How do I calculate break-even?

[KelNottAt]

I've read several members' posts that mention reaching break-even on their DVC purchase after X number of years. How do you calculate that?

I realize it probably varies by member, but I'd like to get a general idea on how to begin. I think it's a factor of dues, purchase price and equivalent non-member rates, but I need guidance on putting it all together.

Can anyone help? Thanks.
Kelley

 

[tjkraz]

It's pretty simple really.

First, decide what your vacation habits will be into the forseeable future. Calculate how many DVC points you would need to buy (or already own) in order to take those trips.

Start a spreadsheet (or draw a line down the center of a sheet of paper).

On one side, start listing the Rack Rate (plus about 12% resort tax) for cash stays at the DVC resort as the years go by. On the other side, list your initial purchase price for the points, and then start adding your maintenance fees as the years go by.

When you reach a point that your accumulated Rack Rate total equals or exceeds your DVC investment + maintenance, you've reached your breakeven. At that very point in time, if you had not (or do not) purchase DVC, you would have spent as much money on cash stays as you would have buying into DVC.

Personally, I would stick with 2004 dollars for all of your calculations. Disney resort rates will increase each year, and so with maintenance. Others may disagree, but given the slight variations that would occur otherwise, I prefer to just keep everything in current year dollars rather than trying to project unknown increases.

The only other variable worth considering is whether you really want to use the Rack Rate or some discounted percentage of that rate. Right now you can get AP holder discounts, AAA discounts, etc. Again, the level of discounts will vary as time goes on. But it's probably reasonable to factor-in a 20% discount off of the Rack Rate if you really want to see a fair analysis.

Hope that helps.

 

[spiceycat]

try 25% to 40% off the rack rates - remember the rates change with season - so be sure to add that to your calculation.

 

[erikthewise]

You can calculate it anyway you want -- this is not an exam. People in this forum have used all sort of homebrew accounting schemes of greatly varying degrees of validity and (not surprisingly) reached a wide variety of answers.

Even with valid accounting methods, answers can vary quite a bit depending on interest rates, projected increases in cost of your alternative accommodations, and many other assumptions.

Are you considering purchase, or already a member and just curious? It's a worthwhile question, but shouldn't be taken too seriously.

 

[tjkraz]

Originally posted by erikthewise
It's a worthwhile question, but shouldn't be taken too seriously.

I totally agree!!!

 

[SoCalKDG]

try 25% to 40% off the rack rates - remember the rates change with season - so be sure to add that to your calculation.

I used 30% for my calculations. Do remember to add in tax to these rates.


Compared to a moderate, DVC offers a better room.

If you aways wanted a 1 bedroom instead of a standard room, then comparing the costs of DVC to a standard room isn't a fair comparison.

 

[vacationman]

Don't forget to factor in:

1. The cost savings of a rental car since you don't have to have one staying on-site.

2. The ease of walking to the parks (like Epcot and MGM from the BWV or BCV). This is worth at least 2 cents per step (saving fuel costs and increased calorie burning).

3. The savings in air fare since you will soon become an expert in when to book flights to Orlando (since you will now be planning WAY ahead).

4. The reduced food costs if you eat several meals in your in-room kitchen (or even use the microwave and fridge in your Studio).

5. The cost of extra point purchases.

6. The cost of the tape recorder you will need so you can record your response to the "isn't that a just a timehare" question you will soon get tired of answering individually.

7. The loss of friends and family since they will never understand why you go to the same darn place all the time.

8. The loss of time you will experience by being on these boards making sure you don't miss out on new things like the DVC watch craze.

9. The cost of Advil used to combat the headache that arrives while you try to keep track of your point use possibilities two years from now, ten years from now, twenty years from now, after you die, etc.

10. The cost of feeding your kids for the next 40 years since they will never want to leave a family that has DVC points.

 

[tamu91]

Originally posted by vacationman
Don't forget to factor in:

very funny, vacationman

You can run these numbers any way you want but only you can answer whether DVC is right for you or not.
For what it's worth, here is how I broke it down for my family. If you plan on visiting WDW at least once a year and enjoy the amenities that on-site properties has to offer, don't have to sleep sandwiched between three other people in a 300 sf studio and no more wake up calls at 4 AM to check the latest AP codes, then DVC might be for you.

