DVC Cost Analysis

[Ryansdad0727]

There has been some mention of retirement during this thread so i want to hit on that as a reason to buy instead of rent.

I'm 34 and own 2 timeshares. Worldmark (24000 pts) and DVC (120 pts). I bought DVC resale. For comparison i can trade 9000 Worldmark pts through RCI for a 1 bdrm DVC for 7 nights. My WM contract never expires. I will leave it to my kids when i die.

One of my main reasons for buying both timeshares was to save money when i retire. Both my wife and i love to travel and so i know when we retire we will be traveling a lot.

In 20 years a DCV room on cash might be 40 or 50 times higher than what it is now but 120 points at SSR should still get me a 1 bdrm. Same thing with my WM accommodations. New resorts will have higher point values but the older ones will stay the same.

Another reason i bought was that i knew i would have better vacations if my accommodations were pre-paid. I would not worry so much about all the money we were spending and i could do some extra things with the money i would have spent on a room. So far it has worked out great. It's the same logic Disney uses with the dining plan.

 

[ELMC]

Dan;
Lots of intangible variables to be considered, and those are usually what sways folks when it comes to parting with their money. I don't think buying direct would push the break-even point out by a factor of two. There are some perks that are valuable to some that are included in buying direct. The convenience is worth more to me, than it may be to others. I just bought direct at SSR, and using my own personal analysis, figure I break even after about 7 -8 years. & there is a convenience factor knowing that I have access to upscale accommodations. When we go to other resorts at the 7 month window, we are gaining more of a return on our points. So many variables, that the dollars and cents get lost in the process. If you use your points every year, and you would have vacationed in those years if you had not purchased DVC, you are probably coming out ahead. & If you use your points with your family, children, grandchildren........you are getting a value that can not be itemized in dollars!

ET, you definitely make some great points....which I happen to agree with! We own a Marriott timeshare and now DVC because we feel it helps us get better experiences for our vacation dollars. Bigger rooms, multiple bedrooms, full kitchens, better service...these are all the intangibles that go along with ownership. Your post reminds me that we are not looking at buying DVC as the most efficient way to use your money, but rather a great way to use your money to enhance your vacation experience.

One quick point to clarify my statement about the break even point. When compared to paying rack rates for deluxe accommodations, you are correct that you will break even between 7 and 8 trips. What the DVC salespeople won't tell you a lot about, however, is the option to rent points. This is the middle ground (cost wise) between paying rack rate (most expensive over time) and owning DVC (least expensive over time). So when I ran my numbers the break even point for buying direct vs. rack rate was 7 years, buying direct vs. renting was about 13.

I'm not trying to make anybody feel badly about buying direct, because you have a lot of other perks that I do not get from buying resale. You also get immediate use of your points and I am still waiting for mine (it will be an 8 week process start to finish) My whole reason for writing this post was to simply examine the most cost effective way to stay in DVC villas.

In the end, and like so many people have said in this thread, there are a million variables that can be (over)analyzed. There's definitely peace of mind that can come from just buying a contract (either direct or resale)...and you can't put a price tag on that.

 

[Dean]

Your comparison assumes that DVC using points (owned or rented) is the best choice for you. As noted, there are MANY variables and one must decide which ones apply to them and how they affect their situation. I do believe that many people over think this type of situation and also that many that do, end up making an impulse buy and use their investigation to justify buying rather than to make a truly informed decision.

DVC makes the most sense for those will will use the points for DVC resorts and stay in moderates or above. comparing a studio to a moderate should be around break even and to a deluxe, should favor DVC significantly. The next best situation is 2 rooms compared to a 2 BR. It's hard to justify a 1 BR from a cost standpoint.

Here are some assumptions and considerations I'd suggest in considering DVC for purchase or long term rental. I'm sure everyone can find additional items.

