Opinions on financing

[marynvince]

I know a lot of people that make good money and bad choices and are thus poor or living on borrowed time. To me being poor is more of a lifestyle choice than anything else. Living beyond means including financing cars and other luxuries is a means to keeping that status quo. Financing DVC, and other luxuries, adds risk as a minimum, increases the cost of such items and increases the likelihood that one will live beyond their means. Look at all the posts we've seen recently about having to sell.

Looking deeper, I disagree with your basic premise's that include that you have to finance to have nice things, that you have to finance DVC to enjoy the benefits of DVC and ultimately, that people who reasonably can afford DVC, can't do so without financing. I'd turn it the other way and say that if you can't do it without financing, you likely shouldn't buy at all. One may choose to finance something they didn't have to, their choice of course. Ultimately people have the right to make bad choices, we've all made bad choices where finances are concerned, IMO, financing a timeshare is an example of that right.

My basic premise was that there are 3 types of people that purchase DVC:
1)Cash is the only way to go, you should never finance
2)Financing "Necessities" is OK, but not "luxuries"
3) Finance away you can always walk away if things go bad

Advisors like to rationalize their decision by convincing those that ask that their way of thinking is really the right way.

I never said or implied that one has to finance to have nice things.
If you want to look deeper. My advice was/is, do what makes sense for you, what you are comfortable with, with the realization that you've only got so long on this earth and all the best planning doesn't guarantee anything. A child is only 5 years old once and that smile that doesn't disappear from their face the entire week they are at Disney is priceless. And there is a cost associated to not sharing those types of memories with your children or wife or significant other.

 

[WonderlandsMostWantd]

We just bought DVC a few months ago, and yes, we financed. Here is our reasoning:

* We have a family annual tradition of going to Disney every year, and plan to continue doing so, regardless of whether we’re paying for DVC or paying Disney directly for our rooms.

* We’ve been getting/would continue to get, 2-3 rooms EVERY trip, in a moderate resort. (While every year hoping and praying for one of those magical 40-45% of PIN codes that MIGHT allow us to upgrade to AKL for slightly more than we’d been planning at the Mod.)

* My rule for years has been NO borrowing/financing/credit cards for vacations. However, at the same time we don’t have the cash on hand to just pick up and go, so for years I’ve set aside money out of every paycheck (a set amount) that goes into our “vacation savings” account, and builds and waits there until time for the next trip, booking the flights, etc. so we’re never borrowing ANYTHING for the trip, we save up and pay cash for all aspects of the trip.

* Being that we know what kind of rooms we need, and how many, for how long, we budget for rack rate – if we can’t afford to save for rack rate, we can’t go – realistically we’ve never paid rack rate, but I just don’t count on getting a discount in order to go. (If we get a discount, we use the “saved” money for an extra treat, like a tour, or La Nouba, etc, that was outside the original budget.) Fortunately, we can afford to save and go every year this way.

We’ve been perfectly content in Modorate rooms (after determining that Values were just too "busy" for us after a while) up to this point, but after taking the DVC tour a few years back (and deciding the time wasn’t right then and passing) we decided to take another look at what the cost really would be if we financed. Well, the cost of our payments with financing PLUS our annual dues (paid monthly) for a year is within $200 of what we’ve been planning/budgeting/saving for, based on this year’s room rates, for our 2 Moderate rooms, and is over $1,000 less than what we’d be paying the years we need a third room. That is based on JUST paying the amount due every month (or as I look at it, the minimum payment.) Well, $200 overall is kind of our goal/wiggle room budget to consider the option to upgrade to AKL, in the event we got a significant discount code…

So for us, we realized that while we didn’t necessarily like the idea of financing vacation expenses, and we’d be paying a pretty penny in interest (IF we didn’t pay off early)we would actually be paying NO MORE out of pocket annually to finance DVC than we were already going to be paying Disney for our rooms. For us, it meant taking the same trips we were already planning, at the same time of year, but instead of 2-3 Moderate rooms, we’re getting a 1-2br Villa at AKL for the same out of pocket expense we were already budgeting for/saving/paying.
For us, THAT was the reason financing made sense in our situation. Also, 1 Deluxe resort room (depending on resort) can cost about as much as 2 Mod rooms, so YMMV based on your own vacationing habits.

