DVC Survey asks about pre-paying for annual dues for future years

[DVC Mike]

I received an email on Friday from DVC.

You have been randomly selected to participate in the 2010 Annual Condominium Association Survey. Your opinions on topics such as Member satisfaction, Member benefits, and Disney Vacation Club information sources are of great value to us. Key findings from the survey will be shared at the 2010 Annual Condominium Association Meetings, and in a future issue of Disney Files.

It was a typical survey, asking about perks, etc. However, one of the questions was in regards to prepaying youir annual dues for years in advance.

The "pre-paid annual dues" program would allow Members to pre-pay for annual dues for future years. To make a payment, Members could select from a range of 5-year increment amounts to decide which best fits their needs. Financing options would be available.

It asked me the number of years I would prefer to pay in advance. One option was to prepay all the dues for all the years of the membership up front (when you buy your points).

Why would anyone want to do such a thing? How could they calculate the dues anyway? What if they under-estimated? Would the owners who didn't pre-pay get socked with the difference? What if they over-estimated?

It seemed to be a very strange option to me.

 

[CarolMN]

I agree - odd question. I wonder if they are getting questions from prospective members asking to do this. Maybe some want to roll future dues into their original financing?

I have all the same questions you listed. I think I would only want to pre-pay if there were a discount or at least a guarantee that I would not end up owing more than the estimate.

Might be of interest for those who plan to gift a contract to their children/grandchildren or perhaps as part of estate planning.

Wonder how the "pre-pay" would work with a re-sale? In today's environment, my guess is that a member would NOT get much of a benefit for the pre-payment.

 

[rondesj]

No way would I want to pay them in advance. Too many what if are involved.

 

[rondesj]

I did not get one of the surveys. i wonder how many they sent out.

 

[rondesj]

It seems to me that it is all about the interest that can be collected on the money collected right from the start. It does not seeem like the member would bemefit at all in these times on the sale of it. It does seem to be good for not having the kids pay dues if the property is willed to them

 

[AnnaS]

Pre-pay 5 years in advance? Wow - maybe a year or two.

Not sure why anyone would do that except again if the membership is gifted to a child/grandchild, etc. Perhaps if companies owe many points - would they have some kind of write-off for this or some other benefit for prepaying?

Is it possible members might buy and not be able to afford the dues and add them to the initial purchase price for financing - which is crazy.

DVC would benefit if enough people did this for five years - they can make money on top of our money.

Would anyone consider it if they froze the dues for the 5 year period? (today's rate of course).

Just thinking out loud

 

[Tiger926]

Maybe it's for people who finance? Hubby is banker, and he says many people roll their property taxes into their mortgages. We don't do this, as we pay monthly - actually it's spread out over 10 months, so Dec./Jan are off months, but we have the money to do this, but with Disney, I bet dues cause people not to purchase, so if Disney just rolled it into the package (we all know how Disney likes their packages), then it might allow some people who finance to actually purchase? Not smart financially, as it will cost a lot more, but perhaps this is where Disney is heading?

I'm wondering if this would be an option for those who finance, but I can't imagine how you'd figure that out, and correct me if I'm wrong, aren't we talking about astronomical amounts of money? Our dues for our contracts are $1700.00/year.

Now, if they let us Canadians pay by monthly credit card, then that is something I would go for!

I'm shaking my head on this one...Tiger

 

[gkrykewy]

I don't see the confusion

I answered this survey question very positively, and said I'd be interested in paying dues up to 5 years in advance. I assumed they meant that you would be pre-paying those years at today's dues rate, since that's how prepayments typically work (though I think the wording should have been more explicit).

If you have the cash, it's a great way to hedge against dues increases, and will likely outperform many other alternative investments over the same timeframe.

Now life of contract, no way

Also, who on earth would be dumb enough to finance the prepayment? I know, I'll hedge against 4% annual dues increases by paying upfront, and I'll just finance that prepayment at 10% through Disney! Brilliant!

 

[dianeschlicht]

Wow, not sure what to think of that, but most of what I think is negative. Sure, you COULD assume they would keep your rate constant, and if that was the case, it MIGHT be a good idea. However, when it comes to DVC, I've learned NEVER to assume anything. I too like Mike would wonder what it would mean to those who did NOT pre-pay.

Hmmmm, looks like food for thought, and I'm sure we'll hear more about this in the future.

 

[spiceycat]

hey when I plan to retired (not when forced too) was going to set up an annuity to pay the dues.

but I would kept control of the annuity - not DVC.

that is trusting them with several thousand dollars for the future - don't know about that.

you would need to get a good discount because they would have to base it on future which requires them to give your account interest.

but who knows with DVC how it would work.

