DVC Dilemma for us

[2Princes2Princesses]

Okay, I read another thread about affordability, and that is not a problem for us. But I have seen that alot of members on here are strict "cash or no buy" (which, I might add, I LIKE) rather than finance.

We rent our house, not because we cannot afford to buy, but we may be moving out of state in the next few years and many of our friends are stuck in houses in this area that they cannot sell. We have about $200 outstanding on our CC's(which we only have 2 anyway...I HATE credit). We have a decent savings that is NOT for vacation, DVC, or anything other than an emergency or a downpayment when we buy a house. We also have our "extra" savings for our trips, furniture, etc.

We pay cash for our Disney trips...ALWAYS. I refuse to even pay for a Mickey stuffy with a credit card.

So, we want to buy into DVC...been mulling it over since the beginning of 2005. Here is my dilemma:

We went down in May of this year, paid cash for a 2-BR at SSR.
We have 4 kids, ranging from 1-13 and my mom has become a Disney addict too, so she will probably be traveling with us at least once per year. Once our older kids get even older and are not with us all the time, we will probably make additional trips. This year, we are going back in September with just the baby for a week, and then are planning to take all the kids and mom in Feb.

Now, we currently have enough left in our "extras" savings after our September trip is paid for to put a 30% downpayment and finance for 5 years. If we wait until Jan/Feb, we could do a 50% and 1 year finance. If we wait til mid to late 2007? We could do a buy-in cash.

BUT, we would be paying cash for our trip in February (although my cousin is a CM and we are using her discount, so not at rack rate). I am not sure if we should buy in and do a 1-yr finance or just wait.

I really would prefer not to finance, but I refuse to dip into our regular savings for DVC. And without doing that, we would be waiting til at least mid-2007....and paying cash for any trips we take in the interim.

Another solution I have thought of is this:
Buy a small contract resale that we can buy with cash now. Then add points with cash over the next 2 years. Could we use the points from our small contract to book a ressie in Feb and then do the cash res for the remainder of the trip??? I am thinking this would be the best way to end up with the point total we want and avoid financing.

I hate financing anything. We financed 1/3 of the total cost of our truck and I went in the bathroom and threw up after we signed. My father left my mom with about 140,000 in debt when he died, so I think I was scarred for life by that.

So do you think the small contract/add-on solution is the best choice for us? DH says finance, which is why I do all the bills. He'd be spending our savings account on a Mustang (so practical for a family of 6).

 

[CPTJAK]

you could buy a small contract and than go to the rent/trade board and have points transferred from another owner for cash, which may be less expensive than paying cash for additional nights.

I think you are wise to pay cash.

 

[DrTomorrow]

Financing is not inherently wrong (how many folks pay cash for their homes) - only when it is mis-used. If you are truly going to buy into DVC, it would not make sense to pay for a hotel when you could be paying towards DVC.

While it is always important that you keep within your own comfort level when investing, be careful not to let irrational emotion be your only guide. That is like a 23 year old - whole life ahead of her - putting retirement money only into a CD instead of a stock index fund because a CD is "safe".

IMHO, your situation is like the old philosophical parable: If someone can actually be worried enough to wonder if they have a soul, that answers the question. The fact that you worry about financing means that you won't be abusing it - but don't be afraid to use a valid financial tool.

IMHO - YMMV - Be well!

 

[nicky mouse]

Also remember that if you buy from Disney directly and finance the purchase you can prepay the loan with no penalties. So you could by the points that you want and then just pay extra money when you have it.

