How DVC members save a boatload of money, help me explain

[Disney1fan2002]

I have a few people interested in DVC, but they are worried about the cost. I am trying to explain to them how it really is a cost savings, but I can't seem to explain it so they "get it."

Tell me I am doing this right....

I have 5 nights in an OKW Grand Villa that is costing me 225 points. I pay $4.40/point on maintenance fees. The cost for 225 points is $990.00. That is QUITE a bargain for a GV. But, they point out that I am ignoring the price I paid for DVC. (I always forget that, because I paid cash for the 300 points). How do I factor in the price of the points? I know my guide did the whole formula when we took the tour 4 years ago, but I can't remember how she showed us the savings.

I paid $73/point for 300 points in 2003. I got all of 2002 banked points, So I got 600 points in my 1st year.

 

[NurseKim]

I would be interested in the answer to this too, since the MFs is one of the big reasons DH doesn't want DVC.

 

[alldiz]

I have a few people interested in DVC, but they are worried about the cost. I am trying to explain to them how it really is a cost savings, but I can't seem to explain it so they "get it."

Tell me I am doing this right....

I have 5 nights in an OKW Grand Villa that is costing me 225 points. I pay $4.40/point on maintenance fees. The cost for 225 points is $990.00. That is QUITE a bargain for a GV. But, they point out that I am ignoring the price I paid for DVC. (I always forget that, because I paid cash for the 300 points). How do I factor in the price of the points? I know my guide did the whole formula when we took the tour 4 years ago, but I can't remember how she showed us the savings.

I paid $73/point for 300 points in 2003. I got all of 2002 banked points, So I got 600 points in my 1st year.

I'm no math expert....
but try multiplying the 990 by how many years you will own DVC...

u also have 75 pts left which is more than enough for a studio
for 5 nights at okw...add that to your number...
It's a start
Kerri

 

[Disney1fan2002]

I would be interested in the answer to this too, since the MFs is one of the big reasons DH doesn't want DVC.

For MF's, you just have to look at my example. $990 for FIVE nights in a Grand Villa. That is almost HALF of what you pay for a ONE night cash reservation.

If MF's were all we paid, and didn't have pay for the points, it would be simple math. I just don't know how to figure $22,000.00 I paid for the 300 points.

 

[chalee94]

For MF's, you just have to look at my example. $990 for FIVE nights in a Grand Villa. That is almost HALF of what you pay for a ONE night cash reservation.

If MF's were all we paid, and didn't have pay for the points, it would be simple math. I just don't know how to figure $22,000.00 I paid for the 300 points.

$22,000 / (300pts x 38ish years?) = $1.93 a pt

$1.93 a pt x 225 pts = $434 additional for 5 nights in a GV.

the trick is figuring time-value of money. that $22,000 paid in 2003 is considerably more valuable than $22,000 in 2033, so you'd need to factor in some percentage for inflation (i.e. you paid $434 + maybe 15-20% by this point, so that you're measuring your payment for a 2007 GV completely in 2007 dollars.)

calculating a reasonable time-value factor is what makes things complicated. (but at $73 a point, it looks like a pretty good deal at this point.)

 

[Disney1fan2002]

Ok, here's what I figure, hopefully someone can correct me if I am wrong.

If I paid $73/point and i wnat to just use this onereservation as an example I could say this....

5 nights in GV=225 points

225 x $73 = $16,425.00

$16,425/40 = $410.62

225 x $4.40= $990.00

Total cash cost for 5 nights ina Grand Villa = $1400.62

Here is the rack rate info on the GV:

3 Bedroom Grand Villa
$1226.50 Value season
$1365.88 Regular season(this is the season our dates are in)
$1544.28 Peak season
$1722.68 Holiday

Did I do the math right? Looks through DVC we get a grand villa for 5 nights for a little more than one nights cash reservation. Buy one, get 4 free!

 

[rahrah]

The best way to deal with the initial investment is to consider what would have happened if you invested it in an annuity (or on your own) and withdrew money each year to finance your vacation in such a way that when your membership would have ended, there is no money left from your initial investment.

Then you have to deal with inflation (which is even harder). I just subtracted 3% from the annuity rate assuming inflation is about 3% per year. In other words, the cost of another hotel will go up 3% a year. When I went through the math I came up with the following for Saratoga Springs with the $86 a point friends and family promotion:

1) If you invested in a simple annuity paying about 5% (2% after inflation) then each point is worth about $6.03 (2.78(annuity) + 4.25(dues)) a year.

2) If you invested in the stock market earning about 5% (6% after inflation) then each point is worh about $9.45 (5.20(annuity) + 4.25(dues)) a year.

So if you are using 100 pts for a vacation and you would have invested in the stock market, then that vacation cost $945. Ie you would have had $945 dollars to spend staying somewhere else.