 

[manning]

After you get that done, start on your retirement. LOL

When I retired I had the option to take pension as a lump sum. I retired early.

Talk about trying to hit a moving target blindfolded. The things you try to take into account. The life happens and changes everything.

Only thing I will tell you is don't consider it as an investment. It is a prepaid vacation. And that is old advice.

 

[Dean]

Since this is a vacation issue, one's personal habits come into play. The answer is different for one who usually stays at comfort in or in off site timeshares as compared to one that usually stays in a Deluxe on property. And it's different for weekends vs weekdays. In general DVC will not save one money but will give them better choices for generally the same amount as they might spend otherwise. But the extra trips may end up costing far more money over the long haul.

 

[PHILCT]

Vacationman, that is so terribly funny !
I sadly completely identified with everything you said.
There must be a life beyond Disney?

We are indeed Disney addicts.

I often think what I could do with just buying more points, but I will never be able to live to see them all used.
I would be 104 in the current final Disney Usage Year for SSR.
I think I will more likely be visiting the Haunted Mansion that year.

The cruelest part of DVC calculations:
"What can I do with my points if I only use them on Sunday through Thursday Nights?"

My friends and relatives have no appreciation on this last statement, as they are my non paying guests.
Points are only what gets in the way for them getting their own bedrooms and not sharing the extra bed or couch with anyone else they asked to invite.

And OKW is getting a little bit boring for them now, they wonder why I don't use all those valuable points on them for the Disney Cruise. They don't understand my addiction to the PARKS themselves, and Cruise Points are VERY EXPENSIVE.

8 DVC POINT = 1 OKW Studio off-season. Good Deal.
8 DVC POINT = 8 MICKEY ICE CREAM POPS. Bad Deal.

Do I stay at Disney three times a year on Sunday thru Friday checkout, off season, or do I listen to my relatives who would like to stay in their own separate bedrooms during School Winter Peak Break for 10 days, regardless of something I stress them with called POINTS CALCULATING.

So when I calculate Disney DVC savings, I always factor the Sun-Thur Night thing in there, that way I can see I am getting three trips a year for where I would have only gotten one 7 day trip a year with my own cash and no DVC contract.
It makes me smile and justify my madness for DVC.
Yet I will never be at DVC on a Friday or Saturday Night sadly.

Three trips is better than one: One just before Christmas, One during Fall, and One early February or May.

I calculate based on 5 nights Sun - Thur, at 40 percent off the rack rate, and compare my points costs plus maintenace costs all at current dollars over the contract lifetime. I then don't fret about cost of living, because the Disney Rates will go up just as much.

Now If I could only get a contract for a paid up LIFE TIME Disney anywhere in the world PASS, based on X amount of years versus the Annual Pass.

I just may not be able to buy another new car ever again. Calculating DVC values can give you the Madness !

Time for my ZOLOF !


Phil

 

[Poorman]

Try this ,it is a little dated but it still works.



http://www.mouseplanet.com/dtp/dvc/1_Forward/forward.htm

 

[Pa@okw95]

There is no such thing. In real life one would never travel to WDW for 40 plus years every year or what ever you use for your calculations. Plus the cost of going more times when you first purchase will throw you off. Breaking even is myth. Also you do not know what the future holds for WDW, another myth is the rising costs of rooms,etc. Will WDW even be a place you would want to go to if you were not a DVC member, the way it is changing you may not like it. Too many variables to life to even bother to figure it.

 

[vernon]

There is no such thing, In real life one would never travel to WDW for 40 plus years every year or what ever you use for your calculations

Sorry I have to disagree, for one I think there are many people who would visit WDW at least every other year and for 2 the other options to use DVC points mean it can provide accomodation of a good quality for less $$.

