Not drinking the cool aid on resale!!

[Johnny D]

DVC is an investment whether one wants to admit it or not. There IS a financial component, if not, why even question the value, just pay whatever Disney is charging (what some seem to do anyway it seems). IMO there is a value and enjoyment standpoint but there is the financial component. Unless the purchase makes sense financially, it's foolish to buy in. Why pay the same or more than you could get with cash and have more options, safety and control? I couldn't disagree more on the efficient of the resale market, DVC is better than most but certainly not efficient. I don't disagree that buying a "lessor" resort contract (size or home resort) has the potential for a higher return as a % of a current retail purchase, however, it has a much lower return globally compared to paying less for SSR or similar and leaving the rest in a true investment. The difference is truly sunk costs unless one plans to sell later and any RTU difference and benefit comes at the end, starting at 2054 for SSR. The additional years add minimal to very modest additional value all else being equal that far out, it's a large % as the RTU grows closer as in the 2042 resorts.

Whether the additional cost is worth it depends on many factors including personal preference. Since we can't measure that and don't want to delve into any given individual's specific finances, all we really can do is talk about principles. For some the additional costs for VGF, or the Poly coming up, will be worth it because they will get the additional potential value. The difference in purchase between SSR & VGF 200 points is currently about $18K up front, almost $40K at 10 years (ignoring the additional dues which are almost certain to increase to more than $1 pp over SSR within 5 years) and almost $400K over the life of the SSR contract.

As I've said before, I don't feel it is a reasonable choice to purposefully wait on buying VGF anticipating cost savings. While I believe there will be some, I do not feel they will be enough to justify the loss of usage and other related factors. That said, someone looking to buy in 5 years at say $120 resale vs $180 retail will be faced with a significantly different choice and the reasonableness of their decisions will be different then compared today in all likelihood.

There is a financial component and value in everything you buy, but everything you buy is not an investment from the traditional sense of the word. I think comparing some resorts to others, many times is a false comparison. Some are system buys and some are resort buys. Right now you can't even get a studio at the 7 month mark for a week in January at VGF if you don't own there. I haven't checked but I could probably get in SSR tomorrow? It is just a different product. I agree you should buy where you want to stay. I could easily bid on priceline and get 4 star hotels in the Disney area for $80 a night and financially calculate my savings over 10 years and make a comparison. But it would be a false comparison. Yes, there are more similarities between DVC resorts, but there are many differences; and those physical and systematic differences matter and have value to many.

 

[Dean]

I could easily bid on priceline and get 4 star hotels in the Disney area for $80 a night and financially calculate my savings over 10 years and make a comparison. But it would be a false comparison.

It's not a false comparison, only a different comparison as is staying off property or trading in through RCI when available. Comparing DVC to itself is really the questionable comparison in many ways. I don't think the difference in availability matters unless it matters to the individual, as I've stated many times. If one wants VGF and must stay there and use the points only at VGF it may be worth it for that person but even for VGF that will likely be the minority of owners there both because of availability issues and long term choices. IF one wants to stay there routinely, may as well buy a fixed week, anything else is risking not getting what you want with the more expensive points at 7 or 11 months.

 

[ell13]

We bought last year for the first time:

150 pts @ SSR for $58/pt

We are young, but we're still getting 40 years. Our direct option would have been VGF at the time which would have been $150/pt.

I couldn't be happier with the purchase... emotionally and financially. Everything (spreadsheets, bank account, feelings, etc.) says we made the right choice.

 

[bakerworld]

IMO people only question the value of DVC when they feel they're not receiving /or are afraid from reading these forums that they won't receive the product. Frankly, BL always made me feel that way until we stayed in a 2Br - that 2Br was the product I was expecting. AK has always lived up to it's hype and BC's location is what we paid, not the venue - altho we prefer BC to BW (just personal taste ).

When people question value and start talking about 'investment' then they've bought the wrong product. We're seriously thinking about selling BL because I don't like their studio's but cannot justify staying in a 1BR. Right now we'd break even on the purchase price. Some would say that with 6 years of annual dues we're losing but IMO the vacations we 'spent' those points were worth the $480 a year in AD's. Where are you going to stay on Disney property for $480/wk? (No, I'm not a camper).

