History and projections for point rental prices? (for break-even comparison)

[BillPA]

With resale, you can grind the number to be either way, for or against owning. The real question is will you go to WDW, with or without DVC? And will you continue to go for the next X years?
I run the number and with todays direct prices, there is no way I can fudge the numbers to make buying at $176 a point worth while.

 

[Disney Dad ADL]

With resale, you can grind the number to be either way, for or against owning. The real question is will you go to WDW, with or without DVC? And will you continue to go for the next X years?
I run the number and with todays direct prices, there is no way I can fudge the numbers to make buying at $176 a point worth while.

Right, in the end, I don't think the main risk in DVC has anything to do with the numbers or Disney per se. The much bigger risk is that your tastes/life circumstances change.

 

[Dean]

As I do with most of your posts, I'll agree to completely disagree with you on every point you've made. As I said, everybody's abilities, opportunities, and desires to OPTIMALLY financially manage their contracts are different. If you're comfortable with your numbers (including your understanding of cost basis and how it affects your return of capital (think direct versus retail), than that's all that matters. There are many factors involved that can drastically affect the breakeven point of one's contract; ignoring them or not understanding them doesn't make them go away.

We all realize there are individual nuances that we can't account for here and even if we were sitting down for hours with a given person trying to help them make such a decision, there's always the personal preference and feel the a given individual develops. All we can do is to address the info as we see it and in my case, that includes certain principles and absolutes. Those include that one should gather enough information to make an informed decision, don't finance, don't buy to use for cash exchanges, don't buy high end to use routinely at lower end options and don't buy retail unless you're getting something of real value to you that you can't get resale. Can one proceed outside those rules and principles, certainly but IMO it'd be a poor decision 100% of the time in todays current environment. Certainly some poor decisions are far worse than others. One thing I don't accept, and I believe some do, is just because someone looked at the information and made a decision they're happy with, that doesn't make it a good decision. While I agree that up to a point one can make a spreadsheet say what you want it to, I don't think anyone can make an informed decision without at least considering the financial variables.

 

[Friendlyadvice2]

We all realize there are individual nuances that we can't account for here and even if we were sitting down for hours with a given person trying to help them make such a decision, there's always the personal preference and feel the a given individual develops. All we can do is to address the info as we see it and in my case, that includes certain principles and absolutes. Those include that one should gather enough information to make an informed decision, don't finance, don't buy to use for cash exchanges, don't buy high end to use routinely at lower end options and don't buy retail unless you're getting something of real value to you that you can't get resale. Can one proceed outside those rules and principles, certainly but IMO it'd be a poor decision 100% of the time in todays current environment. Certainly some poor decisions are far worse than others. One thing I don't accept, and I believe some do, is just because someone looked at the information and made a decision they're happy with, that doesn't make it a good decision. While I agree that up to a point one can make a spreadsheet say what you want it to, I don't think anyone can make an informed decision without at least considering the financial variables.

Dean, I completely agree. Your posts are usually right on point and I appreciate your analysis. I'm not sure how anyone has got the impression that I'm against financially analyzing this. Its gotten quite humorous because its actually the exact the opposite and my spreadsheet analysis evidently has a little more sophistication to it than evidently others use for their analysis. My point is simply that there are many variables that have to be accounted for to accurately calculate a break even point and if you look, the OP did not provide any, yet we have break even calculations being thrown out that range anywhere from 7 to 15 years. And those projections being followed up with admissions that certain financial variables are or are not accounted for various reasons or even that the price one pays (basis) will have NO impact on the break even calculation. These are all things I can't agree with and I want to ensure that others reading these recommendations understand that there are many variables that exist and everyone's own abilities, opportunities, and desires vary and need to be accounted for in their own spreadsheet to calculate their own figures versus a sometimes (not always) flawed projection from others who have not considered all of those variables.

If the numbers don't make sense, there is no reason to own to DVC; one can just rent or pay cash. Everyone needs to assess their own particulars to determine if the numbers make sense.

 

[Dean]

Dean, I completely agree. Your posts are usually right on point and I appreciate your analysis. I'm not sure how anyone has got the impression that I'm against financially analyzing this. Its gotten quite humorous because its actually the exact the opposite and my spreadsheet analysis evidently has a little more sophistication to it than evidently others use for their analysis. My point is simply that there are many variables that have to be accounted for to accurately calculate a break even point and if you look, the OP did not provide any, yet we have break even calculations being thrown out that range anywhere from 7 to 15 years. And those projections being followed up with admissions that certain financial variables are or are not accounted for various reasons or even that the price one pays (basis) will have NO impact on the break even calculation. These are all things I can't agree with and I want to ensure that others reading these recommendations understand that there are many variables that exist and everyone's own abilities, opportunities, and desires vary and need to be accounted for in their own spreadsheet to calculate their own figures versus a sometimes (not always) flawed projection from others who have not considered all of those variables.

