DVC Financial Analysis

[Brian Noble]

No, that is also part of the equation. One common way to account for all of this is "net present value" -- adding up all the the costs when they are incurred, but expressed in today's dollars. You have to make a few assumptions to model this: the rate at which the costs go up, and the rate of inflation. Typically, I use a range of numbers for this, and look at the contours of the range.

 

[Sandisw]

Problem with looking at it this way is that (it seems) you are not accounting for the opportunity cost of your up-front payment. Also, you are not accounting for your annual dues.

It is a simple way to look at it but I am not sure it is the way to accurately calculate your break even.

That said I'm sure you have saved/made PLENTY over the years!

My vacation money got spent either way….it wasn’t saved and for us, opportunity cost or time value of money wasn’t a major piece of the puzzle that we felt was important because I don’t use it to microanalyze any of our expenses that way.

The whole point, for us, was whether it made any sense to buy, not to worry if it was going to be perfect in its analysis,

As I said, we used a 50% loss, as break even point at 5 years and that was good for us because that 5 years of opportunity would not have been enough to stress about on a $16k expenditure…especially when the first year, the cash stay cost went directly to reduce what we took from savings.

Obviously, we knew things could happen, but from a purely simple calculation, it was enough for us to decide to become DVC.

 

[VGCgroupie]

This was a great thread to browse. I missed the whole real time discussion because I was sitting on the beach in Hawaii enjoying my DVC while my husband used 5 days of PTO. He used to never take much PTO since he had the option to get paid out for it, thats no longer an option so I strong arm him into taking his hard earned time off. I guess those 10 years of taking minimal PTO helped us fund DVC now.

 

[Stank]

You have to look at how you’re saving money with DVC.

DVC locks you into taking Disney vacations. Those are some of the most expensive vacations you will take. Without DVC, you may only go to Disney once every 3-5 years; with it, you’re going every 1-2, 3 at the least—or even multiple times in one year! So you’re spending more money being “forced” to go to Disney, renting out points notwithstanding.

But….with DVC, the quality of your vacation goes up considerably. You’re on property. You have much more space, especially 1 bedroom and up. So DVC upgrades your vacation. When you’re younger, you can get away with economy Disney trips. If you start a family, you’re going to want more space. It’ll be much more enjoyable with a 1 or 2 bedroom. And that’s where DVC pays off.

Overall, DVC will force you to spend more. But it’ll be more intentional vacationing vs. maybe you’ll take a trip/maybe you won’t. And you’ll have better stays and memories vs. being a sardine in a hotel room, or staying off property.

There’s a lot of stuff that a financial calculator doesn’t take into consideration and you have to look at DVC in a different way compared to just “what does a hotel rack rate vs. DVC studio cost and discount the cost/dues to do an NPV.” That’s certainly a way to do it, but not at all the way I look at it. It’s a totally different vacation. Most people will never, ever pay cash for a 1 bedroom. So, it’s flawed to use hotel studio vs. DVC studio when you can easily access a 1 bedroom with points. With cash rack rates, your costs skyrocket.

 

[Rex1993]

I'll reiterate a few points I've made in other threads.

1. On a net present value basis the residual sale value on a contract after 14 years means almost nothing. In other words, 14 years out from purchase it really doesn't matter if you can sell the contract for anything so you shouldn't worry about resale if you will hold for 15+ years.

2. Factoring in investment alternatives with historical returns on the S&P 500 on a 10+ year horizon there's no way to make DVC make financial sense. You are vastly better off putting the money in SPY and paying cash for your stays.

3. Owning DVC locks you in which is a minus in a lot of ways but definitely a plus for me. My whole family loves Disney and we love doing our 2-3x per year vacations. If I was paying cash each time I'd make excuses not to go that often. With DVC ownership that psychology gets flipped on its head. I'm losing money if I don't go, right?

4. Somewhat like #3, I'm the kind of person who doesn't like watching all the cash exit my pocket while trying to enjoy vacation. This is one of the reasons why I bulk up on Disney gift cards during the year and then don't even think about it in the parks. The same is true for accommodations. When we first stayed at the Grand Cal, we paid over $700 per night for a woods view double room and this was back in 2017. I felt pretty cheated paying that kind of money for a room that didn't even have a bath and barely enough room to fit the strollers and bags. The next trip we stayed in an absolutely palatial suite off property but had torrential rains that made the walk to and from the parks absolutely abysmal. Guess where we have stayed ever since? Grand Cal... Since I'm stuck there regardless I figured I'd rather just bite the big bullet once and then think about it like a game from then on.

5. We always stay at the Grand Cal when going to DLR and usually go for 4-7 nights. Having in-room laundry and a kitchen is a game changer. You can't get that outside of DVC even in the ridiculously overpriced but amazing signature suites.

Is spending $200K on DVC a good financial move? Obviously not. However, life isn't always about making the best financial move.

 

[VGCgroupie]

I'll reiterate a few points I've made in other threads.

1. On a net present value basis the residual sale value on a contract after 14 years means almost nothing. In other words, 14 years out from purchase it really doesn't matter if you can sell the contract for anything so you shouldn't worry about resale if you will hold for 15+ years.

2. Factoring in investment alternatives with historical returns on the S&P 500 on a 10+ year horizon there's no way to make DVC make financial sense. You are vastly better off putting the money in SPY and paying cash for your stays.

3. Owning DVC locks you in which is a minus in a lot of ways but definitely a plus for me. My whole family loves Disney and we love doing our 2-3x per year vacations. If I was paying cash each time I'd make excuses not to go that often. With DVC ownership that psychology gets flipped on its head. I'm losing money if I don't go, right?