• 3-4% fee increase, 3% is likely a little low.
• 2-3% rental increase.
• 20-25% discount on CRO options (DVC or otherwise), using DVC rack rate is a fools comparison unless one would pay cash for DVC or suites.
• time value of money invested taking into account up front costs and yearly outlays for vacation.
• account for interest if financed (poor choice to do so)
• Risks if there is a job issue or other financial changes.
• Owning DVC needs to save 20% over the life of the membership including all assumptions.
• IF DVC makes sense, one needs to buy rather than rent if the numbers are fairly close and there are no other reasons not to buy (financial risks).
• One needs to be able to plan at least 7 months out.

The cheapest way to stay at DVC is through well situated timeshare exchanges but it is the highest risk and most nerve racking for those that are looking for specific options/times.

 

[bigtony777]

We recently purchased resale and when I run the numbers, we save about $1000 per year with our DVC versus staying at Value. This is comparing a studio room for multiple trips versus one room at a value with the AP 25% discount. I do take into account the savings of annual passes for the savings.

We will likely switch to a 1 bedroom in a couple of years as a girls get older and again comparing at a value with a 25% discount, it comes to right around $1000 savings.

If you really want to look at the time value of money then you must take the annual savings into account. So if I take the $17,000 I spent for resale and invest over 31 years, it will come to $77,467.02 at a 5% return. If I take the $1000 each year and invest at the same 5% return, it will come to $75,298.83 over the 31 years.

I think that the $2,168.19 over the 31 years of travel is well worth the improvement in accommodations.

 

[zavandor]

Thank you ELMC, I was looking exactly for a calculation like your.
I'm in the process of finding a contract and I've read every post here to try to understand if purchasing was right for me.
Every comparison between DVC and rack rates goes incredibly in favor to DVC, but a comparison between renting and buying is much more interesting.

IS that savings of $1000 per year worth the risk?

You are not considering the risk of renting. Not evryone is lucky to be able to access a source of reliable points for 10$pp.

I know that people rent points every day and I've never read here about someone cheated, so it should be rare if you follow the guidelines to rent points. But what happens if you arrive to the resort and find that the reservation has been cancelled? Maybe the renter did not want to cheat you, but things just happen.

12$ is what professional brokers charge, this is the reason I like ELMC numbers.

 

[zavandor]

BTW owning points allows you also to save in a different way. Some room category are very convenient but also not easy to book.
AKV value studio, for example, is very cheap in points and to book it you need to make the reservation very early (in hot days it even requires walking). It could not be easy to rent points for such accommodation.

 

[DisneyLoverUSA]

Hey all,

So I've really been interested in reading all of the different views on DVC ownership posted on this forum. So it got me thinking that I should do an analysis of the numbers. Personally, our history shows that we vacation in Disney at least once a year and we like to stay in Deluxe Villas. So we decided it makes sense for us. But just how much sense? Well I crunched the numbers on purchasing a DVC RESALE contract at BWV for $52 pp, 150 point contract. (This is our actual pending purchase). There are 104 points left over from 2011 which are included in the first year numbers.

I made a couple of assumptions in my cost analysis. The numbers shown here assume a 3% annual increase in MF and a 3% annual increase in the cost of renting points, starting at $12 per point. I took a little liberty with this one because although they have remained somewhat constant, one has to assume that the price of renting points will go up over time. Also, I used $12 because it is the official price of one broker (TTS) and it is a happy medium between private rental prices ($10-11pp) and David's ($13 pp). This doesn't factor in the cost of use of money because I felt that would overly complicate things and only have a minimal effect. As you can see, owning DVC becomes cost effective after 6 years vs. renting points. Not a bad deal when you think about it.

Keep in mind that this does not compare buying DVC with staying at values or mods. It also doesn't consider buying DVC at direct prices (hint: the break even point is twice as far out).

Hope people find this helpful and I'd love to hear your comments and critiques of my work.

