DVC & finance 101

[Zurg]

I have seen over the years a lot of people trying to make head or tales out of the financial issue of buying DVC and have seen some very creative thinking.

I am trained in fincance - I even earned a degree in it. (you all know it wasn't spelling LOL)

The basic tool of financial analysis is Net Present Value. We all know this instinctively (a bird in the hand...) but to get a dergree you got to be able to use jargon so we finance geeks call it NVP.

The way to consider two alternatives is to consider the current value of the cash flows.

I have done this for DVC in a few different scenarios. It is long (even for me and I can be long winded.) So if you would like to see it Click here

 

[Maistre Gracey]

Well, I thought I was following everything okay, untill.... "The Net Present Values are DVC $11,882" I am a little confused where this number came from. I am also confused where you factored in the 7.3% lost interest.

Thanx for putting this together...

 

[Zurg]

Well I as too lazy to do the NPV calculations by hand so I can't "show my work." like in a blue book back in school.

So here is the formula for discounting a number back to the NPV.

1/(1+R)^N where R = Rate and N= number of years. This give you a factor that you multiply the future amount by to the the NPV.

So at 7.3% for 3 years the factor is 1/(1.073)^3 .. 1/1.235376017 = 0.809470142

You calculate (or the computer calculates) this factor for each year. Than you multiply the factor times that years cash flow to get that years contribution to the NPV. Next you add up each years contribution and you get the total of all cash flows.

- or-

you use the NPV() function in Excel and it does all the caluclations for you.

Guess what method I use?

 

[Maistre Gracey]

Oh my! I'll go with the second method...

Thanx...

 

[Zurg]

OK I updated one of the tables for you with the NPV factors so you cna see the "magic" of the NPV calculations.

 

[yearlightbuzz]

That was great!! Thanks for taking the time to do it. I'm on my way right now to ask my wife if I can buy more points with the $50,000 I saved!!

 

[JimC]

Zurg, nicely done. Your results are very similar to what I got using historical room rate increases, AP and DC discounts, blended seasons, blended moderate deluxe resorts and historical maintenance fee increases.

It still held as a reasonable deal even if I skewed the results by using only 85% of the historical increases in room rates and 120% of the historical increases in maintenance fees.

By the way. I think most of us spell just fine. Its the typing and phonetic shortcuts we use that get in the way.

 

[Zurg]

Originally posted by yearlightbuzz
That was great!! Thanks for taking the time to do it. I'm on my way right now to ask my wife if I can buy more points with the $50,000 I saved!!

Great ylBuzz. Let me know how it works out, my commission rates are low, I'll only be looking for a few points a year.

Yo! JimC speak for youself! I spell so bad I confuse spell check.

 

[mckryan]

Zurg, thanks for doing this! It gives me a headache reading it, but I know my DH will love pouring over every detail of this information. My eyes glaze over the minute he starts talking about IRAs, mutual funds, etc. He might even sign up for his own DIS account just so he can thank you personally. Unfortunately, he's out of town until the end of the month and won't see it until he returns. Silly man wouldn't take a laptop with him!

Christa

 

[LIFERBABE]

I factored in renting points out also.

If your kids get tired of going when they are older you can rent the points. Currently at $10 p/pt., on 150 pts. you could rent for $1500. Pay your dues which are currently 4 pt. and apply the remaining $800 to the original cost of the contract. Basically make your own MB for the years you don't go.

Does this make sense? Im trying to explain it to DH as he is concerned when our DS's get older. What would be the drawbacks to this line of thinking? I think as the prices increase, more people will look to rent or become members themselves.

Thanks ZURG I appreciate you breaking that down.

 

[BCVOwner2002]

I think someone has a little too much time on their hands!!! LOL!!! Thanks for putting this information together. I am going to share it with a co-worker who isn't quite sure if DVC is a good value even though they visit WDW every year!!! Annmarie

 

[Zurg]

LIFERBABE I would show the DH the DVC board sponsor's page.
http://www.dvc-resales.com/

Two reasons. 1) there is an active and fairly liquid market for "used" DVC memberships (I know my DW ZW is always looking for more ponts!) Anyway there is a way out withiout taking a total bath. 2) You can buy a "used" for less than the mouse is selling new ones.

 

[LIFERBABE]

Zurg,
I checked out the resales and the rental board and they are both really active.
It is very difficult for most to sell a timeshare but DVC appears not to have that problem. I actually called on a resale that was posted and the 2nd day it was listed it was pending sale! Im purchasing from Disney but may want to add later.

 

[fluffydonkey]

My DW and I are looking into purchasing DVC membership. We both love the Disney "magic" when staying on-site. Our recent experiences tempted us to attend the Open House. However, I needed to justify it financially somehow. (I was glad you did the work for me, as I was getting ready to do the same.)

Looks like we'll be taking the plunge (and I have the rest of family behind me pushing).

Thank you for your time and effort. (Don't sweat the spelling.) (BTW, my DW would have made a contribution to the list of BAD SHOES on our most recent visit.)

Thank again.

 

[Zurg]

Originally posted by fluffydonkey
(BTW, my DW would have made a contribution to the list of BAD SHOES on our most recent visit.)

LOL.