4. Somewhat like #3, I'm the kind of person who doesn't like watching all the cash exit my pocket while trying to enjoy vacation. This is one of the reasons why I bulk up on Disney gift cards during the year and then don't even think about it in the parks. The same is true for accommodations. When we first stayed at the Grand Cal, we paid over $700 per night for a woods view double room and this was back in 2017. I felt pretty cheated paying that kind of money for a room that didn't even have a bath and barely enough room to fit the strollers and bags. The next trip we stayed in an absolutely palatial suite off property but had torrential rains that made the walk to and from the parks absolutely abysmal. Guess where we have stayed ever since? Grand Cal... Since I'm stuck there regardless I figured I'd rather just bite the big bullet once and then think about it like a game from then on.

5. We always stay at the Grand Cal when going to DLR and usually go for 4-7 nights. Having in-room laundry and a kitchen is a game changer. You can't get that outside of DVC even in the ridiculously overpriced but amazing signature suites.

Is spending $200K on DVC a good financial move? Obviously not. However, life isn't always about making the best financial move.

Agree. With #4 especially

 

[zavandor]

This is how I thought about it when buying our first resale contract at BLT in 2018:

-The average time that people keep DVC contracts is 7 years, so I assumed I would be average and sell after 7 years.

This is definitely not true.
Over half of OKW is still owned by the original purchasers. 30+ years and counting. I don't know the actual average, but if I have to guess it's well over 20 years, and increasing.

 

[Sandisw]

This is definitely not true.
Over half of OKW is still owned by the original purchasers. 30+ years and counting. I don't know the actual average, but if I have to guess it's well over 20 years, and increasing.

Thanks for helping others to understand! I think the piece of info that gets sometimes confused is that out of those who choose to sell, the average for that small subset tends to be 10 years. It’s not based on all owners.

The other thing that can’t be determined is whether or it those people selling are also buying

I think I have sold maybe 8 contracts in my 15 years of ownership but bought others too!!

 

[eticketplease]

This is definitely not true.
Over half of OKW is still owned by the original purchasers. 30+ years and counting. I don't know the actual average, but if I have to guess it's well over 20 years, and increasing.

I don’t know the numbers but PP was mentioning purchasing in 2018.

That means OKW, BCV, BRV, BWV, HHI, VB, SSR, AKL and BLT would all be old enough to have meet the 7 year mark. Even if OKW owners haven’t sold it is still possible.

Also to note it is an average as we have seen on resale market sometimes people get in over their heads and have to sell early before the resort even opens which certainly helps bring down the average.

 

[TheDailyMoo]

With DVC ownership that psychology gets flipped on its head. I'm losing money if I don't go, right?

So much this. Having the AP is also part of that equation.

 

[Tatebeck]

The key factor is that the 7 year data is probably based on how long the average resale contract has been owned at the time it is resold. That doesn't take into account all of the contracts that have never been resold. We would need to know the amount of contracts that have been resold and the number of contracts that have never been resold and are still owned by the original purchasers. Then use that data with how long each resort has been open in order to get an actual number about general DVC ownership length.

The average resale contract may have been sold after approximately 7 years, but the average DVC contract has not

 

[CastAStone]

Guys the 7 year number is nonsense.

Can anyone even provide an original source for it?

 

[CastAStone]

2. Factoring in investment alternatives with historical returns on the S&P 500 on a 10+ year horizon there's no way to make DVC make financial sense. You are vastly better off putting the money in SPY and paying cash for your stays.

This is true for most and perhaps all direct purchases, but it’s definitely possible to beat the market with a resale contract.

 

[CastAStone]

I’ll bet that 2057 OKW for $95 deal they ran this spring paid out vs the S&P. Especially for GV stays.

 

[Stank]

The problem is vacations aren’t investments; they’re expenses. Sure, life comes with endless opportunity costs….but chasing an NPV spread on everything isn’t living. There’s always a cheaper alternative to trade down to.

 

[CastAStone]

The problem is vacations aren’t investments; they’re expenses. Sure, life comes with endless opportunity costs….but chasing an NPV spread on everything isn’t living. There’s always a cheaper alternative to trade down to.

For some of us the spreadsheets are half of the fun.

 

[Chili327]

Guys the 7 year number is nonsense.

Can anyone even provide an original source for it?

I’m sure it’s the average length for people that sell, not the avg of all contracts get sold.

 

[CastAStone]

I’m sure it’s the average length for people that sell, not the avg of all contracts get sold.

I’m skeptical that even among people who sell that the average sale is that short.

I’d bet that includes foreclosures etc as well.

Or that it was calculated in like 2005 when the whole system had only been around for 13 years.

If it wasn’t just pulled out of thin air.

 

[juliebee]

Guys the 7 year number is nonsense.

Can anyone even provide an original source for it?

I know I've heard it at least once or twice recently on the DVC Fan podcast... or maybe it was the *********** podcast. Maybe Paul Krieger can tell us?

 

[TheDailyMoo]

This is true for most and perhaps all direct purchases, but it’s definitely possible to beat the market with a resale contract.

This is probably true for all purchases. Technically we should all live in a one room shack with one lightbulb eating cans of beans while we DCA every last cent into the broad market indexes then we can die in our dark shacks with a ton of money and full of beans.

Or we can spend a lot of money to have dole whips while waiting to meet a guy in an oversized rat suit but enjoy the heck out of it.

PS I do enjoy beans though