# Help me with the math

#### Stan Chen

##### Earning My Ears
Hi Friends, first post here, as we explore DVC. Family of five, all three kids elementary age. Historically have visited 1x/3yrs, could see us going as frequently as 1x/yr, but probably not more than that. The past couple times we've rented DVC points and stayed in a 1BR, and then 2BR, Deluxe. That's the level we would stay at going forward.

I can't get the math to work. I understand there are all sorts of non-financial benefits to DVC; for the purpose of this post, let's exclude those. I also understand that there are peripheral financial benefits (AP and dining discounts). For our family, we probably wouldn't go frequently enough to warrant the AP, so "best case" (?) assume a 10% discount on meals for 1 week/yr.

If I only compare the membership cost (including maintenance) vs. the point rental cost, I get a breakeven around my 5th trip. But when I add in lost investment gains on that upfront investment, I never breakeven, and it gets worse over time. And that's with a relatively modest 4% assumption on investment gains. It helps if you assume we sell out halfway through to recoup some dollars, but even then I still come out behind, and that's assuming that the contract holds its full value (all math adjusted for time value of money).

I've read other posts indicating that if you are staying at Value Resorts, DVC may not make sense. But we are the opposite end of that spectrum and I still can't figure it out. I also have read the comments that suggest DVC members spend more money because you go more often, etc. - not even worried about that right now. Just trying to understand if there's some financial benefit of this timeshare, from a lodging-only perspective, that I am missing.

#### DVC_HK

##### Mouseketeer
So I say you save more money in lodging as we spent one week in 1BR at AKL that the rack rate was over the price of our first contract and dues all together. I always price out our vacations to see how am I saving on that trip and with use going 2-3 times a year I've came out ahead a lot to the point we bought at RIV

#### SG131

##### DIS Veteran
Hi Friends, first post here, as we explore DVC. Family of five, all three kids elementary age. Historically have visited 1x/3yrs, could see us going as frequently as 1x/yr, but probably not more than that. The past couple times we've rented DVC points and stayed in a 1BR, and then 2BR, Deluxe. That's the level we would stay at going forward.

I can't get the math to work. I understand there are all sorts of non-financial benefits to DVC; for the purpose of this post, let's exclude those. I also understand that there are peripheral financial benefits (AP and dining discounts). For our family, we probably wouldn't go frequently enough to warrant the AP, so "best case" (?) assume a 10% discount on meals for 1 week/yr.

If I only compare the membership cost (including maintenance) vs. the point rental cost, I get a breakeven around my 5th trip. But when I add in lost investment gains on that upfront investment, I never breakeven, and it gets worse over time. And that's with a relatively modest 4% assumption on investment gains. It helps if you assume we sell out halfway through to recoup some dollars, but even then I still come out behind, and that's assuming that the contract holds its full value (all math adjusted for time value of money).

I've read other posts indicating that if you are staying at Value Resorts, DVC may not make sense. But we are the opposite end of that spectrum and I still can't figure it out. I also have read the comments that suggest DVC members spend more money because you go more often, etc. - not even worried about that right now. Just trying to understand if there's some financial benefit of this timeshare, from a lodging-only perspective, that I am missing.

Well, problem #1 is that you're looking it as an investment. DVC most definitely can't be seen as an investment. You are essentially pre-purchasing vacations. However, the biggest issue with your math is that you're considering investment gains on the money, but not inflation on the cost of hotel rooms. Even with renting points, the cost to rent points will steadily trend upwards. If you don't intend on using many of the non-financial benefits, have you considered purchasing resale. It can save a chunk of money.