 

[bongo59]

i cant be any more clear than NEVER BUY a luxury purchase on credit.................it is a huge financial mistake........buying a house is not equivalent to a DVC purchase and in todays mkt most buyers over the last 5 yrs have bought too much house on too little foundation and our now getting creamed on thier adjustable arms after 16 consecutive Fed rate increases..................Buying a house with financing I am OK with but i think it is insanity to buy one if your subject to PMI...........plunk down your conventional 20 % to avoid it or better yet build up your asssets so that your net worth will allow a bank to waive the PMI with a more conventional 5-10% down...............No, I am not a fan of the recent real estate boom because it is now crumbling rigth infront of some shocked folks...........and people like me are buying these distressed properties for 40 to 60% less than they financed them for..............that is a different talk however.............back on topic.........my advice is to avoid trips WDW for several yrs because as we all know WDW has huge associated cost too with the cost of a room............vacation locally and more frugally the next 4 yrs and bank your money in an asset management account and buy a growth stock with a high dividend that will give you 4-7% per yr growth.................here are some recs.............Citigroup, Pfizer, Conoco Phillips and Wells Fargo.................if you want to be more aggressive then i would suggest you buy fallen angels or small growth stocks.................things in this category Ebay Yahoo Chico's Kyphon etc...............good luck..............and no i am not flexible on my beliefs on financing DVC............it is a mistake in every circumstance and any finacial counselor worth their salt will tell you the same....................good Luck

 

[abner1776]

Call me old fashioned and conservative, but buying a timeshare including DVC on credit just runs against my better judgement. I know that our country has been built on easy credit, but that does not mean you have to fall victum to the same forces that have forced thousands of people into bankruptcy and credit problems.

As bongo59 says, buying an appreciating asset like a home on credit is fine, but a luxury purchase should only be done if you can afford it ....now....not tomorrow. Tomorrow may never come or your financial circumstances could change.

DVC is a great program and a great value...but not if you have to mortgage your future to get it. JMHO....

 

[dianeschlicht]

ON the other hand......Since your intent is to pay it off in less than a year, I would be inclined to go ahead with the purchase NOW before the price increases July 1st. What you will save buying before the price increase is minimal, but what you will save in hotel costs during that year is nothing to sneeze at. Why continue to pay the deluxe hotel costs while you plan to buy DVC? I think it is a sound decision for that reason alone.

 

[snowbunny]

you could buy a small contract and than go to the rent/trade board and have points transferred from another owner for cash, which may be less expensive than paying cash for additional nights.

I think you are wise to pay cash.

One more idea: the Disney Visa credit card offers 0% interest for 6 months on DVC downpayment (buying direct from Disney). So you could finance that part of it free for six months while working on paying off the principal.

But in your shoes, and I think you are very smart financially, I would buy a resale contract for the amount you can afford to pay now, rent points as needed instead of using cash for CRO reservations, and add additional points as you are able.

 

[Didney Daddy]

Given how quickly you can accumulate the cash, I would buy with the financing and just pay off as quickly as you can which sounds like about 12 months. Disney allows you to prepay with no penalty. Especially since you are planning a trip so soon and will have to plunk down cash for that too. I would just get the points and finance, may be a wash over 12 months or not enough to worry about.

 

[browniemtb]

I would consider buying in now and put what you can in for a down payment. Finance the rest with an understanding that you will pay it off sooner then the loan is written for. I understand that paying for DVC up front and in full would be a nice thing to do....but most DVC owners, I would say, have financed a portion of their Disney interest. Using some one elses money for a little while is not all that bad and isn't wrong. Investing funds into the market, as some have said, for several years can net you some gains...also you can lose.....But over those several years what are you giving up percentage wise over buying now. For example say you invest the money for 7 years....year get a 12% return.......now you take the money out and are subject to capital gains tax....there goes some $$. Now over those 7 years DVC I'm sure will go up.......I beleive SSR went up almost 10% this year alone. So those realized gains could be eaten up by DVC's inflation of value.
In reality after 7 years you may be in no better shape than you are right now. Also remember, buy where you want to stay......Good Luck
Brownie

 