We never thought of DVC as a necessity, and we would have been just fine staying where we were at the Mods, but when we realized it really wouldn’t cost us more annually than we were already budgeting for, it made sense – it was money we were already spending on Disney accommodations anyway. And, once the financing is paid off, (even if we took the full 10 years) we’ll be paying less than we would have been paying anyhow, which will be nice, but by then we may only have needed one room anyway, so at worst, we’d still probably be paying as much in annual dues as we would on our own room anyhow (assuming inflation on both room rates and annual dues). I don’t look at DVC as an investment or as something that’s “saving” me any money. I didn’t buy for the perks offered to owners, or with any expectations of “value” above and beyond the expense of accommodation. But, it does afford us significantly nicer accommodations, more room, and options like a kitchen that were not previously available to us, every year, for the same amount we were already paying in the first place. Everything else is just gravy.

 

[WonderlandsMostWantd]

Also, by that same token, if we were paying Disney that money for our room every year anyway, instead of paying for our DVC loan, PLUS saving money to one day buy DVC outright, we couldn't see how we were actually saving anything on interest in long run. Even if it took us the full 10 years to pay of the financing, even at Disney's highest rate of 14%, the amount we paid in interest in those 10 years would still be less than we'd have paid outright for for our rooms at moderate resorts for those same 10 years, while "saving up" to buy our DVC outright. And that's assuming that somehow 10 years from now, we'd still be looking at the same cost to buy in as we paid this year (which anyone who bought 10 years ago knows is highly unlikely)

If you're in a position to save up enough money to buy outright within a year or so, it's a diffent story of course. For us, financing made perfect sense.

 

[crisi]

Don't listen to the rationalizers that say I dont finance anything except for Home or cars or whatever. Financing is Financing. Or the folks that only pay cash because blah blah blah. They pay cash because they can, because they have plenty of it. They havent saved for 10 years to buy DVC. Trust me. Likely they have good jobs or inherited money. Hey I've got nothing against paying cash. I am one of those people that have no credit card debt.

Good jobs and inherited money. But before I had those things, we didn't vacation at Disney but once every five to ten years. In other words, there would BE no DVC in our family if we had to finance and we have no problem skipping vacations we can't afford.

 

[Dean]

My basic premise was that there are 3 types of people that purchase DVC:
1)Cash is the only way to go, you should never finance
2)Financing "Necessities" is OK, but not "luxuries"
3) Finance away you can always walk away if things go bad

Advisors like to rationalize their decision by convincing those that ask that their way of thinking is really the right way.

I never said or implied that one has to finance to have nice things.
If you want to look deeper. My advice was/is, do what makes sense for you, what you are comfortable with, with the realization that you've only got so long on this earth and all the best planning doesn't guarantee anything. A child is only 5 years old once and that smile that doesn't disappear from their face the entire week they are at Disney is priceless. And there is a cost associated to not sharing those types of memories with your children or wife or significant other.

Put me between 1 & 2, closer to #1. IMO, financing a luxury purchase including a timeshares is #3 in your list. I know it's a little more complicated than that as there are unique circumstances, but overall, #3. I also know it's worked out for some but been a real burden for others. When it all boils down, financing a luxury purchase is a poor choice, but for DVC it might not be as bad as giving your bank account number in response to a nigerian email request.

 

[JWG]

Put me between 1 & 2, closer to #1. IMO, financing a luxury purchase including a timeshares is #3 in your list. I know it's a little more complicated than that as there are unique circumstances, but overall, #3. I also know it's worked out for some but been a real burden for others. When it all boils down, financing a luxury purchase is a poor choice, but for DVC it might not be as bad as giving your bank account number in response to a nigerian email request.

I seriously hope I don't upset or offend anyone by sharing this (as in the potential seller). I'm watching resales and noted a 100 pt. BLT resale with an August use year. It had 200 points available, 2009 banked and 2010 (since we're now in August).

Given that August 2009 was the first August points that would have been available, unless there's some incentive I don't know about, it has never been used. Even if they got some really special price, say $100 per pt., that's still $10,000 for something never used.

I'm sure it will sell quickly but with the reseller's fee I'm fairly certain this won't be a break even or money making venture. I know it was financed, maybe I was told a bit more than I should have been when inquiring about it.

I don't think too many people finance a purchase to never use it or as an investment to resell in less than a year with intent. I feel horrible for whoever it is and hope nothing overly serious caused the need to sell a DVC contract never used.

Again, cash vs. finance is very personal decision and neither is right or wrong. But you just never know what may happen.