If the numbers don't make sense, there is no reason to own to DVC; one can just rent or pay cash. Everyone needs to assess their own particulars to determine if the numbers make sense.

Thanks, most of the time it seems when people are disagreeing with a financial analysis and want to make the points that it's all personal so there's no way we could offer any recommendations, they're trying to justify or defend an essentially undependable position. Such as the idea I referenced where some believe that just the fact someone investigated and made a decision they're comfortable with makes it a good one. They are 2 different things, it's not automatically a good decision in that situation but it may be. And to me, IMO, if it's outside the principles I listed, it likely isn't a good decision. That's why I wanted to be clear that I see there are principles involved in my view. But it's like saying one shouldn't finance (which is a view I hold). One who has a 100% mortgage, leased or car notes, credit card debt, school loans, etc and then adds a financed DVC to their mix is in a greatly different position than one who has no other debt and has the money sitting there to pay for it but decides to finance anyway like playing games with a CC.

 

[peabody58]

My simplistic spreadsheet has our breakeven at 7.5 yrs (this year!!). I'm good with knowing that from a financial position, it was a good (or not bad) decision. I know I have made a lot of bad financial decision over the past 45 years which would make any DVC breakeven calculation pale in relevance. We had the disposable income at the time and all our other financial obligations were being met and then some.

2 points to also consider in the never ending 'breakeven' discussion:

- Factor in the value of the DVC asset when you plan on selling it. At today's resale prices, I would get back nearly all of my original purchase price. Obviously if you're not planning on selling, this value would be 0, but I'll be long dead before my DVC RTU, therefore we plan on selling once all our tickets and AP vouchers are used up (about 10 more years).

- Value of the Non-financial factors of having DVC. For me, I probably would have had major negative life-changing experience (medical, family, stress, mental, etc.) if I had not found a way to 'successfully' vacation, relax and reconnect with my DW/Family. Can't give DVC all the credit, but since joining in 2010 we have been able to retire 5 years ahead of schedule and are living a wonderful life with many DVC vacations ahead of us.

And that's my 2 cents worth!!

 

[MamaBear12]

don't buy high end to use routinely at lower end options

Could you elaborate on this? Example? Thanks!

 

[Dean]

Could you elaborate on this? Example? Thanks!

Sure, buying Poly or VGF retail (or even resale) and using at SSR, OKW or AKV for example; will cost you every time you do os because you could have bought and used cheaper points the same way. Doing it once isn't likely a big deal but doing it routinely can easily make DVC cost more than not owning and as a minimum, makes DVC dramatically more expensive than it needs to be. The same line of thinking follows cash type exchanges as well though it's an even worse choice where you'd buy retail, pay more, buy more points than needed just at DVC all for the chance to trade those points for something one could have reserved cheaper AND with less risk on cash.

 

[MamaBear12]

Sure, buying Poly or VGF retail (or even resale) and using at SSR, OKW or AKV for example; will cost you every time you do os because you could have bought and used cheaper points the same way. Doing it once isn't likely a big deal but doing it routinely can easily make DVC cost more than not owning and as a minimum, makes DVC dramatically more expensive than it needs to be. The same line of thinking follows cash type exchanges as well though it's an even worse choice where you'd buy retail, pay more, buy more points than needed just at DVC all for the chance to trade those points for something one could have reserved cheaper AND with less risk on cash.

Thank you! I wasn't sure if you were referring to room-type (villas vs. studios) or resorts. If we do decide to purchase, we're leaning towards AKV or SSR and a smaller 100-150 point resale contract with the plan to go for a week annually while our kids are elementary age--dream or adventure season--and stay in studios, with a trip or two in a 2bedroom bringing grandparents along (banking/borrowing as needed). Then when our kiddos are middle school+, going every other year doing studio/1bedroom split stays and an occasional 2bedroom with family or friends.

 

[MamaBear12]

Anyone want to use their fancy models to estimate our potential break-even point? ;-)

 

[Disney Dad ADL]

Anyone want to use their fancy models to estimate our potential break-even point? ;-)

Sure, I'd just need to know:

Which resort
Initial $/pt
How many points
Estimated Closing costs
Initial rental cost either $ per year or $ per point
How much do MFs increase per year
How much do rental costs increase per year

Other optional stuff (not necessarily recommended, but I have places in my spreadsheet for them)

Do you want to take into account the interest lost from investing the initial cost? If so, what %interest?
Do you plan to sell one day, if so when and how much do you think the contract will be worth at that time?

