Financing DVC's...Good/Bad???

[Ms.Mouse]

Ok, here's the question.....
Is it still worth it to buy into the DVC's even though you have to finance??? Especially now that you're saving about 15%???
How many of you financed and feel it was a good/bad decision.

 

[Anewman]

Well when we purchased everyone said wait until we can afford to pay cash, well saving 20k would have taken us around 3 years. And for us that meant paying full price for 3 vacations and that does not even take into account the increase in price that will surly happen in 3 years.

So yes we are paying interest(mortage/ductable), but we are saving on our trips RIGHT NOW.

 

[browniemtb]

I agree that most will say pay cash....who has $20,000 lying around anyway. The way I look at it if we were not members of the DVC we would paying anywhere from $3000 to $5000 for acommodations. We like the deluxe resorts and lots of space. So we financed with the notion that we will not, repeat, will not go the full 10 year term though. But even doing the math and you do go the 10 year term you still save, just not as much. At 10.75% through Disney, isn't bad for a timeshare loan...most are much higher. Also theres home equity which should be hovering around 7% right now. Crunch the numbers and see what works best for you.....
Good Luck
Brownie

 

[CapeCodFam]

If you are definately going to stay in deluxes and pay cash for the next 4-5 years anyway, I think financing is still cheaper and it is an asset.

Having said that, I wouldn't pay those crazy rates. I'd suggest getting your own financing at a lower rate.

 

[Doctor P]

If you are financing as a means of managing cash flow as opposed to affordability, then their certainly is nothing wrong with financing. We financed our initial purchase to avoid having to give all the money up front, but paid the loan off within about a year. We then paid cash for our three add ons.

 

[Olaf]

We paid half up front, and then paid it all off in three years. When you look at the actual interest paid, it's not that much in the grand scheme of things.

 

[crisi]

If you are financing as a means of managing cash flow as opposed to affordability, then their certainly is nothing wrong with financing. We financed our initial purchase to avoid having to give all the money up front, but paid the loan off within about a year. We then paid cash for our three add ons.

That's sort of the kicker - most people can't really tell the difference. We financed some of it for a few weeks while a bonus check arrived.

DVC is a luxury purchase, and like most luxury purchases, think carefully about what it means to finance it.

There are other options to financing. You can rent points economically while you save. You can buy a small contract resale - finding one may take some effort - and add on as you can afford it.

I agree that most will say pay cash....who has $20,000 lying around anyway.

A lot of people have $20,000 lying around, or can get it fairly easily. And if you buy the minimum number of points, you won't need $20,000. The savings aren't nearly as compelling when you are paying todays prices for a contract plus interest.

 

[NYMomof4]

Financing is a temporary thing for me-I would not have chosen it if I thought it would take the 10 years to pay off. My tax refund usually goes to a trip to Disney that cost $3500 each year the past 2 years so this year it will pay a chunk on the balance of the financing instead. Now the problem is what to do with future refund checks when DVC is paid off!LOL (I feel add-on-itis coming on....)

 

[rocketriter]

Disney financing and home equity loans each have their pros and cons. A home equity loan usually comes with a lower interest rate and that interest might be tax deductible; but it's a lien on your house and so a default (unexpected illness, death, divorce etc.) can jeopardize your home. A Disney loan comes with a higher interest rate; but it requires no collateral. In most cases, you can pay off either loan more quickly than you promised, and save interest charges.

 

[stampinshauna]

When we were thinking about buying, DH wanted to go ahead and do it and finance and I wanted to save up and pay cash. Well, one of my past DCL cruisemates and fellow DISer was answering questions for me and he gave me the cost history of DVC. I thought if we waited and saved up, so we wouldn't have to pay interest, we would make up for missing out on the 15% discount. I didn't realize that prices are constantly going up for DVC. We knew we could pay it off in a year or two, so we decided to go ahead and take advantage of the 15% discount and get in before prices go up again.

It totally depends on your situation. It is nice to pay cash for things, but sometimes it just isn't feasible. I wouldn't finance it if it would take you 10 years to pay off, but if you can do it in a few it isn't so bad.

 

[DiznEeyore]

We also financed and paid off our contract early. We still saved quite a bit of money over paying for hotels during the time we were paying it off.

 

[cobbler]

As for financing goes, we did and I normally wouldn't encourage this at all. In fact we had no intention of financing.

What I did was this. I basically took the amount we financed and see how long it would take us to pay it off with a loan calculator. I see it would take us 3 years and I saw the amount of interest we would pay. And I am using the 9.75% because we are going to stay with Disney financing.

Then I took the same calculator and did a savings calculator for the same duration to see how much $$ we could save with interest. I gave a pretty generous interest rate of 4.5% because well I just don't know what the rates will be between now and 3 more years but since it is less than that now (on average) I figured that would be a good median.

Then I took a guesstimate on how much points would be in 3 years. I actually just took todays cost of 98 at SSR because that is probably pretty accurate in 3 years, although we never know.

Anyway, we are basically coming out ahead financing because the interest we would pay added to the principal amount of the loan and then divide that by the number of points, it workes out to be 92 a point.

Which is the going rate at the sold out resorts now, less then the SSR of 98 per point but 2 more per point then the sale (which is nothing). Added that we were going to go to Disney every year anyway and I could take that money that I would have spent for accomodations toward the loan. . .

Weird but we are actually coming out ahead. So I suggest you run the numbers. NOW if you can't afford the payments with financing I would suggest it - obviously. And I did take into account the annual due increase.

I am even super anal and have spreadsheets of how much I am paying, how much the room rates are at cost and even figured with an AAA discount to see when I will break even and such.