 

[jlewisinsyr]

Again, cash vs. finance is very personal decision and neither is right or wrong. But you just never know what may happen.

Correct, you can always live your life saving for the next day or you can live life. Having lost my brother to suicide recently and losing many friends due to illness and accident makes it very clear to me that you cannot always just save for tomorrow because it tomorrow may never come.

Now I believe in saving, but I don't believe in not enjoying life either, there is a balance, everyone needs to find the one that works best for themselves while taking personal responsibility for their actions.

 

[crisi]

Unfortunately, there appear to have been a lot of listings like that in this economy. People buy thinking that their job is safe and before they get a chance to use their points, they are doing the unemployment scramble. Financing in such a scenario can put you upside down quick - or turning over your contract back to Disney out your deposit. Years ago someone posted that they bought, came home and their spouse said "the marriage is over." I though "you know, he could have at least said "let's sleep on it" while they were on vacation....."

You don't necessarily make money by avoiding financing, but if you have to sell, you are likely to loose less.

 

[jodifla]

We did, we just paid for them out of pocket as the years went by and anything left over went to the savings account. Since then we have been on 2 Disney cruises and numerous trips. My father and I attend the NCAA Men's Hockey Championship every year. We put money toward a vacation fund every month. That fund has grown over the years as our vacations haven't caused us to spend it all. In my mind, I've not paid a 15% premium on vacations by financing them and have earned more money toward future trips by saving the money with interest (That was obviously more true the first 5 years of this plan than the last).

I'm not saying financing is bad or wrong, it just wasn't right for us. We have lots of friends who carry credit card debt and finance purchases we don't, we love them just as much as our friends who don't.

But you could have just put that money toward DVC, paid it off in a couple of years, and now had a paid-for asset.

I've had about 30 vacations to WDW in the past 14 years on my DVC. And I could sell my DVC for more than I bought it for all these years later, because I bought it back when it was so (relatively) cheap.

We bought back then for another reason....we were DINKS. Buying before we had children was another smart move on our part we felt, because once a child came along and one of us went part time, we could still afford to take great vacations, because our DVC was all paid for. We would not have wanted to put all that money out for rooms, now it's easy to stay in 1 bedrooms when we travel, or 2 bedrooms, and invite our friends.

You are paying a heck of a lot more for your points today then I paid 14 years ago, so I really don't see the cost savings. Frankly, I don't think I'd buy at today's prices; they seem too inflated to me.

Again, I just don't get the reasoning.

 

[Brian Noble]

Having lost my brother to suicide recently and losing many friends due to illness and accident makes it very clear to me that you cannot always just save for tomorrow because it tomorrow may never come.

I'm sorry for your loss. But, while it is true you could always live today as if tomorrow never comes, I'd personally prefer to play the odds. So far, tomorrow has always shown up, right on time.

I realize I'm indulging in a little hyperbole, but still.

 

[jlewisinsyr]

I'm sorry for your loss. But, while it is true you could always live today as if tomorrow never comes, I'd personally prefer to play the odds. So far, tomorrow has always shown up, right on time.

I realize I'm indulging in a little hyperbole, but still.

Right, it's a balance, everyone has their own comfort level of what that balance is. For us, it is financing items that we know we could pay for, but would rather leave money saved for a rainy day. Sure we pay some interest, but we also have a safety net for immediate and retirement use.

 

[loritemp]

Now I believe in saving, but I don't believe in not enjoying life either, there is a balance, everyone needs to find the one that works best for themselves while taking personal responsibility for their actions.

This is a lesson I learned a few years back and I am much better off for it!!!

 

[Dean]

I seriously hope I don't upset or offend anyone by sharing this (as in the potential seller). I'm watching resales and noted a 100 pt. BLT resale with an August use year. It had 200 points available, 2009 banked and 2010 (since we're now in August).

Given that August 2009 was the first August points that would have been available, unless there's some incentive I don't know about, it has never been used. Even if they got some really special price, say $100 per pt., that's still $10,000 for something never used.

I'm sure it will sell quickly but with the reseller's fee I'm fairly certain this won't be a break even or money making venture. I know it was financed, maybe I was told a bit more than I should have been when inquiring about it.

I don't think too many people finance a purchase to never use it or as an investment to resell in less than a year with intent. I feel horrible for whoever it is and hope nothing overly serious caused the need to sell a DVC contract never used.