 

[crisi]

Whether you paid $145, 150 or 165 will be irrelevant in the scheme of things in 10 years.

Time for a time value of money lesson.

Let's say you buy at 200 points at $145 instead of $165. So you save yourself $20 a point X 200 or $4000.

You invest it in a Fidelity Mutual Fund and get an 8% return - it MIGHT go down during that time, it might go up, but ten years is pretty safe and 8% is pretty conservative.

In 10 years you'll have almost $8,700. Now maybe that's an irrelevant amount of money to you, but even factoring in inflation, that's a nice trip for my husband and I when the kids leave home. Its quite a few anniversary dinners out. Its a lot of presents for eventual grandchildren.

Now, lets say instead of buying at $165 new, you find a resale for $75 - doable pretty easily at SSR or VAKL. Now you are saving $90 a point on 200 points, or $18,000, which if you get an 8% return on is almost $39,000.

And longer timeframes - exponential growth - if you are buying now and looking at contract length because you are younger and going to own forever - do the calculations over 20 or 30 years for fun.....($4k at 20 years is $18.6k, at 30 years its $40k - $18k at 20 years is $83.8k at 30 years its $181k)

I have seen a lot of DVCers make arguments that direct isn't much more than resale, or that they need the latest and greatest resort - and often MORE POINTS for MORE TRIPS - then a few years later show up on the budget board complaining about the expected family contribution for college and how are they possibly supposed to pay that.

If your financial house is really solid - you know how the kids are going to get through college, your retirement savings are looking comfy, you'll be weathering a layoff without much fuss - then maybe this isn't a lot of money and its worth it to spend that much more. At that point, buy where you want, how you want. And, quite honestly, there are a lot of people out there with a lot of money who can do that (frankly, if I could, I'd book Disney Suites rather than buy DVC - which gets to Dean's point - at some level you should just pay cash - you get more choices, more flexibility and less risk - if money isn't an issue). The majority of Americans are not saving enough for college or retirement and the majority of people who come to this board looking for purchase advice mention money concerns - it has to work out financially for it to work, they can't afford $181k to spend 30 years staying at GFV rather than SSR.

 

[disneynutz]

The way that I see it is that people who have decided to vacation at Disney, who buy DVC, are willing to pay a premium price for their vacations. DVC may save some money on your room but it also causes you to vacation more frequently and spend more money.

Time value of money is the last thing most think about, they are too busy planning their next Disney vacation, their next Disney cruise, their Member Cruise, and/or thinking about the Poly.

Bill

 

[crisi]

I wouldn't say causes - I'd say "few DVC members don't change their travel patterns once they own DVC making the comparison between a single Deluxe or moderate room and a DVC studio sort of useless."

IF you could manage to only stay in studios - or perhaps stayed in one bedrooms and used the mini kitchen - or with a larger family - a two bedroom instead of two rooms - and you continued to only go for as many nights as you went for before, and you managed to not be tempted by add ons you would have never done on cash ("we've done so much at Disney because we've gone six times in three years, lets do Cirque, we've never done that! Lets book a fireworks cruise, we've never done that!"). The "savings" work out - and there are a few people here that I'm pretty sure pull that off.

From what I can tell, for most of us, we take trips we wouldn't take without DVC (i.e. "since we bought an AP this year, lets squeeze in an extra trip to see the Christmas decorations - we can use frequent flyer miles and it will be almost free!"), we bring guests - how many of us would have paid out of pocket for our grown siblings to go to Disney for us - but many of us have treated them to a room. We decide that one and two bedrooms are WAY nicer than a studio. Without a room bill at the end of the trip - we "magically" have more in our budget to go to Cirque. And DVC becomes a very effective way for Disney to see more of our money than they would have without DVC.

 

[chalee94]

They way that I see it is that people who have decided to vacation at Disney, who buy DVC, are willing to pay a premium price for their vacations. DVC may save some money on your room but it also causes you to vacation more frequently and spend more money.

Time value of money is the last thing most think about, they are too busy planning their next Disney vacation, their next Disney cruise, their Member Cruise, and/or thinking about the Poly.

the ants feel a certain obligation to warn the grasshoppers anyway.

but if the grasshoppers want to play all day and spend money without a thought of tomorrow, at least they shouldn't post on the budget board asking for advice about how to file for bankruptcy and expect that no one will bust their chops for owning DVC...