• #### CraigInPA

##### Since June 1974
Echoing @SG131 comments, the cost of rental points may increase over time. The other issue I see with your analysis is that you appear to be comparing direct purchase price versus resale prices. You would have a significant savings by buying resale versus direct. For example, BLT is \$225pp direct, but resale contracts in the 300-350 point range (where you'd be if you want a 2 bedroom) are in the \$140pp range. While it is true you wouldn't get the annual pass discount, it doesn't sound like that's something you need anyway. Other than the discounts on merchandise and food, which you can get with a Disney Visa, the rest of the DVC benefits (concierge collection, using points for cruises, etc...) aren't really worth much (and in some cases are *not* good deals at all).

My wife and I go once a year for 10 days, using between 200 and 230 points per year. We calculated an inflection point at 5 years, assuming an annual rate of return of 5%, over staying at the Poly, and an inflection point at 8 years over renting. We assumed a growth in hotel and point rental equal to the annual growth rate of our investments. With the economy's growth of late, we're getting rates of return in the 15% range, so all of that careful analysis was for naught. But, we've had some great vacations and don't kick ourselves for buying resale instead of continuing to rent points.

#### Sandisw

##### Moderator
Moderator
I am one who doesn’t look at the lost investment income, but I know others do.

If, buying a contract today, using current rental rates and a one time per year trip, you break even in 5 years, then I think it could make sense for you, given the age of your kids,

If you own, and decide one year, you can’t go, you could rent your points, cover your MFs, and get additional money that might help reduce those investment loses.

In terms of direct benefits, even with a one a year trip, if you went 51 weeks apart, you could make an AP work. Two trips out of one pass. You’d then have to only buy tickets every other year. With a family of 5, that could help offset the cost of direct at some point. You could always just buy the minimum of 100 and buy the rest of what you want resale.

You don’t mention how many points you want, so that may not work. And, as long as staying at Rivera and any other new resorts aren’t a concern, resale will save you money for sure over direct.

Good luck!

#### BWoody

##### Earning My Ears
I am one who doesn’t look at the lost investment income, but I know others do.

If, buying a contract today, using current rental rates and a one time per year trip, you break even in 5 years, then I think it could make sense for you, given the age of your kids,

If you own, and decide one year, you can’t go, you could rent your points, cover your MFs, and get additional money that might help reduce those investment loses.

In terms of direct benefits, even with a one a year trip, if you went 51 weeks apart, you could make an AP work. Two trips out of one pass. You’d then have to only buy tickets every other year. With a family of 5, that could help offset the cost of direct at some point. You could always just buy the minimum of 100 and buy the rest of what you want resale.

You don’t mention how many points you want, so that may not work. And, as long as staying at Rivera and any other new resorts aren’t a concern, resale will save you money for sure over direct.

Good luck!
The 51 week, 2 trips on an annual pass method generally only works if you go to parks enough days during each trip and you like the option of hopping though. My family will usually only go to parks on 3 days and we don't hop, so 2 trips on an annual pass would still be more expensive or near break even when compared to buying single day tickets in this case. If you go to parks 4 days or more per trip and/or like to hop, then the annual pass could save you money if you can squeeze the 2 trips in on it.

#### Lumpy1106

##### DIS Veteran
Are you considering "Disney Inflation" on the rack-rate room you would have otherwise booked? That's the comparison you should be making, not lost investment opportunity. Assumption #1 has to be you ARE going to WDW and that money is spent. That said, I spent quite a bit of time pre-purchase writing a spreadsheet to try and guess a break-even. Buying direct just would not work for me. It was resale or I was out. The other thing to remember is that if you get 4-5 years in and decide it's not for you, you can almost assuredly sell a resale contract and get back almost everything you spent, minus the MF's and seller costs. In fact, you might even come out ahead.

