First DVC poster: Are these calculations accurate

[MrInfinity]

Dues X 50 years= $36,300 plus initial investment of $18,200 so
Total Cash investment is $54,500 over 50 years for 5,000 points
Per point cash "value"= $10.90 per point or $1,090 per year "cash/investment value" so to speak
This example I do not see the value in DVC: tying up $50,000 plus dollars for that low of savings.
Please give me any input you have or accuracy, correctness, etc. Benefits I have missed or if I just missed the entire thing.

Overall I am trying to see the value in tying up so much money over 50 years when the benefits don’t seem to be that substantial.
DVC members: what are the main perks?
My thought is that the biggest perk will be locking in a point cost for resort because once you sign up, they cannot charge more total points for that resort, only reallocate within that resort. BUT, is this lock in offset by increasing annual dues?

You seem to have nailed most of the pros and cons. I'll add a few bits to consider.

You've come to the same conclusion many do, that the value per point ends up around $11. That is only valid if you'd otherwise store your money in a shoebox. The biggest cost is the value of that money over time. If you have $18,000 now, then at even a modest 5% you could be earning $900 per year toward cash vacations. Add this $900/yr to your $1090/yr (or subtract it from your cash vacation expense) and you'll see the costs are more like $2000/yr, or around $20pp (per point)

That's buying direct. Buying resale, you can get that down to around $15pp... Which... Coincidentally is what Disney will sell you one-time-use points for.

Another way to think about it is like this. If you had $18k 50 years ago and you diversified it among strong companies that are still around today... You would now be wealthy. On the other hand if you'd bought a timeshare, you'd now own a $0-value timeshare and have no cash.

You also seem (IMO) to be pegging the cash prices high. We stay in Deluxes and have never paid $505 a night. We paid more like $330-$450. Consider discounts and other savings methods you'd use on a cash room that don't apply to DVC.

Given this, you'd already come to the conclusion that DVC wasn't a great deal even with undervaluing the costs and overstating the cost of staying hotel-side. And with the modifications above you'll find that buying direct is not likely to save you at all... and buying resale you'll save maybe a little but it's tight.

Why buy then? Well if you only need Studios, it's tough. You can stay in a hotel for about the same cost, but with total flexibility. But we have outgrown hotels and studios, and when you enter that realm of needing the 2-Bedroom or larger units, DVC starts to shine financially. Larger suites at the World can be 3x-4x the cost of a regular room... But 2B's are only about 2x the cost of a Studio. There is a bigger savings when you want to take your family of 6+ and stay in one room.

There is also the emotional side. You've got $18k to enjoy, so you can buy anything -- a timeshare that you'll use for life is a perfectly good thing to buy. We love ours. It gives us access to many stay options at Disney World that we wouldn't have otherwise. You'll take more vacations over the long run and that's a good thing!

 

[disneynutz]

IMO there are often times when it makes sense to buy one place with the intent of consistently buying elsewhere. But one should be OK staying there if they can't get something elsewhere.

After not getting what we wanted a couple of times we decided to buy where we love and book it at 11 months. It didn't makes sense to spend thousands of dollars to hope that you get what you want. As we get older we have higher exceptions and we are set in our ways and don't like to take chances. We will spend more to insure that we get what we expect.

Bill

 

[Jbryansoutherland]

It doesn't make sense to buy at one resort with the intention of staying elsewhere so the motto buy where you want to stay (or don't mind staying) is the first step in your decision process. Then you can figure if going direct or going resale is the best route. If you only intend on going every other year then definitely look at resale, if you plan on going yearly or more frequently then going direct to get some discounts is a benefit. But when you look at the cost of direct and the savings that can be had by buying resale, it often makes more sense to go resale.

Even though yearly MF will increase it is kind of off set by the fact that room costs direct from Disney will increase too. So in a sense it could be a wash if you are comparing rack rate or even discounted rates to the MF.

One thing to keep in mind is that most people don't keep their contract until the end. You do have the option to sell if in say 10-15 years your family no longer loves disney trips. As long as the market remains good, many people who bought even a few years ago would be able to sell today and actually make a little $$. So don't necessarily think of it as a 50 year commitment. It will be for how ever long you need your contract. The contract life plays a part in the future resale value. For example BC which expires in 2042 is selling resale for a very high price per point, but you could buy AK which expires in 2057 (so when you are well into your 70's). If you keep your contract for 15 years -- the 2042 expiration contracts will only have 9 years left and the cost per point will likely have dropped, so if you wanted to sell you would make back a smaller amount. Buying a 2057 contract (or beyond) and you keep for 15 years, well that contract now has 24 years left -- thus possibly being able to sell for more.