Again, cash vs. finance is very personal decision and neither is right or wrong. But you just never know what may happen.

We've seen quite a number of hardship posts along this line in the last couple of years. Not all were financing issues, some were simply affording the dues when life happens. After SSR went on sale you saw a lot of listings where they bought, used the one time sales bonus and then tried to sell at break even or a profit. The number and nature of the listings made it clear they had bought with the idea of flipping in mind. I have no idea how it worked out for them though I'm guessing most didn't sell as much as the hoped.

Correct, you can always live your life saving for the next day or you can live life. Having lost my brother to suicide recently and losing many friends due to illness and accident makes it very clear to me that you cannot always just save for tomorrow because it tomorrow may never come.

Now I believe in saving, but I don't believe in not enjoying life either, there is a balance, everyone needs to find the one that works best for themselves while taking personal responsibility for their actions.

I too am sorry for your loss. I'll point out that some suicides are related to stresses associated with financing and that financial issues are the number one cause of divorce.

I'm not a naysayer but a cheerleader for most situations related to this issue. If one actually can afford DVC, they can figure out a way to have it within a reasonable amount of time without financing. I realize there are special circumstances such as that sweetheart deal, cash coming in, etc.

 

[jlewisinsyr]

I too am sorry for your loss. I'll point out that some suicides are related to stresses associated with financing and that financial issues are the number one cause of divorce.

I'm not a naysayer but a cheerleader for most situations related to this issue. If one actually can afford DVC, they can figure out a way to have it within a reasonable amount of time without financing. I realize there are special circumstances such as that sweetheart deal, cash coming in, etc.

My bro's suicide had nothing to do with money and I do not expect (nor really want) sympathy. It was a selfish act and I do have a lot of anger more then grief, but it put things in perspective that life is too short.

I think you're stretching the number one cause of suicide to fit your statement. The number one cause is money, not financing. It could be a loss of a job/income (self devaluation), making a poor financial decision with liquid assets and yes, it can be in part by debt, but it is not just anyone of these items.

If debt/financing didn't exist, in a broad sense - not just DVC, the world would not be as nearly as advanced as it is. Debt and the multiplier effect of it fuels growth. Now there is a healthly level of debt (again, broad sense) and excessive, we saw that latter during the financial meltdown.

 

[Kanga1]

We’ve been perfectly content in Modorate rooms (after determining that Values were just too "busy" for us after a while) up to this point, but after taking the DVC tour a few years back (and deciding the time wasn’t right then and passing) we decided to take another look at what the cost really would be if we financed. Well, the cost of our payments with financing PLUS our annual dues (paid monthly) for a year is within $200 of what we’ve been planning/budgeting/saving for, based on this year’s room rates, for our 2 Moderate rooms, and is over $1,000 less than what we’d be paying the years we need a third room. That is based on JUST paying the amount due every month (or as I look at it, the minimum payment.) Well, $200 overall is kind of our goal/wiggle room budget to consider the option to upgrade to AKL, in the event we got a significant discount code…

So for us, we realized that while we didn’t necessarily like the idea of financing vacation expenses, and we’d be paying a pretty penny in interest (IF we didn’t pay off early)we would actually be paying NO MORE out of pocket annually to finance DVC than we were already going to be paying Disney for our rooms. For us, it meant taking the same trips we were already planning, at the same time of year, but instead of 2-3 Moderate rooms, we’re getting a 1-2br Villa at AKL for the same out of pocket expense we were already budgeting for/saving/paying.
For us, THAT was the reason financing made sense in our situation. Also, 1 Deluxe resort room (depending on resort) can cost about as much as 2 Mod rooms, so YMMV based on your own vacationing habits.

See, we were considering financing DVC on this same way of thinking, but when we factored in the cost of meals, tickets, airfare, etc., the cost of the monthly payments of DVC took all of that money as well. Do you save for that stuff too, separate from your DVC payments?

 

[jlewisinsyr]

See, we were considering financing DVC on this same way of thinking, but when we factored in the cost of meals, tickets, airfare, etc., the cost of the monthly payments of DVC took all of that money as well. Do you save for that stuff too, separate from your DVC payments?

Not the poster you were replying to, but I know our DVC, Dues, Park Tickets, etc. during the finance period is still less annually then what we were paying for our annual trip to Disney at a Deluxe resort with all things being equal.