 

[disneynutz]

the ants feel a certain obligation to warn the grasshoppers anyway.

but if the grasshoppers want to play all day and spend money without a thought of tomorrow, at least they shouldn't post on the budget board asking for advice about how to file for bankruptcy and expect that no one will bust their chops for owning DVC...

The ants are a minority and Disney loves and plays to the grasshoppers. I'm bi-insect, sometimes an ant, sometimes a hopper.

Bill

 

[ell13]

I bought in because I was familiar with the savings of going to Disney in fairly large groups every two years or so. I look at what I paid for 150 points resale @ SSR and the 1 year of dues so far (approx. $10k) compared to the cash value of ten nights we are staying in a 2BR @ OKW this January ( about $8k) and 40 more years worth of vacations and I can't help but feel good about it.

We're doing what we love to do with the people we love to do it with. Could we afford buying direct? Of course. But why not get the most bang for my buck and give myself the opportunity to go more and do more?

 

[crisi]

the ants feel a certain obligation to warn the grasshoppers anyway.

but if the grasshoppers want to play all day and spend money without a thought of tomorrow, at least they shouldn't post on the budget board asking for advice about how to file for bankruptcy and expect that no one will bust their chops for owning DVC...

What?! That hasn't happened in the last.....week.

 

[skier_pete]

The way that I see it is that people who have decided to vacation at Disney, who buy DVC, are willing to pay a premium price for their vacations. DVC may save some money on your room but it also causes you to vacation more frequently and spend more money.

Time value of money is the last thing most think about, they are too busy planning their next Disney vacation, their next Disney cruise, their Member Cruise, and/or thinking about the Poly.

Bill

This may be for many DVC people but not all. I just bought into DVC as a long-term plan to SAVE money. I think it highly unlikely that I will start being suckered into renting 1-bedrooms instead of studios or inviting friends to a free room. Our money situation is not that free, and we are primarily looking at ways to make our stays more affordable.

Now as far as adding a trip during a year with APs, that I could see happening, but again, that is getting additional days for less money - i.e. bringing the "value" of my days up.

Of course, we haven't even stayed DVC once yet, so I suppose I should respond again in 5 years.

 

[nalajms]

This may be for many DVC people but not all. I just bought into DVC as a long-term plan to SAVE money. I think it highly unlikely that I will start being suckered into renting 1-bedrooms instead of studios or inviting friends to a free room.

I suggest you never book at 1-bedroom. Once you do, it's very hard to get everyone in your traveling party to go back to a studio. I made that mistake a couple of years back. Now the only time DH will stay in a studio is very few nights at the beginning or end of our trips.

 

[DougEMG]

I suggest you never book at 1-bedroom. Once you do, it's very hard to get everyone in your traveling party to go back to a studio. I made that mistake a couple of years back. Now the only time DH will stay in a studio is very few nights at the beginning or end of our trips.

I give my family options each trip and let them pick what they want to do. For example, all the following options are equal

(1) Stay in a 1 bedroom for 1 week
(2) Stay in a studio for 2 week
(3) Stay in a studio for 1 week and have an extra $1000 spending money (comes from renting out those extra points)

Oddly enough, they actually do pick different options at different times.

 

[wildforgoofy]

I give my family options each trip and let them pick what they want to do. For example, all the following options are equal (1) Stay in a 1 bedroom for 1 week (2) Stay in a studio for 2 week (3) Stay in a studio for 1 week and have an extra $1000 spending money (comes from renting out those extra points) Oddly enough, they actually do pick different options at different times.

Doug I took your strategy and gave my kids the choices of BLT 7 night 1 bedroom or AKV 6 nights 2 bedroom, and they chose AKV! I'm shocked they wanted the resort over days at WDW!

 

[DVCanadian]

DVC is an investment whether one wants to admit it or not. There IS a financial component

All things with financial components are not investments. I don't see how DVC can be called an investment. It is definitely a financial expenditure and a financial commitment but an investment? No.

Time for a time value of money lesson.