[bongo59]

well i dont buy any of the last three posters arguments for buying on credit...............do i understand their points.............sure............but it makes no sense financially to do it.............do without WDW until you can afford it totally without risk. If you follow Diane's logic that you are already putting money out so why not buy DVC..............what happens if you get in a spot where you become disabled and have no income coming in for several months???? If your lucky and smart you would have bought a disability policy before DVC..............to cover that issue...........and if you did you still would have a 3-6 month elimination period before any new income would be coming in.........or what if, god forbid, we have another attack on US soil in the NE that bottoms out the economy and tourism for several yrs?............prior to 9/11 no one thought it would happen..............Now we know it can happen..............So you and your families margin of safety should always be completely insulated.......................the bottom line is you need to always plan for the worse case scenario because it covers you and your family's risk...............if you think I am nuts..........fine.............but in my world personally and professionally I would never put my financial well being at risk for something that is so non essential.........And i do think 95 % of the USA believes as this board does and that still does not make it correct advice.............I think in this case they and you are gambling with odds that maybe in your favor................I am a very concrete thinker and i try to manage risk well................I dont think many in our country value that type of thinking because quite frankly it is un American to think that way................In this case i dont think like the herd and i am a staunch contrarian.....................and i would not put my family at risk for that either to save a couple of bucks for a DVC vacation..................Just my opinion..............

 

[tomandrobin]

We paid cash for our DVC ownership. DVC is a luxury, not a necessity like a house. If you can afford only a small contract, do that. If it won't kill you to wait 9 more months, I would. Thru DVC the minimum contract will be 150 points. And above all us, do what makes you the most comfortable.

There really is no such thing as good debt!

 

[DrTomorrow]

bongo's point is valid - assuming that your primary goal in life is to avoid/minimize risk. Of course, the logical extension of that approach is to never have children (cost certain outweighs eventual financial payback) and get married as soon as possible (two incomes == less risk). This, however, is not MY goal in life, nor, I suspect, is it for many others. Yes, risk needs to be managed, but not at the expense of irreplacable life experiences and personal quality-of-life issues.

bongo is also right that there is too much of a "live it up today - worry about paying tomorrow" attitude - our country has a dismal savings rate. However, extremism in the opposite direction is just as unhealthy; when managing risk turns into avoiding all risk, then into fear of what the future may bring - that's avery sad way of living life.

My late father (child of the Depression, member of the "Greatest Generation") always stressed to me the important of balance and moderation. While he did not eagerly embrace debt, neither did he phobically reject it; he used it when he deemed that it added value to his life, and to that of his family.

OP, you already seem to have a reasonable attitude about things, so take a look at your own personal situation, listen (a little) to the fine advice given on these boards, then determine what will work best for you - and your family.

And dear bongo, I respectfully suggest that you not worry quite so much about what might happen tomorrow and focus a bit more time on enjoying the here and now. As a statistical simulation software designer, I learned a lot of formulas, but I never once found a way to quantify true love, give a finite value to the smile on a child's face, or how to plug joy and happiness into to an actuary's Excel spreadsheet.

IMHO - YMMV - Be well!

 

[Big Fat Disney MaMa]

Steph: Only you know your spending habits and what you will be comfortable with. I get really sick of the preaching regarding money and how other people think you should spend it. You need to do what you feel comfortable with and what is fiscally responsible for your family. You should not feel that you have to come to this board and justify your spending habits with others.

I would suggest that you talk to guide and ask him about your financing options. Our guide was absolutely wonderful. He listened to my fears and suggested a plan of action. Personally we wanted to get in during the F&F promotion, but it would have been painful to pay the entire amount at that time. We put half down and half on the Disney Visa with the 0% financing and we already have it paid off 3 months later. Even though we could have paid the entire up-front I didn't have to worry about touching my savings and having an un-foreseen crisis in the meantime which put me at ease and I didn't have such a hard time with the entire process. I have not once regretted my financing decision and am especially thankful that I got in on the promotion when I did instead of waiting until I had the full amount.

 

[DrTomorrow]

[...]There really is no such thing as good debt!

I respectfully disagree. Let's assume that I wish to buy something that costs $10,000, and I have that $10,000 available to me (above and beyond my 'cushion'). If I can get a 10% rate of return on that $10,000 and can borrow $10,000 at 5%, that is great debt!

What about borrowing to pay for education - which has an incredible return on investment (what someone with a degree will earn in a lifetime vs someone with only a HS diploma)?

Again, I know too many friends and family who have multiple maxed-out credit cards and make only the minimum payment - this is bad Bad BAD! However, to blindly say that all debt is bad is as irrational - IMHO - as saying all debt is good.

