DVC vs. non-DVC for Cash... ®¿®

[EastCoast]

I set up a spreadsheet to compare some numbers buying into DVC as compared to cash outlay for non-DVC rooms. These assumptions were used (although they can be easily changed in the original worksheet... BTW, anyone want a copy?):

Assumption #1: Purchase of 210 points @ $80 per point
Assumption #2: Maintenance fee is pro-rated for the first year from August to December
Assumption #3: Maintenance fee will increase by 2% annually
Assumption #4: Cost for a room elsewhere (perhaps cheap for Disney) would begin at $279 per night
Assumption #5: Cost for a non-DVC room would increase by 6% annually

With these assumptions, I calculated when the cost for the DVC room becomes less expensive than the non-DVC room.

Anyone care to either support or blow holes into this logic?

With hopes that you can read the small image below...
EC

 

[Lisa P.]

Are you able to add two columns which would show the cumulative costs of each cash payment approach, over time? You already have one for DVC, "Cost To Date."

By adding the "Cash Cost To Date" columns, you could compare each one with the DVC Cost To Date column, side-by-side. When the cumulative figure in the DVC column is below the cumulative figure in the Cash column, for either 7 or 10 night vacations, you've reached breakeven... and your room will only cost maint fees after that.

From what I can see, with these figures, your breakeven would come at the end of year 2011 if you compare to 7 night cash stays. It would come at the end of year 2008 if you always stretch your points to obtain 10 nights of vacation.

Of course, this all assumes that you would be happy to give up daily housekeeping and make early planning a priority, in exchange for the longer term benefit. It also assumes that you will not use any of your points during that time for any non-DVC purposes (concierge, cruises, etc.). And naturally, it assumes that you will remain satisfied with the studio accommodations and not begin using the points, since "they're there, why not use them???" for 1BR and larger accommodations. Used as suggested by the assumptions given, it would be a good longterm idea. Hope this helps.

 

[EastCoast]

Hello Lisa P.

Thanks for your comments... you make a valid point

Maybe because I authored the sheet, it seems to be sufficiently intuitive and would not need the additional columns. Then again, you may be looking at it differently (with "first time eyes") and the change is really needed. Tell you what, if I receive more similar comments I will make the changes (time permitting).

 

[Lisa P.]

EastCoast, I've edited my comments above - maybe that will help.

 

[RobDoc]

You might also consider using 4% as the annual dues increase, since it's been in the 3-5% range (per year) since 1991. Some years have decreased and some have increased. The average has varied by resort also.

Thanks for providing the spreadsheet, it does offer some very useful consideration!

 

[Richyams]

Using a studio makes the breakeven period longer. Your break even comes mcuh faster in larger units.

My breakeven was almost on my first trip. We bought 230 points in 92 for $12000, dues, $700. We had two years of points for our first vacation, 12 nights in the OKW GV.....rack rate was near $12000 for just that trip, add room taxes and the cost of the tote bag, I may have broke even that trip.

We won't even mention the FREE 12 nights X 6 hopper passes, or 72 one day hoppers that we got that first trip.

My second trip was again 12 nights in the GV using the extra 200 points that we added on during the first trip......we probablybroke even for those points on that trip.....the free passes were just gravy.

If you count rack rate, I would have to guess that we spent about 15-20% of the cost of our accomodations. Today I stay in the GV for the cost of dues, about $120 per night for a room that often has a rack rate well over $1000 per night.

Basically, I am disagreeing with the point about using a studio as an example not being a good example....I say it is a real good example, it is actually a worst case scenerio.

The only criticism I would have is the 6% average annual increase. I think that is a best case scenerio, I would prefer 4% and using a one bedroom or larger unit.

 

[EastCoast]

To all,

In case you missed the offer, I am willing to share the original sheet so that you can plug in variables as you see fit (such as a change in the number of points purchased, or change the percentage increase in the points or in the off-site room rates).

In the past two days I was conversing with one of the webmasters (Alex) and I sent the sheet to him. He is contemplating posting the sheet should anyone chose to play with some numbers. Hopefully that will happen. If not, then either I can supply you with the original via email or I can change the senerio and repost the graphic.

Anyone?

 

[Dean]

Obviously you would need to use the comparison numbers you're comfortable with. I personally would not use $279 per night as the minimum charge but it depends on what type room you are comparing with. I would also agree that the 2% for dues increases and 6% for room increases is far too great a difference, I would use the same percent for each. Lisa's point about the cumulative totals being helpful is a good one.

