Does DVC just not work for some people?

[Dean]

I think the time frame has to be incredibly variable based on the person buying, which is the problem. There isn't really a "best" time frame for everyone, IMHO.

We have no intention to ever sell...and we're 5 years into it. We bought it as pre-paid vacations at a discount, not an "investment" (meaning something we would eventually recoup costs on, via resale). Granted, it doesn't mean we won't change our mind in 10 or 15 more years...but as of now, we have no compelling reason to do so. We bought with the intent to use the contract until expiration (ours or the contracts). Maybe 50 years is too long to amortize over (though we were in our early 30's when we bought, and were making annual trips before we ever had kids)...but 10 (for us) would be far too short to be representative of use.

I suspect the shorter term is based on the way that person perceives they will use the timeshare. Timeshare "specialists" seem to buy and sell much more frequently than the "average" buyer,at least anecdotally. For them, 5 to 10 years might be about right...because it's likely going to be sold around that time frame.

I use 50 years because, without knowing the proceeds of resale (which will be based on a ton of factors, including the economy at the time of resale) when/if there is a choice to resell....it's an impossible calculation. Since I have not thought of selling it...it's impossible to project even the relative use that will be left in the contract when/if we were to sell. It's dicey using the current 2042 contract prices...because the economy stinks. Yes, I've heard the point that the lower economy drives people to resale for cheaper prices...it also drives people completely out of the market, altogether.

In any case, if I were to use the same calculation, but amortize the up front cost over 10 years, include our annual dues, our room rate for our upcoming trip would be about $330 per night (9 nights this trip). That's not taking into account opportunity cost on the initial money.

Of course, after 10 years of use...your "estimated room rate" is likely going to drop into the 130's (assuming the same growth in dues over the next 5 years)...which makes the discount even more substantial.

Of course there are many variables, your assumptions give you the best case possible. My sense of a shorter time window is independent of selling down the road and more about limiting risk. Any timeshare, including DVC, is a high risk venture. If the best case scenario is the only way it works for someone, the risk is far too high and the chances of life and timeshares happening too you are all too likely. Like the CAN resort where the fees are not almost $28K per week that I mentioned a couple of weeks ago or a handful of resorts that have closed or had owners shut out over the years. I'm sure you'll say that would never happen with DVC, dues won't go up high enough to make owning more expensive than not, the parks will remain open, etc but those are all real long term risks that are not out of the realm of possibility. I love DVC and prefer to stay on property most trips though my costs are generally in the $400 a week range when I stay at DVC rather than $200-330 a night.

 

[DougEMG]

What would be nice is a little flow chart that a person could use that would show if DVC would work for them.

Questions could be something like:

1 - Do you want to stay on site
2 - Do you plan to visit at least once every 3 years
3 - Can you plan in advance
4 - Do you spend $??? per night for a room

 

[pilferk]

If that's the way you took it then I apologize, that was not my focus or intent. However, these are issues that have been discussed to excess over time plus the principle was the important thing and I felt (still do) that a numbers discussion was not helpful or reasonable in this situation. However, it seems you are saying that one needs to explain and justify every time one posts an opinion, we'll simply have to disagree if that's the case.

No, I'm saying the opinion isn't worth much, without explanation or justification.

So, as I said..I'll just refrain from discussing the issue with you...that way, you won't have to be bothered to provide anything of real substance.

As I said, fair enough.

 

[DougEMG]

Of course there are many variables, your assumptions give you the best case possible. My sense of a shorter time window is independent of selling down the road and more about limiting risk. Any timeshare, including DVC, is a high risk venture. If the best case scenario is the only way it works for someone, the risk is far too high and the chances of life and timeshares happening too you are all too likely. Like the CAN resort where the fees are not almost $28K per week that I mentioned a couple of weeks ago or a handful of resorts that have closed or had owners shut out over the years. I'm sure you'll say that would never happen with DVC, dues won't go up high enough to make owning more expensive than not, the parks will remain open, etc but those are all real long term risks that are not out of the realm of possibility. I love DVC and prefer to stay on property most trips though my costs are generally in the $400 a week range when I stay at DVC rather than $200-330 a night.

