC. A week in a Moderate resort is about $1000. A week in a DVC Studio is about 110 points or $760 worth of points).

Of course inflation and a different return on the annuity will change these numbers.

That why a good rule of thumb for comparison is the Moderate level resorts.

For your example, 12 points a night would be about $83 a night.

 

[DisDaydreamer]

You need to remember that over the life of the DVC membership you will pay more in dues than in your original membership cost. So if the fees are 4.25 a point (not actual value) then you are paying an additional $31,875 over the life of the membership.

If you are thinking per point that is aprox $6 a point (1.72 + 4.25) or $72 for the room.

Of course all of this ignores the future value of money. (ie the money $12,900 would earn if it was invested).

So lets ignore inflation (which means we do not raise our dues each year) If we invest the money we will get about 2% in a simple annuity after inflation (after inflation numbers lets us continue to ignore inflation). This means we would get a payout of about $400 a year for 50 years with a final balance in the annuity of zero dollars. Add in the dues on 150 points (call it 4.25) and you get $1037.50. This is essentially your annual cost of owning a DVC membership.

So just ask yourself, where else can I stay in Orlando for $1037 (or $6.91 a point), and how does that compare to staying at a DVC. A week in a Moderate resort is about $1000. A week in a DVC Studio is about 110 points or $760 worth of points).

Of course inflation and a different return on the annuity will change these numbers.

That why a good rule of thumb for comparison is the Moderate level resorts.

For your example, 12 points a night would be about $83 a night.

That was a nice walk thru

 

[3DisneyKids]

The way the guides do it (currently using $86 per point F&F promo) it works out to $68 and change per night. Don't ask me to do guide math...I can do DVC point math, and I can do DDP credit math, but not guide math...

 

[sconnell]

You need to remember that over the life of the DVC membership you will pay more in dues than in your original membership cost. So if the fees are 4.25 a point (not actual value) then you are paying an additional $31,875 over the life of the membership.

If you are thinking per point that is aprox $6 a point (1.72 + 4.25) or $72 for the room.

Of course all of this ignores the future value of money. (ie the money $12,900 would earn if it was invested).

So lets ignore inflation (which means we do not raise our dues each year) If we invest the money we will get about 2% in a simple annuity after inflation (after inflation numbers lets us continue to ignore inflation). This means we would get a payout of about $400 a year for 50 years with a final balance in the annuity of zero dollars. Add in the dues on 150 points (call it 4.25) and you get $1037.50. This is essentially your annual cost of owning a DVC membership.

So just ask yourself, where else can I stay in Orlando for $1037 (or $6.91 a point), and how does that compare to staying at a DVC. A week in a Moderate resort is about $1000. A week in a DVC Studio is about 110 points or $760 worth of points).

Of course inflation and a different return on the annuity will change these numbers.

That why a good rule of thumb for comparison is the Moderate level resorts.

For your example, 12 points a night would be about $83 a night.

Very good walk-through. I knew that someone would have it all thought out.

 

[Maistre Gracey]

I always use that formula to compare DVC costs to the cash rates when we stay at the Disney hotels. Our costs including fees are approaching $7/pt.

We just returned from the Grand Floridian, and if we used points we would have recieved $6.80 of "per point value" (cash price divided by number of points required for the stay).
That math shows a break even cost using cash or points. I think DVC looks at this when setting Disney Collection point values, as it breaks even quite often.

MG

 

[Granny]

Don't ask me to do guide math...I can do DVC point math, and I can do DDP credit math, but not guide math...

Oh, absolutely don't ask any of us to explain Guide Math! They sure didn't teach that in any of the schools I attended!

 

[Maistre Gracey]

I forgot to add-
I do not figure lost interest into the equation. In my opinion, it just doesn't make sense to do so. Why??

- That money would not sit in the bank earning interest. At minimum I would draw a large sum out four times per year in order to pay for my Disney accommodations. That money would deplete quickly, and after the "break even point", you would actually be losing interest. You will still be taking vacations, but now you will be drawing out money for hotels that would otherwise be earning interest.

MG

 

[bcvillastwo]

Earlier MG said

I do not figure lost interest into the equation. In my opinion, it just doesn't make sense to do so. Why??

--That money would not sit in the bank earning interest. At minimum I would draw a large sum out four times per year in order to pay for my Disney accommodations. That money would deplete quickly, and after the "break even point", you would actually be losing interest. You will still be taking vacations, but now you will be drawing out money for hotels that would otherwise be earning interest.

I agree with MG on this point but only to the extent that you were not going to invest any of the money you use to pay for your DVC points. For example, if you routinely spend $5,000 each year for your Disney vacation and that covers the cost of your points and dues then I can't see what value there is in determining how much investment income you may have lost because you weren't investing this money in the first place. This point has been discussed a few (many, a bunch, multitudes, etc.) times in the past.

I am still open minded about this but to date no one has provided sufficient evidence to convince me of the error of my ways.

