How long before DVC pays for itself

[SamRoc]

Before we purchase the resale we are looking at we were wondering how long it took for DVC to pay for itself. Sorry if this question has been asked before but we are new here. We figure it to be about 15 years of staying in a 2 Bedroom at the Boardwalk Villas at $800 est. a night (7 nights), then it would be paid for. That is figuring 350 pts at $72 (25,200) plus the $900 a year maintenance fees ($36,000). Just trying to get an idea before we join. Thank you!

 

[crisi]

It kind of depends on how you figure ROI.

If I use rack rates for my vacation (7 days BWV preferred view in October, 2 bedroom) I get $5478 (don't forget tax). Of course, it could be argued that I wouldn't pay rack rate. And if I was willing to pay rack rate, no guarentee I'd get a 2 bedroom BW room. And it could be argued that without DVC we'd spend our money staying at a room in the WL for $254 a night.

If I figure dues costs for that its 282 points at $4.10(?). Or $1,156.

If I subtract my dues cost from rack rate its a $4322 savings.

I paid around $10,000 for my points (150 points resale at $63 a point, plus closing costs). So I take three trips and start breaking even.

This ignores time value of money in both directions - i.e. I haven't bothered to figure out how much I'd make on that $10,000 if I'd put it in a nice bond fund, nor have I figured out what inflation will do to that room rate over the next decade.

 

[spiceycat]

do you really need to stay 7 nights - that is the more expensive option - you can stay 2 5 day period for your one 7 day period - that i8s how I do it - and my DVC pay for itself in 3 1/2 years (of course we had those free tickets then).

I also advice to not compare a 2-bedroom to a hotel room - that is not right - compare the studios to a hotel room and that is a fair comparison (although the studios are much better in my mind)

Now it does not matter if you stay in a studio are not (I happen to like them) - what is you are comparing apples to a steak (a 2-bedroom) - you need to compare apples to apples (studio).

 

[pumpkinboy]

OK, so I cannot locate my present-value calculations, but here is the general gist our our personal calculations from my recollections (note that my discount rate was that of my old mortgage: 7.25%; this calculation also compared DVC to "Moderate" resorts rack rates and "Deluxe" resorts' reduced rates, not full rack rate for comparable resorts):

If you pay cash or take the cheap one-year financing (requires 50% down for that one), the payback period was roughly six and a half years, but taking longer term DVC financing (at the usurious 9.75% or 10.75% ups the period to 8 to 9 years due to financing costs.

I also recall that there is a thread somewhere here where someone else goes thru the calculations, using some different assumptions; I seem to recall them coming out with a 7-8 year payback period.

 

[SamRoc]

Thanks for your replies. I do recall reading here somewhere that it takes 7-8 years. I guess I figured longer because of the 350 pts. I also calculated with the 2 bedroom because we have 2 teens (1 boy 1 girl) and we really need the space as they are older now and like to bring their cousins and friends along on vacation! We never really stayed outside of Disney, it was always the Contemporay Tower or Poynesian. But after seeing the DVC models in April we really thought that this was for us.
And Spiceycat thanks for the advice about going 5 nights 2 times a year. Now we have more options and 2 trips to Disney a year sounds great!

 

[pumpkinboy]

Originally posted by SamRoc
I do recall reading here somewhere that it takes 7-8 years. I guess I figured longer because of the 350 pts. I also calculated with the 2 bedroom because we have 2 teens (1 boy 1 girl) and we really need the space as they are older now and like to bring their cousins and friends along on vacation!

The larger number of points would actually pay for itself sooner because you are buying more points, since the comparable would be two rooms or renting a 2BR for cash (this varies of course depending on method of financing; my recommendation, use a cheap home-equity line if possible).

 

[crisi]

I suggest, since you are talking about really needing the space, that you run your comparision against two connecting rooms at the Poly. Though its hard to compare apples to oranges....

For instance, there is no DVC monorail resort. So while DVC is wonderful, if you are a monorail family, you may be disappoint regardless of how fast it pays for itself.

On the other hand, there are no connecting rooms with kitchens in them. So if you want to scramble up a few eggs in the morning, you may be disappointed with the Poly.

Also, I don't know how old your kids are, but when looking at 350 points, you may want to look for a 150 point contract and a 200 point contract (or 2 175 point contracts). This will allow you to sell off one contract when you decide to scale back when your children leave their "vacation with the family" (assuming they do).