 

[ncseric]

We took the route of using a home equity line of credit to pay for a resale ($75/point @ OKW) upfront in place of financing through Disney. We saved a bunch on the points and a few percent on the interest. Any points we rent out go towards the principal on the equity line. We get the mortgage interest deduction, which knocks down the taxes a bit, so we did well all around.

However, it is a splurge purchase but would be easy to jettison at little or no loss (other than interest payments we've made) if finances dictated. We are still able to enjoy the points for the next x years without the long wait to save the money.

- Eric

 

[psu4glory]

DVC is a luxury purchase, and like most luxury purchases, think carefully about what it means to finance it.

"luxury purchase" seems like a pretty strong term...i mean, certainly being able to take a vacation every year is a blessing with everything that's always going on in all our lives. but buying into DVC isn't like buying a yacht or a summer home! we view it more as "paying forward" for the normal annual vacations that we were planning to take anyway...

A lot of people have $20,000 lying around, or can get it fairly easily.

wow! not "a lot of people" i know!! we DEFINITELY would not have been able to pay for our BWV points up front - and were pretty much OK with that. if we had tried to save that money, we may NEVER have gotten there, considering that along the way there would have undoubtedly been countless things come up that would have caused us to "dive into" those savings...

we may be in the minority of those that regularly post on the DIS boards...but we're, for the most part, average folks that understand that any type of large purchase (luxury or not) may - and likely will - have to be financed. btw - we ended up with a home equity loan @ 7.5%, and plan to pay it off in 5 yrs or less...

 

[Groucho]

I'm probably going to buy in on Friday when my guide returns from vacation, but now I'm trying to figure out if I should do a home equity loan or finance through Disney. I've never had a home equity loan before so I'm a little fuzzy on the details. (Nor a timeshare or anything similar.)

I'm guessing that the way it works is that I give Disney the 10% and then have the check cut by the bank to Disney to pay off the remainder of the cost? Is this likely to incur a closing cost (or any other extra cost) that I wouldn't get by just financing through Disney?

I can get 6.25% through a home equity loan vs Disney's 9.75%, which is a pretty good difference... I just want to make sure that I won't be socked with some unexpected upfront cost, or prepayment penalty, or whatnot.

Like cobbler, I also tried to figure out the numbers for financing longer now versus financing shorter later and the numbers came out in favor of buying in now. (See my thread from a few days ago.) And like psu4glory, I'd probably never actually save up that much all at once!

Will the research ever end? Probably not!

 

[DAG]

I thought it was a good idea to put our DVC on a credit card that had 12 months with 0%....some credit cards offer even more than 12 months interest free. As long as the payments are made on time, this is a good deal.

And if its not paid off within a year, the balance can be transfered to another card that has a free interest promotion.

 

[Daitcher]

That's sort of the kicker - most people can't really tell the difference. We financed some of it for a few weeks while a bonus check arrived.

DVC is a luxury purchase, and like most luxury purchases, think carefully about what it means to finance it.

There are other options to financing. You can rent points economically while you save. You can buy a small contract resale - finding one may take some effort - and add on as you can afford it.



A lot of people have $20,000 lying around, or can get it fairly easily. And if you buy the minimum number of points, you won't need $20,000. The savings aren't nearly as compelling when you are paying todays prices for a contract plus interest.

I agree, tons of people have $20,00 "laying around". The ones who don't are the ones who shouldn't be buying a timeshare. Don't kid yourselves folks into believing financing is the way to go. If you must finance it you cannot afford it.


DAVE

 

[pouncingpluto]

Lots of people who don't have $20,000 still take vacations every year. If buying into DVC lets them save money on their vacations, even taking into the account the finance charges, why is it such a bad idea?

 

[Ethan Baby]

I am a single mother without a money tree in my yard. I financed the purchase because the payments are very mangeable for me and I know I will not take the 10 years to pay it off. I already experienced one price increase since I discovered DVC and did not want to wait to save money because I probably never would. Okay, I may need help on that one but in the meantime, I am going to get to spend my son's 2nd B-day in WDW and live with those memories forever. The bottom line is not always the answer for everyone.

 

[crisi]

Lots of people who don't have $20,000 still take vacations every year. If buying into DVC lets them save money on their vacations, even taking into the account the finance charges, why is it such a bad idea?

In my opinion (and I am financially pretty conservative) taking on any debt obligation is a big deal. You are legally obligated to pay someone money - even if six months from now money becomes really tight for you. Timeshares are particularly loaded, because you don't only have a legal obligation to pay the debt, you have the resale value (not a problem with DVC - though if you have to resell and pay a commission within a few years of purchase, you'll still lose money), and you have the emotional committment to vacation. If you regularly vacation at Disney, but you have a tight year financially, you can decide to skip this year or postpone a few months, or maybe save the vacation by booking offsite or a value. With an investment in DVC, those decisions become harder - with the possibility of renting points, its less risky, but I'd hate to be in a position where I needed to rent points.

If you have the debt, and suddenly need to replace the transmission on the car, you now have even more debt (unless you had the funds to replace the transmission on the car sitting aside). Debt tends to spiral because you didn't have the savings set aside for the first purchase. And it tends to become habitual. Debt is a little like weight. Losing five pounds isn't easy, losing fifty isn't ten times harder, its 100 times harder.

In my experience, life is full of unexpected expenses. Debt limits your flexibility to deal with them. And life is filled with problems that are more easily solved when money is available to solve them, debt limits that ability as well.

Now, as I said, I'm pretty conservative, but I'm sort of amazed that people take WDW vacations (much less buy DVC) when they don't have several months worth of expenses sitting around in an emergency fund. I couldn't sleep at night wondering how I was going to pay my bills when I got laid off.