Great explanation, but I don't think it is needed for DVC.
----------------------

The level of decision making and consideration for buying DVC is comparable to buying a car, especially DVC resale.
I'm figuring average resale is $15,000 or so, maybe less?
Average new car purchase, say $15,000-$40,000.
DVC and a car purchase are in the same ballpark and I think are on an equal field re: are they an investment (secret answer: no). They are both depreciating assets headed to zero with maintenance costs during the life of the product.

I see a lot of time given to various calculations (time value of money, investments one could have made, should have made, would have made, ROI, future interest rates, etc) and the advice to try each resort before buying, or wait and do a few years of research to decide if DVC is right for you and which should be your home resort, and I do understand the intent of the advice but at some point let's put most of these purchases in context, it is a similar decision to buying a car, not investing for retirement or buying a house.
Some people will take a year or more to decide on a car but most people? That level of detail/time may not be needed (and is anyone calculating the lost opportunity cost by delaying DVC WDW vacations?).

Obviously my post, and now maybe this thread, are off topic (yet seemingly so on topic for every thread at DIS) that I can't help but wonder why so much overthinking?

 

[DVCMomBLT]

Time for a time value of money lesson.

Let's say you buy at 200 points at $145 instead of $165. So you save yourself $20 a point X 200 or $4000.

You invest it in a Fidelity Mutual Fund and get an 8% return - it MIGHT go down during that time, it might go up, but ten years is pretty safe and 8% is pretty conservative.

In 10 years you'll have almost $8,700. Now maybe that's an irrelevant amount of money to you, but even factoring in inflation, that's a nice trip for my husband and I when the kids leave home. Its quite a few anniversary dinners out. Its a lot of presents for eventual grandchildren.

Now, lets say instead of buying at $165 new, you find a resale for $75 - doable pretty easily at SSR or VAKL. Now you are saving $90 a point on 200 points, or $18,000, which if you get an 8% return on is almost $39,000.

And longer timeframes - exponential growth - if you are buying now and looking at contract length because you are younger and going to own forever - do the calculations over 20 or 30 years for fun.....($4k at 20 years is $18.6k, at 30 years its $40k - $18k at 20 years is $83.8k at 30 years its $181k)

I have seen a lot of DVCers make arguments that direct isn't much more than resale, or that they need the latest and greatest resort - and often MORE POINTS for MORE TRIPS - then a few years later show up on the budget board complaining about the expected family contribution for college and how are they possibly supposed to pay that.

If your financial house is really solid - you know how the kids are going to get through college, your retirement savings are looking comfy, you'll be weathering a layoff without much fuss - then maybe this isn't a lot of money and its worth it to spend that much more. At that point, buy where you want, how you want. And, quite honestly, there are a lot of people out there with a lot of money who can do that (frankly, if I could, I'd book Disney Suites rather than buy DVC - which gets to Dean's point - at some level you should just pay cash - you get more choices, more flexibility and less risk - if money isn't an issue). The majority of Americans are not saving enough for college or retirement and the majority of people who come to this board looking for purchase advice mention money concerns - it has to work out financially for it to work, they can't afford $181k to spend 30 years staying at GFV rather than SSR.

I just meant that the extra $2000 cost in the beginning is only a fraction of your total expenses over the next 10 years. I am well aware of the TVM.

 

[JimMIA]

All things with financial components are not investments. I don't see how DVC can be called an investment. It is definitely a financial expenditure and a financial commitment but an investment? No.
----------------------

The level of decision making and consideration for buying DVC is comparable to buying a car, especially DVC resale.
I'm figuring average resale is $15,000 or so, maybe less?
Average new car purchase, say $15,000-$40,000.
DVC and a car purchase are in the same ballpark and I think are on an equal field re: are they an investment (secret answer: no). They are both depreciating assets headed to zero with maintenance costs during the life of the product.

I see a lot of time given to various calculations (time value of money, investments one could have made, should have made, would have made, ROI, future interest rates, etc) and the advice to try each resort before buying, or wait and do a few years of research to decide if DVC is right for you and which should be your home resort, and I do understand the intent of the advice but at some point let's put most of these purchases in context, it is a similar decision to buying a car, not investing for retirement or buying a house.