 

[Chuck S]

I guess DVC is assuming the collective interest/investment income on the pre-payment would offset any increase. I wonder whatwould happen if it did not fully offset, would Disney/DVD be responsible for the additional amount?

I would maybe pre-pay 2 or 3 years, probably not 5, unless there were some guarantees.

 

[dianeschlicht]

Yes, I could see maybe pre-paying up to 5 years, but not beyond that, and CERTAINLY not up to the life of the contract!

It sounds a bit like when they offered the OKW extension. Why would I extend for something I probably wont be around to see? I'd feel the same about pre-paying dues.

 

[JimC]

Three to five years might work if the discount was sufficient, DVC remained responsible for any shortfall and any unused prepayment transferred to a new owner. Full term of contract would be a lot of risk on DVC and a great deal of money for member.

It would complicate the resale market quite a bit.

 

[Oshawa]

Maybe it's for people who finance? Hubby is banker, and he says many people roll their property taxes into their mortgages. We don't do this, as we pay monthly - actually it's spread out over 10 months, so Dec./Jan are off months, but we have the money to do this, but with Disney, I bet dues cause people not to purchase, so if Disney just rolled it into the package (we all know how Disney likes their packages), then it might allow some people who finance to actually purchase? Not smart financially, as it will cost a lot more, but perhaps this is where Disney is heading?

I'm wondering if this would be an option for those who finance, but I can't imagine how you'd figure that out, and correct me if I'm wrong, aren't we talking about astronomical amounts of money? Our dues for our contracts are $1700.00/year.

Now, if they let us Canadians pay by monthly credit card, then that is something I would go for!

I'm shaking my head on this one...Tiger

I agree that would be a great options for Canadians!!

 

[anna08]

Am I the only one that is suspicious that they are offering this as an option because there is a money shortfall within the system that they are trying to suddenly increase their savings to cover? Maybe slower than anticipated sales and a huge bill due for AKV/BLT/VGC/Aulani construction all due in a relatively short time? Sorry to have negative thoughts but they simply can't be offering something that would be better for owners out of the kindness of their hearts..

 

[Inkmahm]

I don't see the confusion

I answered this survey question very positively, and said I'd be interested in paying dues up to 5 years in advance. I assumed they meant that you would be pre-paying those years at today's dues rate, since that's how prepayments typically work (though I think the wording should have been more explicit).

If you have the cash, it's a great way to hedge against dues increases, and will likely outperform many other alternative investments over the same timeframe.

Now life of contract, no way

Also, who on earth would be dumb enough to finance the prepayment? I know, I'll hedge against 4% annual dues increases by paying upfront, and I'll just finance that prepayment at 10% through Disney! Brilliant!

I"d prepay, also, but would like a discount for paying in advance in addition to the locked in dues rate for the prepaid period. If I got that, I'd sign up for this program for sure.

 

[disneynutz]

Two thoughts, Disney is short cash and they are implementing programs to improve their balance sheet. That is the reason why they are not exercising ROFR.

Secondly, some people like to pay in advance, I would never do it, but that's just me.

Bill

 

[Caren]

We might consider it. We're planning to retire in nine years and it's tempting to prepay now while we're working and have more money, so we can get endless Disney without worrying about the annual fees. It would depend on the terms.

 

[CarolMN]

Two thoughts, Disney is short cash and they are implementing programs to improve their balance sheet. ......(snip)....l

Isn't there something in the POS that says dues have to reflect actual operating costs? I thought that meant Disney couldn't make any money on dues, so I don't see how a pre-pay program would improve their balance sheet. Anything they collect would have to be used for dues.

IMHO, any discount Disney might offer could only be the amount they expect the "principal" to earn unless Disney plans to make up any difference between actual and pre-paid estimates. Don't see that they could legally require those who don't pre-pay to cover any shortage due to a poor estimate or discount for those who pre pay.

What do the rest of you think?

 

[Muhlenberg]

It may have something to do with cash flow. Perhaps with the building of BLT, VGC, and Aulani, and MAYBE not enough revenue from point sales, they want to increase DVC revenues. That's just a guess.

From the member perspective, as an example, our contract has our names plus our kids' names on it. If in, say 25 years, I'm nearing the end of life and I don't want our kids to pay the maintenance fees, prepaying the MF's would be a viable option worth checking into. It would keep their expenses down, and may be advantageous, tax-wise.