 

[PSUDinsey]

Well, there are no official dues discounts. That said, I paid my dues with money I got via payment method manipulation and other tricks... but, I don't consider my dues discounted, because if I was taking a vacation and paying for it instead, I would have applied those techniques there too.

Bessides paying with dues with gift cards paurchased at discounts what tricks are you using?

 

[MamaBear12]

Sure, I'd just need to know:

Which resort
Initial $/pt
How many points
Estimated Closing costs
Initial rental cost either $ per year or $ per point
How much do MFs increase per year
How much do rental costs increase per year

Other optional stuff (not necessarily recommended, but I have places in my spreadsheet for them)

Do you want to take into account the interest lost from investing the initial cost? If so, what %interest?
Do you plan to sell one day, if so when and how much do you think the contract will be worth at that time?

Which resort: AKV
Initial $/pt: $85
How many points: 125 (all current UY points available and future UYs)
Estimated Closing costs: 645 + 823.78 MF
Initial rental cost either $ per year or $ per point: $14
How much do MFs increase per year: 4%
How much do rental costs increase per year: 3%

Thanks so much!

 

[Disney Dad ADL]

Which resort: AKV
Initial $/pt: $85
How many points: 125 (all current UY points available and future UYs)
Estimated Closing costs: 645 + 823.78 MF
Initial rental cost either $ per year or $ per point: $14
How much do MFs increase per year: 4%
How much do rental costs increase per year: 3%

Thanks so much!

Still year 10 (DVC is $20707 vs rental $21011)

 

[Dtw002]

Does this assume an x% interest rate if you invested the upfront cash instead of making the initial purchase?

 

[mustinjourney]

The one thing I will note is that Renting vs. owning is not completely apples to apples.

Renting has some serious negatives associated with it:
1. No control over the reservation process
2. Always some risk the owner is shady and you lose your money (loss of money is lower if you go through a broker -- but you might be out travel costs if you don't buy insurance)
3. VERY limited cancellation options when renting
4. Can be extremely difficult to get VGF/Epcot resort bookings during F&W -- and if you do -- get ready to pay $15-$17 a point -- and you'll have to go private booking.


Also -- I'm not sure if everyone's "break-even" calculator is factoring the value of the underlying asset after each year. My guess is that the 10 year models are not factoring this in. If you do not factor this in, then your model, in my opinion, has some serious flaws.

 

[Disney Dad ADL]

Does this assume an x% interest rate if you invested the upfront cash instead of making the initial purchase?

No. At 4% interest, it takes about 3 years longer.

Edit to add: FWIW, under these specific conditions, by the time the contract expires, this investment angle actually favors DVC ownership. Most people don't consider that if you are allowed to invest your initial buy in, then you are also allowed to invest your "savings" from owning DVC at some point. If the spread between cost of ownership and cost of cash rental is large enough, DVC ownership will eventually overcome the initial deficit and become positive in that regard as well.

 

[Disney Dad ADL]

there's also some peace of mind in controlling the points as opposed to having to find an owner to rent from. Hard to put a value on that though.

Yes, one reason why we purchased instead of renting. Also, difficult reservations are virtually impossible unless you find a really good owner to work with.

 

[mustinjourney]

my break even analysis was significantly shorter, since I factored in my proclivity to lose money in the stock market every year.

Based on my math, buying DVC saves me thousands every year.

 

[crisi]

I'd look at the non-financial pros and cons of renting vs. buying - and weight those. For instance:

Renting - con: you don't control your reservation, you have to find points every year, you might get scammed (low risk, but it happens) pro: you don't have capital tied up, you can skip a year with ease, you can - assuming you find an owner - use the home resort window anywhere. Easy to decide that this year you'll pay cash to get free dining or stay offsite to get Universal FOTL.

Owning - con: expensive up front. "Stuck" with your home resort and the seven month booking window. Tied in. Pros: likely cheaper in the long term. You control your reservation.

I think that if you simply look at numbers, you'll find that you will break even owning DVC eventually and come out financially ahead. But you are making a lot of assumptions to do so - like you'll always take the same sort of trip. Like you won't need to sell due to a tragedy within the first few years of ownership. That you'll continue to want DVC style rooms - and not discover you prefer daily housekeeping and concierge - or would be just as happy at the Value resorts or offsite.