IMHO - YMMV - Be well!

 

[Barak's Disney]

I vote for waiting until you have the cold, hard cash specifically designated for DVC membership. I don't consider membership an investment, I consider it entertainment. I want a membership very badly, but don't have enough money saved in our entertaiment budget, so it will just have to wait another year or so. We are spending $1500 on lodging for our 2007 stay and, yes, that is $1500 less we will have saved toward membership - BUT I am 100% okay with it! We aren't planning a visit for 2008, but by 2009 we should have a membership and enough points banked to stay in a 1 bedroom during peak season. To some, that may seem like a long wait ... to me, the waiting makes the reward twice as nice!

 

[bongo59]

"And dear bongo, I respectfully suggest that you not worry quite so much about what might happen tomorrow and focus a bit more time on enjoying the here and now. As a statistical simulation software designer, I learned a lot of formulas, but I never once found a way to quantify true love, give a finite value to the smile on a child's face, or how to plug joy and happiness into to an actuary's Excel spreadsheet.

IMHO - YMMV - Be well!"

Just to be clear..............I doubt many people have more fun then me or my family do in the here and now................we travel close to 6 months a yr...........for fun.............but we can afford our lifestyle................and I made my money off of folks who were credit first and live it up now instead of paying attention to the basic principals of third grade math............and common sense...............I considered this response in this thread i gave as a bit of counseling for anyone who thinks financing a luxury is the BEST way to do things...........It is not. Moreover, data shows once a person thinks that debt service for this purpose is OK they extrapolate that behavior to others areas of their financial life and their QOL declines rapidly................Do i think all debt is bad..............no i dont............but is DVC DEBT bad.............yes it is in every circumstance in my opinion..............it is luxury entertainment.............and non essential.

 

[crisi]

I'm pretty conservative and generally against financing. But we know the price is going up. You have savings, they are just earmarked other places, it isn't like this will put your net worth negative. It doesn't sound like you'll be using your savings as fast as you'll manage to pay off the loan. You have no other debt and you appear to be living within your income. I'd take the debt as a hedge against price inflation.

For everyone - whether you purchase for cash or finance - you couldn't really immediately sell and get your money back - closing costs, commissions, a discount over what Disney will sell it to you for (unless your 25 BCV contact on eBay goes for $122 a point) - will eat into your investment. So there is always some risk of lost money. Financing just makes the amount you'll be set back a little more.

 

[browniemtb]

bongo...........I read your posts and actually think you are correct to a point. Financing is an option to buy DVC...maybe not the best but it is an option. It helps more families enjoy WDW then if you had to pay everything up front. If you interviewed everyone exiting WDW you would find that most have financed their trip either a small pop on home equity or with credit cards. People can go to far with credit, no question. But I feel in this case this OP has a good head and plans on short term financing if any.....Also I live in the here and now and future. I try not to think of another 9/11 or serious market crash. My kids are whats important and to sit home with a big bank account doesn't seem fair to them. Don't misunderstand me though....I do agree with bongo but not the the fullest extend by which he/she makes it sound. Do what ever makes you comfortable........
Brownie

 

[tomandrobin]

I respectfully disagree. Let's assume that I wish to buy something that costs $10,000, and I have that $10,000 available to me (above and beyond my 'cushion'). If I can get a 10% rate of return on that $10,000 and can borrow $10,000 at 5%, that is great debt!

What about borrowing to pay for education - which has an incredible return on investment (what someone with a degree will earn in a lifetime vs someone with only a HS diploma)?

Again, I know too many friends and family who have multiple maxed-out credit cards and make only the minimum payment - this is bad Bad BAD! However, to blindly say that all debt is bad is as irrational - IMHO - as saying all debt is good.

IMHO - YMMV - Be well!

LOL...I was making a generalization. There are times that it makes sense to have debt. For example, when we bought a new vehicle they were offering 0% financing. We could have paid for the the vehicle, but by financing we were then able to keep the money for some interest bearing CD's.