The benefits that you are buying are being able to get into a deluxe room for the cost of a moderate or less. So for example our April trip consists of 2 poly studios for 3 nights (Disney cost = $2000 per room), then 4 nights at AKL in a 2 BR - this would run about $4000 = So in all it would have cost me around $8000 for this week. My initial buy in at AK resale was just about $9000 back in 2015 - so with one more trip i will likely break even and i have only owned for a few years. After recouping my initial buy in my MF of ~$800 is certainly much cheaper than getting a studio room for a week at AK. We intend on going everyother year in a 1BR so say $1600 for a week at AK in a 1BR -- you try paying that at disney. So there is value in what you are buying. It helps to make disney a little more affordable, but disney isn't a cheap vacation when you have to factor in food, park tickets and travel.

The minimum for benefits/discounts is 75 points, so yes you could buy one resale and one direct. the savings is just less than when they were allowing the 25 point minimum for benefits. You would just have to factor all the numbers including closing costs of 2 contracts etc.

Right now AK is not one of the longerish contracts, which is what drew me to it. You are free to use your points elsewhere at 7 months, as long as there is availability. Higher demand DVC times - Oct - Jan -- you better book at 11 months and you will likely not be able to switch resorts (at least not for your whole length of stay. Most other times of the year, provided it isn't around a holiday or marathon weekend, you could still book your home resort at 11 months and switch all or part to another resort at 7 months. I did this for my upcoming April trip - I booked our home resort AK for 7 nights, then at 7 months i was able to change our first 3 nights to Poly.

There is a TON to learn about DVC, even once you own there are scenarios that pop up so these boards are an essential part of owning DVC because if you don't know the answer, chances are someone here does.

Thank you for the well thought out and informative post. Great information. The only hang up I have now is this. AK is my favorite and primary resort. If I do buy in at $18,200 for a 100 ppy contract, I am only getting 39 years vs 50 but at the same cost right? In other words, you don’t get a break because the time frame is shorter?

Thanks a ton!

 

[Jbryansoutherland]

You don't save anything when using pts for cruises. You pay extra as the exchange rate for trades out of the DVC system is not very good.



What does your crystal ball say? Someone who sold in 2008 during the Great Recession might have taken a big loss (supposedly an OKW contract sold for $25 per pt). Lately, prices have been rising but due to the expiration dates on the contracts, prices will ultimately go to zero - no one knows how that pricing trend will look before expiration. Other timeshare companies try to damage resale values to benefit their direct sales such that their timeshares are basically worthless at resale (and DVC has been inching in that direction).

A reasonable bet is that you will recover a lot of your initial investment if you sell in 10 years but there is a risk that it may be worthless.



As I posted above, it's all in the Resource thread - home resort determines length of contract. Pricing for AKV is less than for CCV direct and much less for AKV at resale. (Due to the time value of money, the last few years are not worth much "right now" - a whole lot can change in 30 years...)

Chalee94 I don’t have a crystal ball, however I do have enough business and investment sense to assess and evaluate the trends of a parent investment to determine if there is a solid possibility, some possibility or little possibility of recouping your investment and/or making money. So I’m not asking for a future telling crystal ball reader, but am going to the source which is very veteran DVC members to see what the true to life trend of this investment is!

Thanks for the reply

 

[Jbryansoutherland]

You seem to have nailed most of the pros and cons. I'll add a few bits to consider.

You've come to the same conclusion many do, that the value per point ends up around $11. That is only valid if you'd otherwise store your money in a shoebox. The biggest cost is the value of that money over time. If you have $18,000 now, then at even a modest 5% you could be earning $900 per year toward cash vacations. Add this $900/yr to your $1090/yr (or subtract it from your cash vacation expense) and you'll see the costs are more like $2000/yr, or around $20pp (per point)

That's buying direct. Buying resale, you can get that down to around $15pp... Which... Coincidentally is what Disney will sell you one-time-use points for.

Another way to think about it is like this. If you had $18k 50 years ago and you diversified it among strong companies that are still around today... You would now be wealthy. On the other hand if you'd bought a timeshare, you'd now own a $0-value timeshare and have no cash.

You also seem (IMO) to be pegging the cash prices high. We stay in Deluxes and have never paid $505 a night. We paid more like $330-$450. Consider discounts and other savings methods you'd use on a cash room that don't apply to DVC.