Limiting ones risk is a smart thing to do. When I bought my assumptions were all based on looking 6-7 years out which is about as long a time horizon as I was willing to assume the risk of owning DVC for.

 

[Dean]

No, I'm saying the opinion isn't worth much, without explanation or justification.

So, as I said..I'll just refrain from discussing the issue with you...that way, you won't have to be bothered to provide anything of real substance.

As I said, fair enough.

Fair enough, I'm quite confident I've contributed greatly over the years and will continue to do so, I'm sorry it's not been to your satisfaction. There is an ignore member option in the user choices.

 

[disneynutz]

Fair enough, I'm quite confident I've contributed greatly over the years and will continue to do so, I'm sorry it's not been to your satisfaction. There is an ignore member option in the user choices.

As I get older I find that I just want to get to the point and not take the time to flower it up or explain my answers so I understand your position. We only have 78 or so Christmas vacations during out lifetime so lets make the most of our precious time.

I like most here on the DIS appreciate your contributions, thank you.

Bill

 

[Dean]

As I get older I find that I just want to get to the point and not take the time to flower it up or explain my answers so I understand your position. We only have 78 or so Christmas vacations during out lifetime so lets make the most of our precious time.

I like most here on the DIS appreciate your contributions, thank you.

Bill

Thanks for the kind words.

My usual approach is to scan titles in the DVC section only and only view thread's that catch my eye. I generally concentrate on areas that are technical, rule related, exchanges and philosophical issues.

 

[DougEMG]

Fair enough, I'm quite confident I've contributed greatly over the years and will continue to do so, I'm sorry it's not been to your satisfaction. There is an ignore member option in the user choices.

I always like reading your posts, I have learned a lot from them.

 

[JimMIA]

No, I'm saying the opinion isn't worth much, without explanation or justification.

So, as I said..I'll just refrain from discussing the issue with you...that way, you won't have to be bothered to provide anything of real substance.

As I said, fair enough.

Children, please!

In the immortal words of Rodney King, "Can't we all get along?"

 

[taaren]

I always like reading your posts, I have learned a lot from them.

I'll second that Dean. I may not always agree with it, but I always learn something from your posts, especially since you have the overall timeshare perspective where I'm only familiar with DVC and Marriott atm.

 

[pilferk]

Fair enough, I'm quite confident I've contributed greatly over the years and will continue to do so, I'm sorry it's not been to your satisfaction. There is an ignore member option in the user choices.

As have I. And as I will continue to do.

But it's irrelevant, really. At least in terms of this conversation.

Every thread is a new conversation. And no one should have to comb through 27,000 posts to try to ferret out meaning/substance because you can't be bothered to provide substance THERE, in the conversation. If you've gotten to the point where you just want to "talk at" people, and pass judgement...fair enough. Then I have little interest in what you have to say because it doesn't really add anything.

I have no need to ignore you...I'll just realize you don't actually want to discuss anything...because you can't be bothered.

To be fair, I've read things in the past where you HAVE contributed substantive opinions. With justification AND numbers. And participated in actual discussion of such. Not sure what changed.

Anyway..time to move on and back to the topic.

 

[pilferk]

Weird double post.

 

[vek239]

"If you had asked us ten years ago if we would ever own any timeshare, we probably would have laughed at you. Our version of 'going to Disney' was driving to Disneyland, staying in some el cheapo motel across the street and staying two to three days with our 'big' dinner being at the Blue Bayou."

Describes us to a T when our kids were young. We were more concerned about saving for college, etc. But now that everyone is grown, through college, married, and we have GRANDKIDS we splurged and love DVC

 

[pilferk]

Limiting ones risk is a smart thing to do. When I bought my assumptions were all based on looking 6-7 years out which is about as long a time horizon as I was willing to assume the risk of owning DVC for.

Does it really limit your risk? Or just artificially front load it in the analysis? Looking at the product, 6-7 years is ultra-conservative (given we're looking at a product on the market for roughly 20 years, in an area that has committed capital improvements for the next 6 to 7 that we know of). The fact is, you're buying for whatever term is left on the contract.

It's a 50 year contract, at the outset.. You're either going to hold it or sell it at some point during the 50 years. If, at the outset, you see through to a point where you might sell...then that approximate point would be a decent risk window to look at.