Dan

Year Annual Cost of Annual Cumulative Savings
Outlay Renting pts Savings
1 $(9,068.00) $3,048.00 $(6,020.00) $(6,020.00)
2 $868.50 $1,800.00 $931.50 $(5,088.50)
3 $894.56 $1,854.00 $959.45 $(4,129.06)
4 $921.39 $1,909.62 $988.23 $(3,140.83)
5 $949.03 $1,966.91 $1,017.88 $(2,122.95)
6 $977.50 $2,025.92 $1,048.41 $(1,074.54)
7 $1,006.83 $2,086.69 $1,079.86 $5.32
8 $1,037.03 $2,149.29 $1,112.26 $1,117.58
9 $1,068.15 $2,213.77 $1,145.63 $2,263.21
10 $1,100.19 $2,280.19 $1,180.00 $3,443.21
11 $1,133.20 $2,348.59 $1,215.40 $4,658.60
12 $1,167.19 $2,419.05 $1,251.86 $5,910.46
13 $1,202.21 $2,491.62 $1,289.41 $7,199.88
14 $1,238.27 $2,566.37 $1,328.10 $8,527.97
15 $1,275.42 $2,643.36 $1,367.94 $9,895.91
16 $1,313.68 $2,722.66 $1,408.98 $11,304.89
17 $1,353.09 $2,804.34 $1,451.25 $12,756.13
18 $1,393.69 $2,888.47 $1,494.78 $14,250.92
19 $1,435.50 $2,975.13 $1,539.63 $15,790.55
20 $1,478.56 $3,064.38 $1,585.82 $17,376.36
21 $1,522.92 $3,156.31 $1,633.39 $19,009.75
22 $1,568.61 $3,251.00 $1,682.39 $20,692.15
23 $1,615.67 $3,348.53 $1,732.86 $22,425.01
24 $1,664.14 $3,448.99 $1,784.85 $24,209.86
25 $1,714.06 $3,552.46 $1,838.40 $26,048.26
26 $1,765.48 $3,659.03 $1,893.55 $27,941.80
27 $1,818.45 $3,768.80 $1,950.35 $29,892.16
28 $1,873.00 $3,881.86 $2,008.86 $31,901.02
29 $1,929.19 $3,998.32 $2,069.13 $33,970.15
30 $1,987.07 $4,118.27 $2,131.20 $36,101.36

We plan on buying a 150 point contract for somewhere in the $9,000 range (crossing fingers) and if that is what we end up with, 2 10 day stays at OKW paying rack rates will cover the entire cost of our initial buy in. I think that is awesome.

Now I know you can get 40% off pin codes or general public offers of 40% off rack rates at deluxes that would make that room less than $300 a night. For those rates it will take 3 years worth of stays for us to break even. So let's say we don't stay 10 nights 3 years in a row, it will be about 5 years for us to make back what we paid for our contract, unless we go to Hawaii, then it will only take 2 years for us to break even.

Thanks for your info. It is interesting to see the numbers crunched like that. I would lose my mind trying to put together that kind of info, so I appreciate your effort.

 

[XGrumpy1]

It is interesting to see all of these posts assuming a 5% return rate on an investment. I wish I could get that! I have a 5% CD maturing in September and it looks like I might be able to get a whole 1% if I renew the CD.

What if I take that same money, buy DVC resale full of points for now and plan to resell the DVC and reinvest the money, if CD rates ever get back up to 5%?

Right now, I get 2-3 years of points for vacation and I am only losing 1% on my money! I will also lose the lower return over what I paid. So, is it good gamble for the short term?

 

[luckyman_apd]

It is interesting to see all of these posts assuming a 5% return rate on an investment. I wish I could get that! I have a 5% CD maturing in September and it looks like I might be able to get a whole 1% if I renew the CD.

What if I take that same money, buy DVC resale full of points for now and plan to resell the DVC and reinvest the money, if CD rates ever get back up to 5%?