Some people will take a year or more to decide on a car but most people? That level of detail/time may not be needed (and is anyone calculating the lost opportunity cost by delaying DVC WDW vacations?).

I happen to agree with both of these points. I'm sure a lot of us here are probably MBA's, but I know I never even considered TVM or any of that other stuff we learned in Finance and cost accounting (insert puking smilie).

I think the reason for so much over-thinking is quite simple -- justification.

It's actually an interesting study to see what lengths folks will go to to justify a luxury purchase like DVC. A lot of time, I think the real thought process is nothing more than, "I want it...how can I justify it?"

But if one insists on some kind of financial analysis, I think the car purchase is a very good analogy.

I would bet the farm that most of us -- myself included -- gave more thought to the car purchase.

 

[Dean]

The way that I see it is that people who have decided to vacation at Disney, who buy DVC, are willing to pay a premium price for their vacations. DVC may save some money on your room but it also causes you to vacation more frequently and spend more money.

Time value of money is the last thing most think about, they are too busy planning their next Disney vacation, their next Disney cruise, their Member Cruise, and/or thinking about the Poly.

Bill

I agree that the nature and psychology of DVC lend themselves to spending any savings elsewhere and then some. Whether that's a good or bad thing depends on specifics and whether one can truly afford it. I would agree they often don't think about the TMV but feel strongly they should. For most people ultimate financial outcome is mostly a result of spending/saving choices, not income. The death by a thousand paper cuts analogy is alive and well when weight and finances are the question, esp timeshares. In addition, with timeshares, one can make large negative mistakes up front. Using the car analogy below, it's like walking in to a dealership and not only paying full MSRP but the full ADM/ADP amount on the side sticker.

This may be for many DVC people but not all. I just bought into DVC as a long-term plan to SAVE money. I think it highly unlikely that I will start being suckered into renting 1-bedrooms instead of studios or inviting friends to a free room. Our money situation is not that free, and we are primarily looking at ways to make our stays more affordable.

Now as far as adding a trip during a year with APs, that I could see happening, but again, that is getting additional days for less money - i.e. bringing the "value" of my days up.

Of course, we haven't even stayed DVC once yet, so I suppose I should respond again in 5 years.

Ultimately I think there are very few people that truly end up saving money with DVC, whether any extra money spent has reasonable value is far more variable. It makes no sense to spend more to own DVC than one could do the same or similar without owning.

All things with financial components are not investments. I don't see how DVC can be called an investment. It is definitely a financial expenditure and a financial commitment but an investment? No.

Semantics. I'd agree that going to work and not going on vacation might be the outcome if dollars were the only consideration. But those who don't at least consider the costs and make reasonable decisions from a financial standpoint for their situations are putting themselves at risk and almost always make similar choices across their lives, not just with DVC. They finance cars (or worse lease them), carry CC balances, etc.

Great explanation, but I don't think it is needed for DVC.

I couldn't disagree more. DVC is a timeshare, if it doesn't make sense from a financial standpoint, it's foolish to buy. I do realize there are many factors but a core one must be that it makes sense financially both from a usage standpoint and a personal affordability standpoint.
----------------------

The level of decision making and consideration for buying DVC is comparable to buying a car, especially DVC resale.
I'm figuring average resale is $15,000 or so, maybe less?
Average new car purchase, say $15,000-$40,000.
DVC and a car purchase are in the same ballpark and I think are on an equal field re: are they an investment (secret answer: no). They are both depreciating assets headed to zero with maintenance costs during the life of the product.

I see a lot of time given to various calculations (time value of money, investments one could have made, should have made, would have made, ROI, future interest rates, etc) and the advice to try each resort before buying, or wait and do a few years of research to decide if DVC is right for you and which should be your home resort, and I do understand the intent of the advice but at some point let's put most of these purchases in context, it is a similar decision to buying a car, not investing for retirement or buying a house.
Some people will take a year or more to decide on a car but most people? That level of detail/time may not be needed (and is anyone calculating the lost opportunity cost by delaying DVC WDW vacations?).

Obviously my post, and now maybe this thread, are off topic (yet seemingly so on topic for every thread at DIS) that I can't help but wonder why so much overthinking?