#### Sandisw

##### Moderator
Moderator
The 51 week, 2 trips on an annual pass method generally only works if you go to parks enough days during each trip and you like the option of hopping though. My family will usually only go to parks on 3 days and we don't hop, so 2 trips on an annual pass would still be more expensive or near break even when compared to buying single day tickets in this case. If you go to parks 4 days or more per trip and/or like to hop, then the annual pass could save you money if you can squeeze the 2 trips in on it.
That is true. If you only do 3 days each time, then it won’t save right now. It might down the road is Disney raises ticket prices but not the DVC AP at the same rate , but even then, unless you decided to increase park days, its not a benefit that fits your situation

#### Sandisw

##### Moderator
Moderator
Are you considering "Disney Inflation" on the rack-rate room you would have otherwise booked? That's the comparison you should be making, not lost investment opportunity. Assumption #1 has to be you ARE going to WDW and that money is spent. That said, I spent quite a bit of time pre-purchase writing a spreadsheet to try and guess a break-even. Buying direct just would not work for me. It was resale or I was out. The other thing to remember is that if you get 4-5 years in and decide it's not for you, you can almost assuredly sell a resale contract and get back almost everything you spent, minus the MF's and seller costs. In fact, you might even come out ahead.
I think it is dangerous to suggest that resale will get you all your money back and IMO, one should go in assuming a resale value of zero.

Yes, DVC has done well. I personally have benefited from it...but there are resale contracts out there now for sale that are selling for less than I am sure some owners paid.

#### Maistre Gracey

##### DIS Veteran
Not sure about your case, but what I often see when folks figure lost investment income is they forget to “draw out” what they would be spending on hotels (or renting points) every year. They think they will invest the entire initial cost of DVC and never touch it. This, of course, would mean you never take a vacation.

##### DIS Veteran
However, the biggest issue with your math is that you're considering investment gains on the money, but not inflation on the cost of hotel rooms. Even with renting points, the cost to rent points will steadily trend upwards. If you don't intend on using many of the non-financial benefits, have you considered purchasing resale. It can save a chunk of money.
This is it.

Also, are you factoring in that every year you will continue to withdraw out of your "investment" to pay for the rental points? If not, your adding new money into the system which will throw the calculation completely out of whack in the favor of renting.

#### _auroraborealis_

##### I like marshmallows. And adult beverages.
Are you using direct pricing as your number? That will do a lot to your math right there, especially buying anywhere but Riviera, and also using RIviera's point charts for what you need to purchase.

Are you assuming every other year and buying half the points required?

#### mustinjourney

##### DIS Veteran
Hi Friends, first post here, as we explore DVC. Family of five, all three kids elementary age. Historically have visited 1x/3yrs, could see us going as frequently as 1x/yr, but probably not more than that. The past couple times we've rented DVC points and stayed in a 1BR, and then 2BR, Deluxe. That's the level we would stay at going forward.

I can't get the math to work. I understand there are all sorts of non-financial benefits to DVC; for the purpose of this post, let's exclude those. I also understand that there are peripheral financial benefits (AP and dining discounts). For our family, we probably wouldn't go frequently enough to warrant the AP, so "best case" (?) assume a 10% discount on meals for 1 week/yr.

If I only compare the membership cost (including maintenance) vs. the point rental cost, I get a breakeven around my 5th trip. But when I add in lost investment gains on that upfront investment, I never breakeven, and it gets worse over time. And that's with a relatively modest 4% assumption on investment gains. It helps if you assume we sell out halfway through to recoup some dollars, but even then I still come out behind, and that's assuming that the contract holds its full value (all math adjusted for time value of money).

I've read other posts indicating that if you are staying at Value Resorts, DVC may not make sense. But we are the opposite end of that spectrum and I still can't figure it out. I also have read the comments that suggest DVC members spend more money because you go more often, etc. - not even worried about that right now. Just trying to understand if there's some financial benefit of this timeshare, from a lodging-only perspective, that I am missing.

I'd have to look at your spreadsheet to see exactly what assumptions you're making. Upfront purchase price being one of the major ones...as well as if you are factoring in rental prices also increasing.