Right now, I get 2-3 years of points for vacation and I am only losing 1% on my money! I will also lose the lower return over what I paid. So, is it good gamble for the short term?

You are forgetting that you will have to pay commission if/when you sell. The resale market has dipped over the past few years.....who is to say it won't drop more?

Bottom line is, if you are looking for a cost anaylsis to buy or keep booking direct from Disney, then this a good place to start. IF you are view DVC as an investment, than keep moving. DVC is NOT an investment for money. It's a prepayment for future vacations. That's it. The cost analysis comes in ONLY to decide if DVC can save you money over the long haul. My answer is yes, if you continue to travel to Disney every other year or more.

 

[bigtony777]

Bottom line is, if you are looking for a cost anaylsis to buy or keep booking direct from Disney, then this a good place to start. IF you are view DVC as an investment, than keep moving. DVC is NOT an investment for money. It's a prepayment for future vacations. That's it. The cost analysis comes in ONLY to decide if DVC can save you money over the long haul. My answer is yes, if you continue to travel to Disney every other year or more.

Agreed. I saw 2 choices for our family. One was to continue to either rent points or book value resorts with AP discounts. Or two, was to pay up front for a DVC membership. They both come out to be roughly the same amount of money over the next 30 years when everything is factored into the equation including time value of money.

Also as to the 4% to 5% return. This would be an average rate of return over 30 years. If you have a sum of money balanced over many asset classes, this would be expected. Just as you don't want to compare DVC to investments, you also can't compare a 1 to 3 year CD to asset allocation over 30 years.

 

[dmoore22]

I remember when we went through the same process of analyzing and studying all the pros and cons of DVC ownership. I guess you could say "Been there, done that." That was ten years ago when we bought in. We have no regrets. It has been cost effective and a whole lot of fun. Here is a link to a nice DVC primer at Mouseplanet.com which also provides a link to a spreadsheet to play with. http://www.mouseplanet.com/8739/A_Disney_Vacation_Club_Primer.

 

[E2ME2]

I remember when we went through the same process of analyzing and studying all the pros and cons of DVC ownership. I guess you could say "Been there, done that." That was ten years ago when we bought in. We have no regrets. It has been cost effective and a whole lot of fun. Here is a link to a nice DVC primer at Mouseplanet.com which also provides a link to a spreadsheet to play with. http://www.mouseplanet.com/8739/A_Disney_Vacation_Club_Primer.

Dmoore......
Thanks for the spreadsheet link.
I can't wait to start using my DVC points - we plan to book SSR for January 2013.
& We just booked a cruise for the week in front of that, on the new Disney Fantasy!

 

[Chriss928]

There have been some great points on this thread. Maybe I am looking at this too simplistically but, here goes: I just bought a resale at AKV, 220 pts for $60/pt. Total outlay is $13200. Annual dues for 2012 are $5.4356/pt. So my dues are $1195.83. If I never set foot at a DVC resort and just rented out points for $10/pt I would end up with about $1004.17 after I paid my dues. That is a 7.61% return. Not too bad I think. Now, at that rate my DVC would be paid for in about 13 years. That is assuming rental rates and dues stay proportionately together. Lets face the fact that I really don't think 10 years from now you will still only be getting $10/pt. That would be a ridiculously low rate considering how prices rise. If it did stay at $10, demand for rented points would be so great as compared to CR that prices would certainly move upward. The other perk, or main perk I should say, is that I can choose to stay at a DVC resort and my family and I can have a great vacation. The bottom line is I am too new to DVC to be able to say whether it is cost effective or not based on thousands of variables but I am looking forward to finding out.

 

[Dean]

It is interesting to see all of these posts assuming a 5% return rate on an investment. I wish I could get that! I have a 5% CD maturing in September and it looks like I might be able to get a whole 1% if I renew the CD.

What if I take that same money, buy DVC resale full of points for now and plan to resell the DVC and reinvest the money, if CD rates ever get back up to 5%?