Some other numbers for the annuity portion:

AKL - $101 per point for 50 years: 6.04@6%, 3.15@2%
SSR - $101 per point for 47 years: 6.11@6%, 3.26@2%
SSR (F&F) - $86 per point for 47 years: 5.20@6%, 2.78@2%
Sold out via Disney - $95 per point for 35 years: 6.18@6%, 3.72@2%
Sold out via resale - $86 per point for 35 years: 5.59@6%, 3.37@2%

In the terms of the finance industry we are hedging against inflation when we buy DVC memberships.

 

[CarolMN]

I have a few people interested in DVC, but they are worried about the cost. I am trying to explain to them how it really is a cost savings, but I can't seem to explain it so they "get it."

Tell me I am doing this right....

I have 5 nights in an OKW Grand Villa that is costing me 225 points. I pay $4.40/point on maintenance fees. The cost for 225 points is $990.00. That is QUITE a bargain for a GV. But, they point out that I am ignoring the price I paid for DVC. (I always forget that, because I paid cash for the 300 points). How do I factor in the price of the points? I know my guide did the whole formula when we took the tour 4 years ago, but I can't remember how she showed us the savings.

I paid $73/point for 300 points in 2003. I got all of 2002 banked points, So I got 600 points in my 1st year.

Respectfully, maybe they do get it -

DVC doesn't save you money if you don't already have a pattern of going at least once a year and staying in a deluxe resort on site when you do. (It could save $$ if you compare it to going once every other year and staying in a moderate, but the "payback" period is so long that I doubt many actually keep their memberships that long).

FWIW, I would never try to convince someone to buy DVC because it saves money. Many who buy DVC end up going more often, taking friends and relatives and/or staying in larger accomodations than they ever did before DVC. That's hardly a recipe for saving money - but it's sure fun to do, if you can afford it, LOL.

DVC commits you to regular vacations (a good thing for some workaholics). But it covers resort accomodations, only. That means you still have to pay for transportation, food, park admission and souvenirs. Those things can be expensive.

I love our DVC membership - but it isn't for everyone.

 

[FamilyGuy]

If anything DVC membership causes many to spend more at WDW! I didn't really factor in any savings when buying DVC. I did take the point cost and divide it by the remaining years, then factor in dues, and even considered the lost opportunity.... but none of that made much of a diffenrence to me.

IMHO, the bottom line was, if you are going to visit WDW at LEAST every couple of years, and like to stay on property, DVC can easily make sense...

 

[JudyTL]

YOU ARE ALL FORGETTING YOU GET TO SELL IT>>> SO< YOU CANNOT COMPLETELY DETERMINE THE VALUE UNTIL YOU SELL THE ASSET.

Also, DISNEY is getting to cruises and other types of vacations. You can use your points to do other vacations. The cruises are cheaper using your points than the outright use of cash. The advantage is you can look forward to a good time of fun. No, this is not for everyone.

YOu need to look beyond WDW and into Disney vacationing...

 

[Cruelladeville]

You can also do it as a buy-sell. You buy a resale for XXX, use it for 3 years(since alot of people have trouble figuring for 30 years), and sell it for XXX. Then you get all your money back(minus closing), and all you have to figure is dues for 3 years + the closing costs. Maybe that is easier for them to understand. Now, it's true that if you keep your contract, you have to figure in the cost you paid to buy it, but I have found that people feel better knowing that in the short run they don't lose their initial investment. I always say that I bought in 1997 for $56, and it's 9 years later, and I can sell for $85 pp, so if they want to figure in that cost, I am actually ahead of the game. When you rent at a regular hotel, you automatically lose all your money. That's why I think DVC is a good deal.

 

[Mtnman44]

I was in the middle of a big financial explanation but then realized it's just a bunch of blah, blah, blah. Bottom line, if you plan to travel to WDW and stay on property at least every couple of years AND want moderate to deluxe level accomodations, then yes it will save you a good chunck of money and it will save you a HUGE chunck of money IF you are able to sell it at some point and get some, most or all of your initial investment back.

You could invest that $15k+ cash and simply let it earn money. However, the amount your equivilant cash stays are going to cost you each year will greatly exceed your investment income so you will eventually deplete that cash LONG before you've had 40 years of vacations.

Again, DVC looks good in a situation where someone wants/plans to stay at deluxish Disney properties at least every couple of years for the foreseeable future. Any other scenario, and the comparisons and advantages get all muddied. jmho of course, every situation is different for the individuals.

 

[ron@pinehurst]

By my calculations, your actual cost for the 5 days GV stay would be:

 

[Delaware Mike]

Here's how I decided to view our DVC "investment"...

First, we purchased via resale, getting 120 SSR points and view the money we spent for the points and closing costs as the "investment" part. Since we're planning upon selling those points in about 10 years, in order to purchase other resale points in another resort/contract, we'll probably break about even.

Historically, the cost of points on the resale market goes up a little with each DVC price increase for "new" points. There will be a point when the per-point price will begin to decline, as time gets closer to the expiration of the resort membership. However, we plan upon selling long before that point is reached.