And while 2 5 night trips is cheaper point wise - if you fly to Disney it may be a false economy. I can own a ton of extra points for what I pay for four roundtrip tickets and the extra vacation time. But that will work differently for different people.

 

[joepoe]

I tried to figure as much of an apples to apples comparison as possible and came up with 7 years. Now if you compare a purchase that gets you a 2 BR for a week with a comfort inn room at $39 a night, (I realize this is an extreme example along the vacation continuum) DVC will lose from a strictly financial perspective every time.

 

[tvwalsh]

DVC will NEVER pay for itself! It will increase the fun you get per dollar! It will make bigger accomodations an easier choice. It will allow you to deduct the dues portion for taxes. It will give you pride of ownership. It will help you with vacation budgeting but... It will NEVER pay for itself. Sorry!

 

[Lisa P.]

I agree with tvwalsh. It's not really cheaper; it's just different. Depends on what you want.

If you would actually have spent $800/night for a 2BR at BWV, then that's a fair comparison. But you've said that you have been staying in a single hotel room at a Disney deluxe hotel. Have you been paying discounted rates? Would this be your plan in the near future, if you don't buy DVC?

If so, that's the figure that you would compare with a DVC 2BR. Compare your family's acceptable cash alternative vs. the DVC alternative. It doesn't really matter whether it's comparing apples to apples, precisely. What matters is looking at your costs and seeing whether the difference (if any) in buying DVC is worth it to you!

DVC is not a cheap way to vacation. But for those who are not vacationing inexpensively anyway (Disney deluxe rooms are not cheap), it may be very worthwhile!

If you split up your points to spread a week's worth over 2 stays of 5 nights each, then you gain more nights but add the cost of two transportation days (airfare or car travel)! Again, perhaps not cheaper, just different. If you want an honest answer, by the numbers, compare fair numbers for your own situation.

Then consider the intangible benefits and disadvantages of DVC/timeshare, depending on how you see them:
--- upgrade to a 2BR - fantastic!
--- loss of housekeeping - do you care?
--- upfront payment - ties up your money or prepays vacations?
--- long term commitment - limits your options or encourages needed vacationing?

Some people love all the great DVC resorts. Some miss the theme or location of their favorite non-DVC resorts. There are so many intangibles - it's hard for other people, whose priorities may be different from yours, to judge for you. Even the various ways of making financial comparisons will come up with different responses to your question about breaking even.

Maybe by seeing the variety of responses here, you can choose the best approach for you and decide for yourself. HTH!

 

[CaptainMidnight]

Originally posted by joepoe
I tried to figure as much of an apples to apples comparison as possible and came up with 7 years. Now if you compare a purchase that gets you a 2 BR for a week with a comfort inn room at $39 a night, (I realize this is an extreme example along the vacation continuum) DVC will lose from a strictly financial perspective every time.

Agreed.

 

[weathernlu]

I just went through this because I just bought in. I wondered if it made sense to me financially, because let's face it, $185 a month for my 150 points is a good amount of money in my world. Sure it's only around 4% of my monthly net income, but anyone who does a budget knows 4-5% on a luxury item is a good bit. That's $200 a month I could be investing in my 401K or saving. Therefore, I went through a lot of different scenarios to make sure this is something I wanted to do. Here is what I came up with:

I always stay on-site, and usually look for good deals on the deluxe rooms although I have stayed at the Coronado Springs once and spent three nights during my trip at AKL at the ASSp. Therefore, I figured an average room rate of about $140 per night ($79 at the All-Stars up to around $200 at the AKL). We go once per year on average and stay for seven nights. Therefore I got a total of:

7 nights at an average of $140 = $980
Taxes of around 17% on the $980 = $166

Total for 7 nights = $1146

Now, that said, I bought 150 points with the discount and they are going to cost me $2220 per year for the next ten years (with dues) and then about $650 per year on average for dues over the next 41. That's a grand total spent of $48850. Understand this is because we are financing the points for the moment until I get a large bonus from work I am expecting next year. We may pay it off which would dramatically lower that total or we may just keep these financed and buy more points with the bonus. Either way I did my calculations with the financing just to make sure that even if they stayed financed that this made sense.