Right now, I get 2-3 years of points for vacation and I am only losing 1% on my money! I will also lose the lower return over what I paid. So, is it good gamble for the short term?

I think a long term 5%, even 8%, is still a reasonable approach. Any investment scenario should assume a min of 5 years for the money invested.

 

[zavandor]

If I never set foot at a DVC resort and just rented out points for $10/pt I would end up with about $1004.17 after I paid my dues.

Are you factoring taxes in this?
That is what stopped me from buying too many points. At first I thought to buy a bigger contract, thinking that if I could not use all the points every year, I could rent them. But then I thought about taxes and since I live abroad I would need an advisor only to understand how to pay them (a good advisor, would not be cheap).

 

[ELMC]

There have been some great points on this thread. Maybe I am looking at this too simplistically but, here goes: I just bought a resale at AKV, 220 pts for $60/pt. Total outlay is $13200. Annual dues for 2012 are $5.4356/pt. So my dues are $1195.83. If I never set foot at a DVC resort and just rented out points for $10/pt I would end up with about $1004.17 after I paid my dues. That is a 7.61% return. Not too bad I think. Now, at that rate my DVC would be paid for in about 13 years. That is assuming rental rates and dues stay proportionately together. Lets face the fact that I really don't think 10 years from now you will still only be getting $10/pt. That would be a ridiculously low rate considering how prices rise. If it did stay at $10, demand for rented points would be so great as compared to CR that prices would certainly move upward. The other perk, or main perk I should say, is that I can choose to stay at a DVC resort and my family and I can have a great vacation. The bottom line is I am too new to DVC to be able to say whether it is cost effective or not based on thousands of variables but I am looking forward to finding out.

I agree with your numbers, but keep in mind that if you were to invest your purchase price, then you would always have your initial investment somewhat liquid at any time. For example, if you put $13,200 in a bond fund or similar investment, you would have that original money any time you wanted. If you spend the money on DVC, you cannot access it unless you resell the contract and you would have to assume that it would be for a price lower than what you paid for it. So there's a bit of a flaw when looking at rates of return on renting points because your principal has a diminishing value.

Bottom line, DVC is NOT an investment. It is a prepayment of future vacations and a better value/upgrade for your vacation dollar.

 

[greatwhite24]

I think if you add in paying for dining or getting free Disney dining the numbers would be very different. For my family of three it would have cost me $940.00 for my march trip. That's where I get torn on dvc ownership. Obviously there is savings and the rooms might be larger and nicer but I would have to cough up $1000.00 every trip for food. Maybe I'm looking at this all wrong.

 

[bigtony777]

I think if you add in paying for dining or getting free Disney dining the numbers would be very different. For my family of three it would have cost me $940.00 for my march trip. That's where I get torn on dvc ownership. Obviously there is savings and the rooms might be larger and nicer but I would have to cough up $1000.00 every trip for food. Maybe I'm looking at this all wrong.

I don't include dining costs in the equation as we determined that Tables in Wonderland saved us more money than the dining plan. It allows a great amount of flexibility and also saves 20% on alcohol. We have annual passes so for us the cost would be the same regardless if we owned DVC or not.

 

[Chriss928]

I did neglect to factor in the premise that my original investment "should" still hold its value in a regular investment scenario. DVC original investment certainly will decrease exponentionally but hey if the market takes a tumble again there isnt much of a difference. Its all a gamble with the market. I personally bought DVC for my family enjoyment and that is truly priceless. I totally agree it certainly isnt a viable investment, there is too much uncertainty. Hey, you never know maybe DVC will become a hot commodity in the future and all of us owners will reap the rewards. That was the pixie dust talking!!!

 

[vickivale]

I also am not sure it makes sense to buy into DVC. I agree you can almost always get $8-$10 points, and you don't tie up a relatively large sum of $$ in an investment where you can't control the cost increases.

I'm also not sure how easy it would be to re-sell. So I'm a renter for now!