Next, we view annual MF as our annual "lodging" cost. We compare those costs to the cost to stay at, say, CBR. Our initial analysis of those costs show an immediate savings.

 

[ron@pinehurst]

By my calculations, your actual cost for the 5 days GV stay would be:

$990.00 - Maintenance cost
410.63 - 1/40th of your initial investment of $16,425.00 for 225 points.
821.25 - 5% of $16,425.00 you could have had on deposit in a CD for
one year.
$2,221.88 - Total

Note that the maintenance cost would potentially increase on an annual
basis. However, the lost interest would decrease by 2 1/2% each year.

 

[calypso726]

When the Contemporary opened up wasn't it about $29 per night to stay there? Isn't it over $300 per night now? I am sure that if someone had mentioned back then that in a short 30 some odd years we'd be paying over 10 times the amount to stay there it would have seemed absurd Just as I'm certain we'd have the same reaction now thinking that in 30 some odd years it might cost over $1000 a night to stay at Pop Century Hotels don't go up about 3% every year. It is more like 7%-8% when we take inflation into consideration. I think the advantage to buying into DVC is you are keeping ahead of inflation.

When I crunched the numbers trying to convince DH to buy DVC (very loudly and with much flair waving around a calculator) I took into consideration the buy in cost plus MF (increasing yearly) and assumed we would keep it until the bitter end. The total cost was quite a scary number I compared that with the cost of a hotel stay and I used a value resort as my base and figured the cost of inflation increasing for the next 47 years. THAT number was WAAAAAAYYYY scarier

He was stunned at the numbers but still didn't budge I figured no sweat I'll just let those numbers sink in and wait We also took the idea of putting the money into an interest bearing account and utillizing those funds for our WDW vacations. Sounds great in theory but we would have run out of money WAY before the DVC membership expired. Not to mention I can not really put a price on the way we will now be upgrading our vacations. We always used to stay off site or at a value resort. Happy to say...never again.

 

[ron@pinehurst]

By my calculations, your actual cost for the 5 days GV stay would be:

$990.00 - Maintenance cost
410.63 - 1/40th of your initial investment of $16,425.00 for 225 points.
821.25 - 5% of $16,425.00 you could have had on deposit in a CD for
one year.
$2,221.88 - Total

Note that the maintenance cost would potentially increase on an annual
basis. However, the lost interest would decrease by 2 1/2% each year.

 

[lmb]

When I was deciding on whether to buy I found the info on mousesavers very helpful. If you go to: http://www.mousesavers.com/dvc.html and look under "introduction" there's a microsoft excel spreadsheet about 1/2 way down the page that you can download. I tweaked the value in box N4 to reflect what I paid for my contract and closing costs and adjusted the values for the maintenance fees and rooms accordingly.

 

[Mickmse2002]

The real cost benefit analysis of a DVC membership isn't necessarily intrinsic. The real value for many members, myself included, is the frequency and quality of family vacations it allows.

 

[Mtnman44]

NurseKim,

(by the way, I love that name... )

get out a piece of paper, or better yet, MS excel and figure out what you would spend on Disney Deluxe Hotels at WDW each year for the next 20 years. Start with prices this year and increase these 3% each year.

Now, start with your purchase cost and this year's maint fees. listed out the maint fees for the next 20 years, increasing them 3% each year.

The table below lists three options. Column one is purchasing a 160 points for 15k with 20 years of maint fees (3% increase each year. Column two is simply paying cash for a seven night stay. $300/night increasing 3% each year. Column three is investing the 15K with an after tax annual return of 5%. You can clearly see that, based on the assumptions, DVC is considerably cheaper than buying similar accomodations with cash over 20 years. You can also see that investing the money at a relatively risk free rate will not pay for your cash stays. Imagine if you took this table out to 40 years or if you sold the 160 points at the 20 year mark for example.....


15,000.00
659.20.................$2,100.00.........................15,000.00
678.98................. $2,163.00................. 15,750.00
699.35................. $2,227.89................. 16,537.50
720.33................. $2,294.73................. 17,364.38
741.94................. $2,363.57................. 18,232.59
764.19................. $2,434.48................. 19,144.22
787.12................. $2,507.51................. 20,101.43
810.73................. $2,582.74................. 21,106.51
835.05................. $2,660.22................. 22,161.83
860.11................. $2,740.02................. 23,269.92
885.91................. $2,822.22................. 24,433.42
912.49................. $2,906.89................. 25,655.09
939.86................. $2,994.10................. 26,937.84
968.06................. $3,083.92................. 28,284.74
997.10................. $3,176.44................. 29,698.97
1,027.01................. $3,271.73................. 31,183.92
1,057.82................. $3,369.88................. 32,743.12
1,089.56................. $3,470.98................. 34,380.27
1,122.24................. $3,575.11................. 36,099.29
1,155.91................. $3,682.36................. 37,904.25

32,712.95................. $56,427.79................. 39,799.47

I would be interested in the answer to this too, since the MFs is one of the big reasons DH doesn't want DVC.