Sure, 50 years is a best case scenario. But 6-7 (or even 10) is surely the opposite end of the spectrum...and not really any more (or less) realistic than 50. They're arbitrary points, seemingly, with no actual connection to the product, itself. At this point, what we have is 20/50 (the 2042 contracts, 20 years in (or 40% of the contract), are worth about 50% at resale)...and that's with a floundering economy. That doesn't seem like justification for a 6-7 (or even 10) year risk window.

I would agree, when looking at things like ROI/opportunity costs and break-even points..you'd like your numbers to be right around 10 years. I'd also agree that the front half of the contract is "worth more" (and the resale numbers we've seen bear this out) than the back half, especially considering inflation. But assigning 100% of the up front purchase cost to the first 10%, 15% or even 20% of the contract doesn't seem to make sense, really (again, keeping in mind...this is just to flesh out a rough nightly room rate or "cost to operate").

So when computing/projecting a rough nightly room rate...I don't see it. I don't see how an exceedingly short risk window really should factor in to that analysis.

Could you explain your thought process?

 

[pilferk]

"If you had asked us ten years ago if we would ever own any timeshare, we probably would have laughed at you. Our version of 'going to Disney' was driving to Disneyland, staying in some el cheapo motel across the street and staying two to three days with our 'big' dinner being at the Blue Bayou."

Describes us to a T when our kids were young. We were more concerned about saving for college, etc. But now that everyone is grown, through college, married, and we have GRANDKIDS we splurged and love DVC

Similar on our views of timeshares. I'd heard the horror stories and had little interest in any of the other products out there on the market. We have/had friends who were DVC members, and it was interesting to hear them RAVE about their purchase. So we took a look, and another, and another. But we held off for a few years....because we weren't overly interested in the resorts they had at WDW, at the time.

We were lucky. We were still in a position to buy when our youngest was still in diapers..and still be able to contribute to college funds, etc. For us, the numbers made enough sense to pull the trigger. And Disney offered a property we REALLY were interested in (AKV).

Our thought process was to use DVC through our kids lives with us at home, and then with our grandkids (should we be so blessed).

 

[nunzia]

"If you had asked us ten years ago if we would ever own any timeshare, we probably would have laughed at you. Our version of 'going to Disney' was driving to Disneyland, staying in some el cheapo motel across the street and staying two to three days with our 'big' dinner being at the Blue Bayou."

Describes us to a T when our kids were young. We were more concerned about saving for college, etc. But now that everyone is grown, through college, married, and we have GRANDKIDS we splurged and love DVC

same here...people can do the numbers all they want and decide that way, or they can figure they have enough in accounts with stodgy and serious purpose and use splurge memory making money on DVC. My total paid in the purchase of DVC is less than what an upper end car would cost and I figure depreciation on that is pretty steep and I generally don't figure in lost money when figuring the cost of buying a car. I still have to buy oil, gas, tune ups, tires, insurance, etc., to be able to have the car whether it's a Lexus or a Focus. I do believe everyone needs to be well informed and as I've said in a previous post, I'm trying to talk a relative OUT of buying. I used to happily stay across the street (DLR person here as well)..now that I'm older I don't want to do that. Now that my kids are all married and we have 9 grandkids I want to give them the room for trips they want to take to DLR. Not every decision is made with just money in mind. I could have dithered forever when I bought my car, but I wanted cheap and good for going around town and the Focus is fine. For the long trips I nudge it up to the HHR, for travel it is usually Microtel, but for Disney it is DVC and no regrets.

 

[Brian Noble]

Does it really limit your risk? Or just artificially front load it in the analysis?

Front-loading the costs *is* limiting the risk. That's the whole point of the exercise. If you know your "break-even"/payoff will happen in that shorter period, then it can only get better from there if your vacation habits do not change over a longer period. Conversely, if you use a too-long horizon to justify your payoff, then you are subject to an increasing likelihood that things will not work out the way you planned. For a luxury purchase like DVC that only pans out if your vacation habits don't change from (relatively circumscribed) expectations, that's potentially quite likely. My first timeshare purchase was just under six years ago, and while things have worked out more or less the way I expected, even I've had some unexpected bumps in the road along the way. But, my payoff point is in the past. At this point, it's all pure gravy. If I had to give away (or even pay something reasonable to dispose of) all of my timeshares tomorrow, I'd still be in the black vs. what I ordinarily would have spent on vacations.