Given this, you'd already come to the conclusion that DVC wasn't a great deal even with undervaluing the costs and overstating the cost of staying hotel-side. And with the modifications above you'll find that buying direct is not likely to save you at all... and buying resale you'll save maybe a little but it's tight.

Why buy then? Well if you only need Studios, it's tough. You can stay in a hotel for about the same cost, but with total flexibility. But we have outgrown hotels and studios, and when you enter that realm of needing the 2-Bedroom or larger units, DVC starts to shine financially. Larger suites at the World can be 3x-4x the cost of a regular room... But 2B's are only about 2x the cost of a Studio. There is a bigger savings when you want to take your family of 6+ and stay in one room.

There is also the emotional side. You've got $18k to enjoy, so you can buy anything -- a timeshare that you'll use for life is a perfectly good thing to buy. We love ours. It gives us access to many stay options at Disney World that we wouldn't have otherwise. You'll take more vacations over the long run and that's a good thing!

Great reply, thank you. I will say that if you know of a 5% per year return on anything, sign me up right now.
The prices that I quoted for cash I took from the Disney website, but that does not include any discounts.
I very much see your point on the 2BR or deluxe villas.
There is a significant discount there, especially when renting or buying resale (which I’ve been looking into).
Thank you very much, this forum has great support and good people!

 

[crisi]

Great reply, thank you. I will say that if you know of a 5% per year return on anything, sign me up right now.
The prices that I quoted for cash I took from the Disney website, but that does not include any discounts.
I very much see your point on the 2BR or deluxe villas.
There is a significant discount there, especially when renting or buying resale (which I’ve been looking into).
Thank you very much, this forum has great support and good people!

Off the top of my head, AT&T's dividend yield is over 5%. GSK is over 5%. There are more, but those are two that come to mind right away. If you are looking at a 38 year investment, there isn't a lot of risk to your capital - and if over that time frame there is risk to your capital, the world and you both have bigger issues.

ETA: BP is at nearly 6% - unless you think we are getting rid of our oil dependence anytime in the next ten years, its a good bet.

 

[MrInfinity]

I will say that if you know of a 5% per year return on anything, sign me up right now.

Well, the stock market has averaged 7%-10% per year depending on which model you follow. Even picking mediocre investments one should be able to make 5%. You could go with some dividend producers and be pretty safe with close to 5%. Along with Crisi I'm a fan of AT&T for the solid dividend. Tho don't consider that advice of course, just random musings of someone on the internet.

 

[CraigInPA]

Thank you for the well thought out and informative post. Great information. The only hang up I have now is this. AK is my favorite and primary resort. If I do buy in at $18,200 for a 100 ppy contract, I am only getting 39 years vs 50 but at the same cost right? In other words, you don’t get a break because the time frame is shorter?

Yes, if you buy any DVC resort, you will get only the number of years remaining on that resort. Buying CCR today, you'll get 50 years. Buying AKV, you'll get 39 years. It doesn't matter if you buy the resort from Disney directly (retail) or if you buy it on the resale market.

The price you've quoted for 100 point contract is full retail from Disney. You could save yourself about $7k if you bought the same number of points resale. $7k would pay for a lot of annual passes, which is the primary benefit one uses to justify a retail purchase at $200 per pass per year.

 

[Dean]

After not getting what we wanted a couple of times we decided to buy where we love and book it at 11 months. It didn't makes sense to spend thousands of dollars to hope that you get what you want. As we get older we have higher exceptions and we are set in our ways and don't like to take chances. We will spend more to insure that we get what we expect.

Bill

Then for that situation it does matter but it doesn't for everyone and there are many situations where it doesn't or it matters little enough that it's not worth the extra $$$ for something else. There's a significant $$$ difference between say SSR & VGF, not as much for BLT long term.

Thank you for the well thought out and informative post. Great information. The only hang up I have now is this. AK is my favorite and primary resort. If I do buy in at $18,200 for a 100 ppy contract, I am only getting 39 years vs 50 but at the same cost right? In other words, you don’t get a break because the time frame is shorter?

Thanks a ton!

Don't sweat the end of the RTU. It's a factor but only one of many and it's actually a relatively unimportant one. But it should be considered in the value though the years on the end are worth less than the ones closer in.

 

[John-DVC]

I would compare it to renting DVC points. That’s a little less than half the cost yearly but you don’t have to pay up front.