I took that grand total of $48850 and divided it by 51. Whether or not I use them for the entire 51 years or my kids use it for the last 20 or I sell the points for money after age 60, the bottom line is that I will get the points for the next 51 years. That equals $957 per year. Already I realize that it's a good deal because it's lower than my figure of $1146 which DOES NOT include inflation. What do you think a room at the All-Stars will cost in 30 years, surely not the same $79.

Taking it a step further, let's compare what I get with DVC to that room at the All-Star or the AKL. Those rooms are no nicer than a studio at any of the DVC resorts. Sure the AKL is nice, but so are the DVC properties studios. So I compared studios to those rooms, because I just stayed in a 2BR at OKW and there IS NO hotel room you can compare that to. If you are going to try, you better figure the equation at $500 per night or higher for a suite of some kind, because that's the only comparison that can be made to a 2BR. When I looked at what my 150 points could get me, it's pretty clear that they will always get me more than 7 nights per year in a studio. As a matter of fact, depeding on the resort my 150 points can get me up to 18 weekday nights or 12 consecutive nights (Sunday to the next Thursday) with 28 points to spare. I thought I could rent out 50 points to pay for my dues and still have 8 nights in a studio (including a Saturday and Sunday). Every way I calculated it, I couldn't make it look like a bad thing.

Sorry for being so long winded, but I thought this might help someone make a decision. Again, I must agree with the others, you cannot compare any regular hotel room to a 2BR. I just stayed at a 2BR at OKW for 4 nights and I was sold. If you are having doubts, rent 25 points from a member and stay ot OKW for one weeknight in a two bedroom on your next WDW stay. It sells itself........really.

 

[mom2rb]

We stayed at the Contempory in Sept. thru Shades of Green.(my step-dad is Dept. of Defense). My husband was upset because he wanted to be in the main tower like all the trips when he was little. $350 a night for main tower, off season and I am still triping over my sons. We knew we would be coming back almost every year until the boys are grown. With DVC we are both happy. My husband gets to stay in deluxe rooms , I get to save money by only eating out once a day and I get to have a much bigger place to stay. 7 days in a park for 8-10 hours then a trip to the pool and Mommy needs some alone time. I figure it will take until my kids are teenagers to break-even but we will be less stressed until then.

 

[pumpkinboy]

Sorry to be the Finance Geek here, but straight-line methods are just not mathematically sound:

Originally posted by weathernlu
Now, that said, I bought 150 points with the discount and they are going to cost me $2220 per year for the next ten years (with dues) and then about $650 per year on average for dues over the next 41. That's a grand total spent of $48850.
I took that grand total of $48850 and divided it by 51. Whether or not I use them for the entire 51 years or my kids use it for the last 20 or I sell the points for money after age 60, the bottom line is that I will get the points for the next 51 years. That equals $957 per year. Already I realize that it's a good deal because it's lower than my figure of $1146 which DOES NOT include inflation. What do you think a room at the All-Stars will cost in 30 years, surely not the same $79.

Good common-sense logic here, but you also need to remember that $1 today is worth more then a promise of $1 a year from now, and a lot more than one 50 years out. I commend weatherlu on his detailed figurings here, and they come to the right conclusion, so my difference is only on methodology (hence the label: finance geek). So time-value-of-money calculations are really called for here. Essentially, they are throwing in the last ten years at almost no cost, given that the promise of a good 40-50 years out has very little market value, even at low discount/ interest rates. The value to you of a DVC purchase is greatest in the first few years, with the present value of the future benefits diminishing as we get farther into the future. IMO the better discount rate to use is your current mortgage rate, since that is the true cost of money for most of us: so if you have a 6% mortgage, the $1 a year from now is worth approximately $0.94, compounding year by year. Bets bet is to use your financial calculator, and do a present value caculation...

I also heartily agree with Lisa P's advice here:

What is it worth to your family?

then take that and do you present value calculation.

Also, remember that when your kids are grown and you decide you want to go to WDW less frequently (tho I could not imagine that happening to me ) you can always dispose of part of it via resale and get that future value up front. Good luck with the figuring.

 

[weathernlu]

Originally posted by pumpkinboy
Sorry to be the Finance Geek here, but straight-line methods are just not mathematically sound:

No offense taken, geek away. I am not a finance geek as most of us aren't I'm sure. This was a good way for me to understand it in simple terms.