But, even with a shorter window, and even under most reasonable opportunity cost assumptions, DVC (resale) can still be a smart purchase for the "usual suspects": those who tend to visit every year or so, strongly prefer to stay onsite, in at least Moderate but usually Deluxe accommodations, and expect that to continue for at least the next 5-10 years, give or take. Longer windows, ignoring opportunity costs, etc. are only necessary for those in the grey areas of "DVC is a good idea for me".

I generally don't figure in lost money when figuring the cost of buying a car

If you are comparing paying cash for, financing the purchase of, and leasing the car you want, you probably should be.

 

[pilferk]

Front-loading the costs *is* limiting the risk. That's the whole point of the exercise. If you know your "break-even"/payoff will happen in that shorter period, then it can only get better from there if your vacation habits do not change over a longer period. Conversely, if you use a too-long horizon to justify your payoff, then you are subject to an increasing likelihood that things will not work out the way you planned. For a luxury purchase like DVC that only pans out if your vacation habits don't change from (relatively circumscribed) expectations, that's potentially quite likely. My first timeshare purchase was just under six years ago, and while things have worked out more or less the way I expected, even I've had some unexpected bumps in the road along the way. But, my payoff point is in the past. At this point, it's all pure gravy. If I had to give away (or even pay something reasonable to dispose of) all of my timeshares tomorrow, I'd still be in the black vs. what I ordinarily would have spent on vacations.

To be clear, I understand risk calculations and their purpose. We don't use them in an estimated "cost to operate" prospective calculation, though. At least not in the manner being suggested (using a drastically reduced functional life span number). We typically use warranted life span or estimated useful life. A truck, for example, has it's purchase price added in to "cost to operate" calculations spanned out over it's first 5 years...because that's when it's warranty expires. In those cases, we have either a service contract OR a decent sized historical sample of functional life span on which to base that calculation.

It's not actually LIMITING the risk, in this case, though. It's limiting your perception of risk, or the perception of how you want your costs distributed, to determine your "cost to operate". Not ROI or break even..those are separate considerations. Which means it's going to vary based on use and long term planning....because there's no hard and fast (or historical evidence) supporting a specific time frame for every person. It's not cost accounting, where you're amortizing over a relatively defined useful life span (or taxable life span), with specific purpose or rule. We're relatively sure (based on history, planned capital investments at WDW, etc) that the product is still going to be functional and useful well after 10 years (or, in my case, 5 more years) after purchase. As a prospective analysis, for break even and ROI, I get it. You want those to be as short as possible, and "in the black" as quickly as possible, and 10 years-ish (less is better) would be the target I would aim for.

For figuring out a rough nightly room rate 5 years in (aka estimated "cost to operate")....not so much. Again, looking at resale values of the 2042 contract, it's obvious that the first half are probably going to be "more expensive" than the last half. So there's some adjustment that likely needs to be done rather than an even "divide" over 50 years. But it seems to be a lot less conservative than spreading the up-fronts over 10 years.

To me, it's an artificial, arbitrary, baseless front load in terms of a very conservative time frame when figuring out a rough nightly room rate. There's no reason to think 6-7, or 10, years is the sweet spot to spread those purchase costs over. Right? It's just a number somebody picked because they liked it. Why that number? Is there something concrete to base it on that I'm not seeing?

It's not really a depiction of actual risk, because it's not a depiction of actual use (or historical ability to use) of the product. Right? I understand wanting to be "in the black" as quickly as possible, and for ROI/oppporunity an break even, I'm right there with you. But rough nightly room rate? What am I missing?

Again,ultra-conservative risk adjusting for ROI and break even, I get. For a rough nightly room rate? Not so much.