 

[nates]

I did not read all of the replies, so sorry if this has already been posted. When trying to estimate the full out of pocket investment you must account for the annual increase in dues - it is substantial.
Using an estimated 3.5% annual increase, here is the total lifetime dues per point for each resort (i.e. multiply your total points by 'lifetime dues per point' to get your total over the contract life):



Applying this to your original CC estimate, you're looking at:
$18,200 + $99,193 = $117,393 Total Cash Investment

The next issue is how you used CC's contract life of 50 years and direct cost per point, but then applied those calculations to booking at Animal Kingdom.
Animal Kingdom's true direct cost per point for 100 points in 2018 is [($17,100 / 4,000) + $6.76] = $11.35
The total annual cost for those 100 points is $1,103.50 so for your 257 points it would be $2,836 instead of $2,735. Pretty close because we're looking at fewer points (39 years) and lower cost pp.

We recently decided to pass on buying direct because of the upfront savings. Those savings do not apply to dues, as obviously those remain constant between resale and direct.
The numbers on break-even for the AP discount are out there - but we preferred to assume that a) we wouldn't need it every year and b) if you sell the contract in 10 to 20 years it defeats the purpose.
We would rather have the huge savings up front, as follows:

100 points resale are going for about $110 pp which means you take $6,100 right off the top. That's 36% off... honestly if you're saving 20% or more over buying direct (which means $155pp @ AKV...) it would worth it.

I just compared our November DVC stay to rack rates - we're a family of 6 and found that 2 adjacent standard hotel rooms @ Pop Century (which they can't even guarantee proximity) for six nights in November costs $2,214 while a DVC 2-bedroom villa @ AKV for the same nights at our personal cost per point of $9.30 X 167 needed points is $1,553 so $661 less... 30% savings to stay deluxe over value. The cherry on the DVC pie (at least for now) is how rack rates look to be increasing by 5% compared to the 3.5% DVC dues increase.

 

[disneynutz]

The DVC savings on the room can be worth the cost if you really expect to vacation at Disney no matter where you stay. If DVC causes you to vacation more often, you will be spending more and don't forget to add the cost of admission, food and travel which will continue to increase in price just like the dues will.

Bill

 

[kniquy]

In other words, you don’t get a break because the time frame is shorter?

No break, which is why for the older resorts people will buy resale AK would be around ~$110 per point so $11,000 vs $18K direct. That is where you get your savings.

 

[DougEMG]

I did not read all of the replies, so sorry if this has already been posted. When trying to estimate the full out of pocket investment you must account for the annual increase in dues - it is substantial.
Using an estimated 3.5% annual increase, here is the total lifetime dues per point for each resort (i.e. multiply your total points by 'lifetime dues per point' to get your total over the contract life):

View attachment 312524

Applying this to your original CC estimate, you're looking at:
$18,200 + $99,193 = $117,393 Total Cash Investment

The next issue is how you used CC's contract life of 50 years and direct cost per point, but then applied those calculations to booking at Animal Kingdom.
Animal Kingdom's true direct cost per point for 100 points in 2018 is [($17,100 / 4,000) + $6.76] = $11.35
The total annual cost for those 100 points is $1,103.50 so for your 257 points it would be $2,836 instead of $2,735. Pretty close because we're looking at fewer points (39 years) and lower cost pp.

We recently decided to pass on buying direct because of the upfront savings. Those savings do not apply to dues, as obviously those remain constant between resale and direct.
The numbers on break-even for the AP discount are out there - but we preferred to assume that a) we wouldn't need it every year and b) if you sell the contract in 10 to 20 years it defeats the purpose.
We would rather have the huge savings up front, as follows:

100 points resale are going for about $110 pp which means you take $6,100 right off the top. That's 36% off... honestly if you're saving 20% or more over buying direct (which means $155pp @ AKV...) it would worth it.

I just compared our November DVC stay to rack rates - we're a family of 6 and found that 2 adjacent standard hotel rooms @ Pop Century (which they can't even guarantee proximity) for six nights in November costs $2,214 while a DVC 2-bedroom villa @ AKV for the same nights at our personal cost per point of $9.30 X 167 needed points is $1,553 so $661 less... 30% savings to stay deluxe over value. The cherry on the DVC pie (at least for now) is how rack rates look to be increasing by 5% compared to the 3.5% DVC dues increase.

The one problem I have with this type of calculation is that you aren't using a constant dollar value. So those final year MF are way overstated.

If you want to do this type of calculation I would take the 3.5% as the average annual increase in MF, but subtract off of it 2% for annual inflation, so that gives you a true increase in MF of 1.5% per year.

This would give you a better cost estimate in 2018 dollars.