#### Carol_

##### Mouseketeer
When we bought, we based it on having a 1BR twice per year (I think) and I think that was just walking the line. (Our twice per year was probably your once per year as we don't typically stay a full week.) A 1 BR at CC goes from 28-53 pts/night depending on when you're going...
We bought 150pts at Copper Creek... then soon realized we needed more points so we bought another contract at SSR for 150pts.
Take a look at the places where you get the member discounts, then remember that that can change at any time, and don't base your purchase decision on it.
When you finally break down and purchase, remember that the DVC magnet gets ripped off by the automatic carwash so take it off before you drive in.

#### Moonlight Graham

##### Earning My Ears
Hi Friends, first post here, as we explore DVC. Family of five, all three kids elementary age. Historically have visited 1x/3yrs, could see us going as frequently as 1x/yr, but probably not more than that. The past couple times we've rented DVC points and stayed in a 1BR, and then 2BR, Deluxe. That's the level we would stay at going forward.

I can't get the math to work. I understand there are all sorts of non-financial benefits to DVC; for the purpose of this post, let's exclude those. I also understand that there are peripheral financial benefits (AP and dining discounts). For our family, we probably wouldn't go frequently enough to warrant the AP, so "best case" (?) assume a 10% discount on meals for 1 week/yr.

If I only compare the membership cost (including maintenance) vs. the point rental cost, I get a breakeven around my 5th trip. But when I add in lost investment gains on that upfront investment, I never breakeven, and it gets worse over time. And that's with a relatively modest 4% assumption on investment gains. It helps if you assume we sell out halfway through to recoup some dollars, but even then I still come out behind, and that's assuming that the contract holds its full value (all math adjusted for time value of money).

I've read other posts indicating that if you are staying at Value Resorts, DVC may not make sense. But we are the opposite end of that spectrum and I still can't figure it out. I also have read the comments that suggest DVC members spend more money because you go more often, etc. - not even worried about that right now. Just trying to understand if there's some financial benefit of this timeshare, from a lodging-only perspective, that I am missing.

Are you deducting the costs of your trips from your investment stream calculation? If the underlying assumption necessary to justify a DVC purchase is that you will go regularly whether you own or not, then you need to regularly deduct the cost of your trips from the investment balance. I think that break even comes around year 10-12 for the middle of the resale market (Poly, BLT, Copper Creek, etc.)

For simplicity sake as an example, let's use a 100 point BLT contract, with an all-in 2019 purchase price of \$15,000.

Rather than buy that contract, you could just invest the \$15,000 and make 6% on it. In year 1, you'll make \$900 on your investment. But you have to deduct from that \$15,900 the amount you would spend to rent those same 100 points. At the end of year 1, your investment balance will be \$14,100. Each year your principal balance will generate less of a return but the cost of renting the points will remain constant (or more likely, increase), so your investment "losses" will accelerate and you pretty quickly hit \$0.

I don't think that exercise is a true "break even" analysis because it doesn't look at the cost to own the contract for that same time frame, but a simple way to see whether the concept would hold up is to look at whether the cost to rent points exceeds the aggregate amount of the annual dues together with the opportunity cost of your money. If it does in year 1, then you will for sure break even because your investment balance will eventually reduce to \$0.

Using the above example, if my BLT contract will cost \$680 in dues and I'll forgo \$900 in investment income in year 1, then it *costs* me \$1580 to own that contract. In order to rent those same points though, it'll cost me \$1,800, so I'm coming out ahead in year one by owning. As above, the gap between renting and owning will likely widen in subsequent years as your "opportunity cost" fund will shrink resulting in fewer forgone investment savings and your point rental cost will likely increase (but in some relation to annual dues increases so those increases may eventually net out).

It takes longer to break even if you only go every two or three years, because your investment savings compound in your off-years, but I think you'd still find that you are trending toward a break even in the long run.