But, even with a shorter window, and even under most reasonable opportunity cost assumptions, DVC (resale) can still be a smart purchase for the "usual suspects": those who tend to visit every year or so, strongly prefer to stay onsite, in at least Moderate but usually Deluxe accommodations, and expect that to continue for at least the next 5-10 years, give or take. Longer windows, ignoring opportunity costs, etc. are only necessary for those in the grey areas of "DVC is a good idea for me".

I've not ignored opportunity cost (except when factored into nightly room rate..that's valid but it's such a moving target it's tough to pin down prospectively and not retrospectively)..and my break even point wasn't long (8 years). Both of those were, and should be, factors. So I agree with (and have not said contrary to) all of the above.

But, again, that's not the same thing as roughing out a nightly room rate...which is where this spur of the conversation came from.

 

[Brian Noble]

We typically use warranted life span or estimated useful life

That only works if you actually have a handle on what that lifetime looks like. For capital equipment like the above-mentioned truck? Sure. We all pretty much know how long that will last. For a particular family's vacation preferences? If you know what your vacation preferences will be with high confidence, even for your own family, 10 years from now, you're a better seer than I.

except when factored into nightly room rate..that's valid but it's such a moving target it's tough to pin down prospectively and not retrospectively

What's wrong with standard amortization of the purchase price over the horizon at a particular cost-of-capital rate? You even get to choose the rate and the horizon! What's not to like?

In any event, as others have, I will let you have the last word on this if you like. I've made my point as best I can, you clearly do not agree with it, so we can all move on.

 

[pilferk]

That only works if you actually have a handle on what that lifetime looks like. For capital equipment like the above-mentioned truck? Sure. We all pretty much know how long that will last. For a particular family's vacation preferences? If you know what your vacation preferences will be with high confidence, even for your own family, 10 years from now, you're a better seer than I.

But that's the point...why use it at all, when looking at a rough nightly room rate? What's the benefit, really? I'll grant you, the even divide isn't perfect, either (looking at resale value). But this isn't really any more representative of reality.

As for historical data on what the lifetime looks like: We have a huge number of points/contracts at their 20 year point...they've lost about 50% ish of their value (granted, in a depressed economy..but that would make them pretty conservative) at resale, right? I'd expect that decline/value shed to get steeper as we get closer to the end of the contracts. There also looks to be about a 15% to 22% "off the lot" decrease between retail and resale (depending on resort...looking at SSR, BLT, and AKV). But still, it's a pretty decent amount of historical data to base assumptions on.

You answered my question though (which I thank you for)...it's an arbitrary number. And it's not one that really has anything other than "personally comfortable with it" attached to it. Which is fine...but it's no better than using 15 or 20 or 30 or whatever number of years. It's all about how confident you are in your use, and your plans for the contract (as you say).

We've been vacationing at WDW since the mid '90's (well, as adults, where I've borne the cost)....about 17 years, 12 of which were "pre-DVC purchase" (and 7 of which were "pre-kids"). While I can't predict what will happen 20 years from now (25 years into our contract)...history doesn't give me much pause for concern.

Again, going to the very individual nature of that number. We were under 35 when we bought, with very young kids, and my wife and I would be happy at AKV for a week without ever touching the parks (not that we've had a chance to take THAT trip yet..but someday!). For US, 10 years would be WAY too conservative in terms of using that as a life span for a cost to operate calculation.

What's wrong with standard amortization of the purchase price over the horizon at a particular cost-of-capital rate? You even get to choose the rate and the horizon! What's not to like?

Nothing..when you're talking about ROI/opportunity cost. You can use a historical average rate of return to project out a long term (and relatively representative) scenario and adjust the horizon to whatever you're comfortable with (providing your term isn't TOO short/unrealistic).

In a "year to year" cost to operate? Too much variability in those rates of return making too big an impact. Retrospectively...it works. PROspectively (especially given the recent market volitivity), it's just too much of a moving target. Sure, you can use the average (2.5% on the S&P, over the past 5 years)...but it's not really very representative in any given year (when you consider that 2008 showed -33% return and 2009 showed 21% return). As an aside...banking instruments (passbooks, CDs, etc) rate of return is SO low..it wouldn't really be worth factoring them in because inflation will almost cancel them out. The compounding will have an effect...but it seems relatively negligible (esp over shorter terms).