Good common-sense logic here, but you also need to remember that $1 today is worth more then a promise of $1 a year from now, and a lot more than one 50 years out. I commend weatherlu on his detailed figurings here, and they come to the right conclusion, so my difference is only on methodology (hence the label: finance geek). So time-value-of-money calculations are really called for here. Essentially, they are throwing in the last ten years at almost no cost, given that the promise of a good 40-50 years out has very little market value, even at low discount/ interest rates. The value to you of a DVC purchase is greatest in the first few years, with the present value of the future benefits diminishing as we get farther into the future. IMO the better discount rate to use is your current mortgage rate, since that is the true cost of money for most of us: so if you have a 6% mortgage, the $1 a year from now is worth approximately $0.94, compounding year by year. Bets bet is to use your financial calculator, and do a present value caculation...

I agree and if you notice I stated in my little ramble that I didn't take into account things such as inflation. I even stated that the cost of hotel rooms are going to undoubtedly go up. You mention that $1 in the future is worth less than a dollar today, however, to be fair and honest you also have to admit that what's worth $1 today is going to be worth $1.03 next year and $1.30 in 10. Therefore, while I agree the value of having something now is more than having it in the future, the actual value of that same dollar in the future will be more than today's dollar. That's a tongue twister. Also, I'm 26 with a 3 year old and a newborn on the way. DVC will be of value to me for much longer than 10 years unless I die before I am 36. When my Mom and Dad were 36 I was 7 and we were going to Disney a lot. If I decide to have a third child, it will be around the same age my parents had me (29). I could envision going to Disney a lot for at least the next 20-25 years. After that, I'll be more interested in trading the points for other kinds of vacations, but I don't plan on not vacationing after I'm 50.

Again, your methods probably make a lot more sense from a finanical standpoint, I am not doubting that. However, from my viewpoint this was a better way for me to understand what's the real hard dollar figures per year and for the rooms themselves. We can only guess what the inflation rate will be and really the money being worth more to someone now that it is in the future is really all up to that individual. That's why the lottery offers lump sums and annunities! Now if I could only win one!!!!!!!!!!

 

[Dean]

This is a very personal decision. There are those of us that look at the finances and those that look at the emotions. I very much agree with Lisa in that you must compare to what you would pay, not the value of the room you're getting. I do think DVC allows many to get better rooms without saving money or by even costing them extra. I also agree that going to WDW can cost a lot of money beyond the actual lodging cost. I also think it's hard to justify buying DVC if you finance 50% or more.

 

[Cruelladeville]

Well, not being a geek I can't say whether or not your calculations are on-target, but I think you're wrong, anyway. Here's why: For those who bought in 92, the return on their points if they sold them has continued to increase. I bought in 97, and my points have also continued to increase in value, enough of an increase that so far the profit from selling the points would have paid for all the maintenance fees I've shelled out since 97, and I haven't even begun to figure out the tax benefits. While I agree with your statement that EVENTUALLY the cost of points will have to decrease in price for resales, you can't say that will happen after the first few years, since it didn't happen after the first 13 years, which is more than "a few." Also, if you are using interest rates in your calculations, note that many members have managed to finance at 0% on credit cards, among other creative forms of financing. That , I think, would make a big difference in your calculations.

It's comforting to know that no matter what your current investment in points might be, you won't lose money NOW if you decided to sell tomorrow, although things may change in the future. But, hey, putting your DVC money into stocks or bonds would have pretty much done the same thing, and I'm having more fun with my money in DVC

 

[goofy4tink]

In my case, I'm figuring based on what I would normally spend for a room...about $1200. Now, if I take my $9,000 that I need to pay off (the rest of the amount was a gift!) and divide it by that 1200, then it would take about 7 trips to break even. Now, I used to visit WDW every other year. It looks like as of right now, I'm planning on once a year. So, it will probably take me about 6 years before it pays off and after that I get to vacation for just my maintainence fees.

 

[Stinson]

TVWalsh,

You said, "It will allow you to deduct the dues portion for taxes." I didn't know this. What portion of the dues is tax deductable?

 

[tvwalsh]

I am able to deduct the part of my annual dues that goes for property taxes on my federal income tax form 1040.