I used a similar method to tjkraz . I calculated how much I would have spent on those vacations (reasonably easy to get the figures of what a hotel would have cost) and kept a note of my DVC outlay, dues and interest charges/losses. Obviously having ticket's included up to 2000 helped a lot as this was a massive saving.

another myth is the rising costs of rooms,etc

With the exception of the 9-11 effect on the travel industry, the rising prices for hotel costs is a fact of life. No matter how far you go back in history, hotels cost more now than they did at any time in the past, there are temporary blips but taken over decades, it's a fact of life. Inflation is an omnipresent factor of our society. Inflation may slow, it may quicken, but apart from very occasional AND TEMPORARY circumstances inflation is a certainty of our society.

 

[OneMoreTry]

Originally posted by Pa@okw95
There is no such thing.

It's nice to see you in a cheerier-than-usual mood, Pa@OKW! Frankly, though, I do agree with your message if not your tone.


It's my opinion that you will probably break even at some point IF

You would have stayed at DVC anyway AND

You wouldn't ALWAYs shop for the BESTBESTBEST bargain AND

You would go to WDW at leat every other year (considering the ability to bank and borrow points -- AND Pa@OKW would want me to point out that DVC can and may very will be on the brink of cancelling the banking privileges as we sit here at this very moment).


I bought DVC so

I own a piece of WDW
I have an excuse to go back every year or two
Or at least take a vacation somewhere

But I don't think the main reason for buying DVC should be the "savings." I do agree with Pa@OKW that there are too many unknowns to justify THAT reason. So just buy it because you want to be a part of DVC. It's great.

 

[KelNottAt]

Thanks to all of you for your input. I guess it just comes down to there is no scientific formula...it's a personal definition of value and expense.

By the way, as a matter of background, I asked this question as a current member, not a prospective member. I've already justified the expense...I was just trying to figure out when we'll finish "recouping" that $20,000 lump so that dues become our only/main vacation cost.

What got me thinking is that, as it turns out, we're not using our points any way like I thought we would. 15 months ago we bought enough BWV points for a week's stay in a 2br during Magic season. As it turns out we won't be using the points that way until 2007...at the earliest. This year alone, we've had 4 nights in HH - and 4 nights in BWV are just around the corner. Add that to the points we're renting for a 2005 cruise and then banking for a Grand Gathering in 2006...Well, all this variety threw my sense of order out of whack and got me wondering if we're ahead of "schedule" or behind.

Thanks again.
Kelley

 

[alsipd]

The wife and I sat in our two bedroom OKW villa, looked at each other and said " this is the best thing we ever did for US".

To me that was worth 100 time what we paid for our DVC.

I have said it before and I will say it again, it is ALL about the "magic"; not the money. You either "get it" or you don't.

If you have to rationalize it, don't do it! You will not be happy with your purchase.

I wish you the best of luck in whatever you do!

 

[BobH]

There are all kinds of ways to get technical about DVC that include loss of interest if you invested wisely. I simply keep track of the rack rate cost of the rooms I use and add in the annual DVC fees. Doing this I figure I'll "break even" sometime next year in my fifth year of membership and will have received roughly as much as I have spent. My method assumes you paid cash. In the end "its a vacation experience" not an investment that you can measure down to the last penny. If DVC is what you want your accomodations will cost you what you pay for dues in your 6th year and beyond. You reeach a "break-even" point quicker if you use the large rooms. If you always use studios it will probably take you a liittle longer to reach the so-called "break-even" point. If you have a loan you have to figure the cost of that and it will take longer to re-cover most of your original cost.

 

[JCPollyanna]

Question to "OneMoreTry", you mentioned that DVC can and might possibly cancel the use of banking points. This is the first I have heard of this. We are in the process of buying - VERY excited - and I thought I had addressed every potential problem. Can DVC also cancel borrowing points? It just hadn't occurred to me DVC had the right to cancel either of these privilages.

STILL really excited

 

[Dean]

Originally posted by JCPollyanna
Question to "OneMoreTry", you mentioned that DVC can and might possibly cancel the use of banking points. This is the first I have heard of this. We are in the process of buying - VERY excited - and I thought I had addressed every potential problem. Can DVC also cancel borrowing points? It just hadn't occurred to me DVC had the right to cancel either of these privilages.

STILL really excited

Banking and borrowing could be suspended. Very unlikely until you get to the last couple of years where it's likely banking will be eliminated.