You can toggle all sorts of assumptions into the model, like the expected increase in annual dues, expected investment income on your opportunity cost fund, the initial cost or purchase, point rental costs, etc., but I think at the end of the day for most resale contracts, you'll get to a break even around year 10-12. And the break even is probably much sooner on an SSR contract. I've never looked at the higher end of the resale market or direct pricing, so I don't know whether a contract selling for \$180/point would break even using similar analysis, but for everything under \$150/point, I think the cost to rent points every year will outpace your foregone investment gains and dues.

This all assumes a break even with zero residual contract value, which seems to me to be the prudent way to look at it.

And I'm sure there are people on here that are much better at analyzing the numbers than me, but to answer the question of how you break even when compared to the investment gains you could otherwise enjoy, that is how we got comfortable.

#### Hjs33

##### Earning My Ears
DVC Gold
Hi Friends, first post here, as we explore DVC. Family of five, all three kids elementary age. Historically have visited 1x/3yrs, could see us going as frequently as 1x/yr, but probably not more than that. The past couple times we've rented DVC points and stayed in a 1BR, and then 2BR, Deluxe. That's the level we would stay at going forward.

I can't get the math to work. I understand there are all sorts of non-financial benefits to DVC; for the purpose of this post, let's exclude those. I also understand that there are peripheral financial benefits (AP and dining discounts). For our family, we probably wouldn't go frequently enough to warrant the AP, so "best case" (?) assume a 10% discount on meals for 1 week/yr.

If I only compare the membership cost (including maintenance) vs. the point rental cost, I get a breakeven around my 5th trip. But when I add in lost investment gains on that upfront investment, I never breakeven, and it gets worse over time. And that's with a relatively modest 4% assumption on investment gains. It helps if you assume we sell out halfway through to recoup some dollars, but even then I still come out behind, and that's assuming that the contract holds its full value (all math adjusted for time value of money).

I've read other posts indicating that if you are staying at Value Resorts, DVC may not make sense. But we are the opposite end of that spectrum and I still can't figure it out. I also have read the comments that suggest DVC members spend more money because you go more often, etc. - not even worried about that right now. Just trying to understand if there's some financial benefit of this timeshare, from a lodging-only perspective, that I am missing.

There’s too much information missing to give you a meaningful answer. What resort are you looking to buy? Beach Club is a much different economic answer relative to say Saratoga Springs. Did you include taxes on your investment return? Also, since you essentially are writing off any of the Blue Card benefits, I’m assuming you used resale prices and not direct Disney prices.

##### DIS Veteran
Are you deducting the costs of your trips from your investment stream calculation? If the underlying assumption necessary to justify a DVC purchase is that you will go regularly whether you own or not, then you need to regularly deduct the cost of your trips from the investment balance. I think that break even comes around year 10-12 for the middle of the resale market (Poly, BLT, Copper Creek, etc.)

For simplicity sake as an example, let's use a 100 point BLT contract, with an all-in 2019 purchase price of \$15,000.

Rather than buy that contract, you could just invest the \$15,000 and make 6% on it. In year 1, you'll make \$900 on your investment. But you have to deduct from that \$15,900 the amount you would spend to rent those same 100 points. At the end of year 1, your investment balance will be \$14,100. Each year your principal balance will generate less of a return but the cost of renting the points will remain constant (or more likely, increase), so your investment "losses" will accelerate and you pretty quickly hit \$0.

I don't think that exercise is a true "break even" analysis because it doesn't look at the cost to own the contract for that same time frame, but a simple way to see whether the concept would hold up is to look at whether the cost to rent points exceeds the aggregate amount of the annual dues together with the opportunity cost of your money. If it does in year 1, then you will for sure break even because your investment balance will eventually reduce to \$0.

Using the above example, if my BLT contract will cost \$680 in dues and I'll forgo \$900 in investment income in year 1, then it *costs* me \$1580 to own that contract. In order to rent those same points though, it'll cost me \$1,800, so I'm coming out ahead in year one by owning. As above, the gap between renting and owning will likely widen in subsequent years as your "opportunity cost" fund will shrink resulting in fewer forgone investment savings and your point rental cost will likely increase (but in some relation to annual dues increases so those increases may eventually net out).