 

[EastCoast]

Dean,

REGARDING YOUR COMMENT, " I would also agree that the 2% for dues increases and 6%
for room increases is far too great a difference, I would use the same percent for each. "

With all other variables the same...

Using an annual room rate increase of 6%, the DVC room becomes the better buy in year 6
Using an annual room rate increase of 5%, the DVC room becomes the better buy in year 6
Using an annual room rate increase of 4%, the DVC room becomes the better buy in year 7
Using an annual room rate increase of 3%, the DVC room becomes the better buy in year 7
Using an annual room rate increase of 2%, the DVC room becomes the better buy in year 8

 

[erikthewise]

Unless I'm missing something, it looks like you are not paying any interest on your loan of $17130. Very nice! Or if you paid cash, you planned to keep that money in your mattress so it would not have accrued any interest.

If you take that into account, you may find it takes several years longer, but eventually the inexorable power of DVC will still win out....

I think your figures for growth of annual dues and of resort rates are both too high.

Resorts: When I went through a similar exercise, I computed the annual growth rate from 1993 to 2001 of the minimum rack rate of GF, Poly, CR, YC, and CBR. (Data taken from Birnbaums Official Guidebook for each year.) These growth rates were all under 6% and the average was 4.15%. Perhaps the median or maximum rack rates behaved differently, but they weren't of interest to me.
(Incidentally, I wonder how many know the proper formula for computing annual growth rate.)

Annual Dues: I suspect that these 3-4-5% growth rates are off base and in any case come from OKW owners. OKW is unique in that it started with low annual fees and has had to "catch up".

If one believes the figures given at http://www.mouseplanet.com/dtp/dvc/2_Program/maintenance.htm
(I have no other sources of information on this), then the annual growth rate of fees at OKW from 1994 to 2002 was 2.218%. I suspect the growth for newer resorts will turn out to be less. There have already been instances of annual fees actually decreasing in some years.

 

[EastCoast]

erikthewise.

Take another look at the top of the original document and you will see that I stated: "does not include the cost of borrowing the original purchase price" Look in the box, top center. And, yes, I know the image is small.

The purpose of the worksheet was not to deceive or mislead anyone. I was offering it as a starting point for anyone that wanted to look at some numbers. I have offered to send a copy to anyone that asked so that they might plug in their own data and alter the sheet to suit their own needs. Certainly I expected that not everyone would like the sheet, agree with it's content or feel that it was complete.

For the record, the 2% maintenance rate was quoted to me by DVC sales and the 6% non-DVC annual rate increase is actually 2 points less than the 8% DVC quotes. One might say that I simply organized an example based on the sales pitch that I heard, no more, no less.

As for your comments, I appreciate (most) of them and I am glad that you shared them in the thread. IMHO, the tone of your opening remark could have been kinder since you appear to be calling me on something you missed , not for something I omitted or mis-stated.

EC

 

[erikthewise]

Sorry I apologize. I tried so hard to read the numbers that I missed the words! I was only trying to be light-hearted in that comment, but I know I'm not always successful at that. I *suspected* it was there somewhere and I was just missing it, which is why I began the post as I did.

DVC is very reasonable in quoting 2% for annual dues; as I mentioned there is historical data backing that up. But 8% for resort rate increases seems out of line; that would mean resort prices doubling roughly every 9 years. (Can someone name a resort that costs twice as much as it did in 1993?) I have to think that's their enthusiasm talking rather than hard data.

 

[EastCoast]

erikthewise,

No harm, no foul... and I am sure there is much that you could share with the forum that would be of value to all. In fact, I liked that you had solid references for your percentages. So far, all I have is the word of DVC sales.

In all honesty, in the three days that I have been in these forums, the cost of ownership (ooops, borrow-ship) seems to be one of the hotter topics. I've seen many different ways which posters have gone after the numbers... no two alike. Best I can figure is that unless one has limitless funds, there is no easy answer.

Still friends?
Just kidding... keep posting!

EC

 

[BCVOwner2002]

EastCoast - I see they let you post your spreadsheet. Thanks for the info.

 

[Maistre Gracey]

I used to figure lost interest income into the price of DVC, but not anymore.

I had someone point out that if I did not spend the loot on DVC, I would just blow it on something else...No lost interest here!

 

[Partridge4ever]

I enjoyed reading your spreadsheet. I also don't include lost interest in my calculations. We bought in 2000 at a time when DH was investing fairly heavily (relative to our annual income at any rate) in the stock market. I insisted that we spend some of our money on DVC. We've pretty much lost everything he invested. DVC has held its value.