On the other hand, if you are using funds that are already being invested and/or funds you planned to invest and diverted this money to DVC then I think you probably should consider your lost opportunity cost.

 

[rahrah]

I had to figure in the opportunity cost because I sold stock to buy our DVC. Since it was stock, you have to use 6% as the interest rate. At this rate, the calculation comes out to $9.45 a point. Or $1040 for a week in a Studio. I just went to Travelocity and the moderate hotels were $145 a night, or $1015 for the week.

It is almost like someone planned it this way

Another interesting tid bit. With the 6% interest rate for the annutity, your initial investment is just about equal to the annual dues over the 50 years.

Oh yea, and at 22 points for a weekend night, you are effectivly paying $210 a night on weekends, getting kind of close to rack rate there.

 

[DebbieB]

All I know is a 1 bedroom is over $400 rack rate. I love them but would not pay that. I look at my initial investment (250 BWV points for $14,750, paid in full now) as something I could get back if I wanted to sell. My dues are about $1,200 a year, I get 11 nights in a 1 bedroom, so around $109 a night. Much more affordable!

 

[Maistre Gracey]

I had to figure in the opportunity cost because I sold stock to buy our DVC. Since it was stock, you have to use 6% as the interest rate. At this rate, the calculation comes out to $9.45 a point. Or $1040 for a week in a Studio. I just went to Travelocity and the moderate hotels were $145 a night, or $1015 for the week.

It is almost like someone planned it this way

Another interesting tid bit. With the 6% interest rate for the annutity, your initial investment is just about equal to the annual dues over the 50 years.

Oh yea, and at 22 points for a weekend night, you are effectivly paying $210 a night on weekends, getting kind of close to rack rate there.

I understand whay you are saying, but you are comparing a DVC purchase to not taking a vacation. In my opinion we must compare a DVC purchase to taking money out of the bank for a Disney hotel.
Either way the loot comes from somewhere. All at once, or over time is the question. Over time the annual money drawn from an account will outweigh, and pass the amount of the initial DVC outlay... including lost interest.

MG

 

[Tink-n-Belle]

I figure my buy in cost over 37 years was $2 per point and I just add my MF to that and multiply by the # of points I used for the trip.

6.65 x 180 points =$1197 for use of a 1 bedroom for 7 days at the BW. NOT BAD!!

Retail the room was $500 per night x7 nights =$3500 plus tax!!!!

 

[goalie5hole]

The way the guides do it (currently using $86 per point F&F promo) it works out to $68 and change per night. Don't ask me to do guide math...I can do DVC point math, and I can do DDP credit math, but not guide math...

And I can tell you how many moles of Carbon are in CO2 or the constant ionization of water-but I won't touch guide math.

 

[JimVL]

When I was deciding to buy points I thought of the different variables, inflation, what if the money were invested, and how much would I be spending on the vacations I already know I'll be taking for years. I decided that a lot of the variables negated each other and just calculated the initial buy and the MF. I figure that it will cost me about $900.00/year, in today's dollars, to control 150 points for the next 47 years. I'll probably sell the contract long before that, which will lower the $900.00/year significantly.

 

[bluslag]

I probably would have spent the money on a car or something that I would not have anymore so I love my DVC!! I think it is a great use of my money and have all the memories each year with more to come.

 

[rahrah]

I understand whay you are saying, but you are comparing a DVC purchase to not taking a vacation. In my opinion we must compare a DVC purchase to taking money out of the bank for a Disney hotel.
Either way the loot comes from somewhere. All at once, or over time is the question. Over time the annual money drawn from an account will outweigh, and pass the amount of the initial DVC outlay... including lost interest.

MG

For most of us that bought into DVC, we really did it for emotional reasons. All we really care to know financially is that we are not being taken advantage of. I am just running the numbers as accurately as I can. If we really cared about saving a buck, we would spend our vacations visiting our relatives

I never figured the numbers if you finance the DVC at 10% interest, I expect that they are not good.

I like to summarize a DVC purchase as: If you are going to go one full week a year it is equivelent to paying for a moderate resort. If you are only going for 5 weekdays, it is equivelent for paying for a budget resort. Of course if everyone starts going for just the weekdays, DVC will raise the weekday points and lower weekend points. Events in the future could change all of this.

If you want scary, assume you are 25 and are never going to go to WDW ( that of course means this is total fantasy) Your initial investment of $86 a point invested in the S&P500 (assume 9%) minus inflation (assume 3%) might yield 6% a year. We will also add in the annual dues ($4.25) being paid each year. This could give you about $1,600 a point when you retire (today's dollars). For 150 points, that is almost a quarter million dollars. ( I can hear the DVC sales people cringing)

As you can tell I spend way too much time thinking about this. (I work on software for the the finance industry, I am not a financial advisor).

If you want to run numbers like these yourself, try http://www.moneychimp.com/calculator/