It takes longer to break even if you only go every two or three years, because your investment savings compound in your off-years, but I think you'd still find that you are trending toward a break even in the long run.

You can toggle all sorts of assumptions into the model, like the expected increase in annual dues, expected investment income on your opportunity cost fund, the initial cost or purchase, point rental costs, etc., but I think at the end of the day for most resale contracts, you'll get to a break even around year 10-12. And the break even is probably much sooner on an SSR contract. I've never looked at the higher end of the resale market or direct pricing, so I don't know whether a contract selling for \$180/point would break even using similar analysis, but for everything under \$150/point, I think the cost to rent points every year will outpace your foregone investment gains and dues.

This all assumes a break even with zero residual contract value, which seems to me to be the prudent way to look at it.

And I'm sure there are people on here that are much better at analyzing the numbers than me, but to answer the question of how you break even when compared to the investment gains you could otherwise enjoy, that is how we got comfortable.
Good description. Even better user name.

#### PaintsWithAllTheColors

##### DIS Veteran
I echo the same thoughts as many above. My strategy to calculate how years it would take to break even is to take:
1) initial investment
2) plus annual return (6%)
3) plus annual maintenance fees if I bought
4) minus cost of room for 1 week a year

then I just see what year my “balance” hits zero!

This may be over simplifying things (I do assume 4% increase to maintenance fees and room costs), but I think it’s a fair way to approach it.

#### Deb & Bill

##### DVC-Trivia Contest, Apr-2006: Honorable Mention
You will go more often with DVC. We went on our first trip in 1997 and we thought it was one and done. It wasn't. We bought OKW points at year and later on added a smaller OKW contract and a direct VWL contract. First 175 points were \$50 a point direct from Disney and we used our resort stay as the down payment on our contract (that was the deal they offered back then). II we had based our purchase on when we would break even, we wouldn't have ever broken even because we thought that was our only trip. We're on trip 51 next week.

We've moved closer to Disney (now three hours away), so we can take frequent three and four night trips instead of one or two seven to ten night trips per year. Plus we get the Florida discount on passes now. So, we've broken even somewhere along the way. We did have five contracts and sold two of them for more than we paid, but that was many, many years ago. We never paid more than \$72 a point direct (four were direct contracts). I don't know how young couples can even begin to afford enough DVC points for a week's stay at Disney World with the prices they charge now, including food and admission prices which are outrageous. Our original annual fees were somewhere around \$3 a point and are now closer to \$8 a point (not quite there).

If renting works for you, I'd go with renting. Disney is just plain expensive. Especially with a family of five and you haven't even started thinking about school costs beyond K-12. The discounts you get with purchasing direct really don't amount to much.

#### Jenniebee

##### Mouseketeer
f I only compare the membership cost (including maintenance) vs. the point rental cost, I get a breakeven around my 5th trip. But when I add in lost investment gains on that upfront investment, I never breakeven, and it gets worse over time. And that's with a relatively modest 4% assumption on investment gains. It helps if you assume we sell out halfway through to recoup some dollars, but even then I still come out behind, and that's assuming that the contract holds its full value (all math adjusted for time value of money).
I would take a step back and look at it like a timeshare/vacation. All you are doing is prepaying for future vacations. It's a timeshare, no more no less. If you are going to go to WDW 1x per year for the next 30-50 years, how much will you spend. If you think it is worthwhile to buy a timeshare to visit Disney properties instead of paying year by year, then it will make sense to you.

Looking at it like lost investment gains on the money is not really a good way to look at it, because the money you would be spending on your yearly vacations would not be taken out of investments. At least I don't think it would anyway, only you know your financial situation. For me I have vacation money, and I have investment money. They are not the same.

Also remember that rack rates for hotels will go up up up every year.

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