And both are often a bad choice, esp if financed. IMO you've made the case FOR reasonable financial evaluation, not against it. Also it's an additional added cost/risk on top of any car, etc.

I just meant that the extra $2000 cost in the beginning is only a fraction of your total expenses over the next 10 years. I am well aware of the TVM.

That's just it, $1-2K up front is not negligible in the long term IMO. In 40 years it's twenty times the original amount and over 4 times adjusted for inflation. I do not believe it to be a negligible amount, whether it's a worth while investment depends on many other factors as well.

It's really simple as I see it. IF there isn't a financial consideration, just stay at DVC or in the suites and pay cash, which is what most people do that don't have to worry about what they spend. After that's we're simply haggling over the price.

 

[chitwndan]

I see a lot of discussion of the time value of money, which as someone with an economics background, I can appreciate. But another way to look at it is opportunity cost. While the time value of money may be a component of opportunity cost i.e. what could you earn with this money, or, the other way to look at is let’s assume you would spend it anyway, what could you do with this money.

This is more applicable to those who will be financing in some form or another, even self-financing. I plan on taking a 5 year loan out on my 401-K which I will pay myself back the interest at 5.25%. So my risk is twofold what could I buy with the income stream used to pay back that loan of about $300 a month, and what will I miss out on by removing my cash from a potentially higher interest earning vehicle.

I hate to admit this, but the majority of the 300 a month cost will be realized by lifestyle changes, i.e. being more frugal, no more, or minimal eating out, no more $50 bottles of scotch, no more HBO except when Game of Thrones is on . Now yes one could argue we could save that money and invest it, but the reality is we wouldn’t be willing to make all these cuts if we didn’t have the goal of DVC ownership.

The 2nd risk is the loss of potential gain. And while a lot of people note an assumed gain of 8% claiming it is conservative you can look at many 5 year periods in the past where the market (S&P 500) underperformed these. Especially if you look at Compound Annual Growth Rate vs the average rate of return of 5 year periods in the past 14 years. A problem with talking about average investment returns is that there is real ambiguity about what people mean by "average". For example, if you had an investment that went up 100% one year and then came down 50% the next, you certainly wouldn't say that you had an average return of 25% = (100% - 50%)/2, because your principal is back where it started: your real annualized gain is zero.
In this example, the 25% is the simple average, or "arithmetic mean". The zero percent that you really got is the "geometric mean", also called the "annualized return", or the "CAGR" for Compound Annual Growth Rate. Here is the CAGR for the past 14 years:
1/1/00 – 12/31/04 = -2.37%
1/1/01 – 12/31/05 = 0.45%
1/1/02 – 12/31/06 = 6.0%
1/1/03 – 12/31/07 = 12.78%
1/1/04 – 12/31/08 = -2.31%
1/1/05 – 12/31/09 = 0.41%
1/1/06 – 12/31/10 = 2.27%
1/1/07 – 12/31/11 = -0.27%
1/1/06 – 12/31/12 = 1.63%
1/1/06 – 12/31/10 = 2.27%
1/1/09 – 12/31/13 = 17.99%
And to sum up: 1/1/00 – 12/31/13 = 3.55%
If you want to play with the numbers, moneychimp.com/features/market_cagr. h t m
So I think the time value of money may be over weighted, unless you can pick the 2 out of 14 year where the CAGR significantly exceeded 5.25%.

And the item that is under weighted the time value of, well… time. If you have lots of disposable income then yes you can break it down to a simple cost analysis. But for many people I’d suspect you will now find a way to vacation more and spend more time with the loved ones. I know I haven’t been to Disney in many years, primarily because I want to stay in the deluxe resorts. With young kids ages 2 and 5, if I wait until I can “afford it” they’ll almost be teenagers. By the same token, if I waited to have children until I could “afford them” well, I’d probably have 1 or 0 children.

The point being if by buying resale you are able to lock yourself into an affordable annual or bi-annual vacation, when you would not be able to afford buying direct or paying for the hotel, it seems like a steal to me and my family, and I can’t see the value in buying direct. It’s not about what the cost is today new vs the cost resale 5 years from now; it’s about the cost to buy today and what that will get me today and in the future vs what buying direct will get me today and in the future. Today resale will make my limited resources go a lot farther.