 

[WonderlandsMostWantd]

See, we were considering financing DVC on this same way of thinking, but when we factored in the cost of meals, tickets, airfare, etc., the cost of the monthly payments of DVC took all of that money as well. Do you save for that stuff too, separate from your DVC payments?

Yes, we do. We made the decision to finance based on what we already saved up/spent for our room expenses only annually. If it was over-riding our ability to pay for food, tickets, airfare, etc. it wouldn’t work with our budget.
Now, bear in mind our annual tradition takes us during the first half of December every year anyway, which is both value season for both Disney’s regular hotels AND DVC, so from a cash vs. points perspective, we’re currently looking at the lowest values of each. Also bearing in mind that our family consists of myself, my husband and my father, (hence the 2 Mod rooms, or 1-br DVC; dad’s stayed on the pull out with friends of his who have DVC and insists that he doesn’t want/need a whole bedroom to himself, though there will be times where we will get 2-brs)– all adults, no kids to pay for in addition to ourselves, which I have no doubt reduces our additional costs for airfare and food, more than many people going to Disney.

Essentially, I save a set amount out of EVERY paycheck, all year. In addition to that, there are 4 times a year where I’m paid for 3 weeks per paycheck instead of 2 (bi-monthly checks, my company chose this way instead of the 86.66 hours per paycheck method). Because the rest of my day to day budget is based around the 2 week paychecks I consistently get, we consider the money from the 3rd week “extra”, as in we do not have it earmarked for necessary expenses like bills, food, savings, etc. So, 4 times a year we can put that “extra” week’s pay directly toward the food/airfare/tickets/souvenir/spending money if we need to, or toward other luxury purchases. This does help our situation, but I also know how much I’d have to adjust my per-paycheck savings if my company or job situation every changed that 3 week check, and we can still live comfortably with that number also.

I’m certainly not saying my method and reasoning work for everyone, and I’m sure it doesn’t work for many. We ran a LOT of “worst-case-scenarios” before we purchased, seeing how our living budget and financial situation would be affected by the decision/commitment to purchase. The 1 factor that made financing worthwhile to us was that what we were spending on annual dues AND finance payments was the same as we were saving for, planning for, and budgeting for, for our lodging expenses ONLY.

We also had the 10% available for the down payment as well, without cutting into our trip budget for the year, so our annual cost decision was made strictly on monthly payments.

There are a lot of factors to consider, and it doesn’t work for everyone, no question about that. For us though, we were fortunate that it did work out.
I know I've given a lot of information here, but I want to make sure anyone who may try to apply our logic to their situation, has a realistic picture of our situation to compare it to. Remember first and foremost, what works for one, does not work for all.

 

[WonderlandsMostWantd]

To me, one thing also worth noting, but easy to overlook in the excitement of the idea of DVC, and amidst the DVC love-fest we find on DISboards (which is VERY easy to get wrapped up in) is that for years before, and for years to come, people have had, and will continue to have, amazing Disney vacations without DVC, or any timeshare for that matter. Every day, 10’s of thousands of people go to Disney parks; some stay on property, some stay off property, in every level of hotel, in tents and campers, in friends and families homes, motels, etc. All of those people have the same potential to have the trip of their lifetime, wherever it is they wind up staying while visiting. Every single day thousands of people have fantastic, magical, quality family vacations to Disney World, without ever so much as setting eyes on a single DVC property.

You don’t NEED DVC to have a great trip – it may afford options and opportunities that other lodging might not, but conversely, other lodging will afford options and opportunities that DVC doesn’t. (Full kitchen in the room vs. free dining promotion vs. being off site) Once the idea of DVC works its way into your consciousness, it’s easy to wind up with tunnel vision, and try to find ways to justify that you need it; to try to find ways to “make it work”, to look at the perks that come with DVC as necessary elements of your future vacations and ways to justify that you must have it in order to really vacation the way you want to now and in the future (even if you never had them before, and never considered them necessary unily you knew they existed and you were "missing out" on them)… but the majority of people were enjoying themselves just fine before they even know DVC existed, and far, far more than not, will continue to enjoy Disney without ever even staying at a DVC resort.

If you’re (and all of this is directed at ANYBODY, not any specific person) running the numbers over and over, trying to justify the cost/expense to yourself, trying to find ways to cut corners to afford DVC, trying to bargain with yourself that it’s worth giving up things you want, or need, trying to find a way to spend money you know you just can’t afford to spend, just to make DVC work, then take a deep breath, sit back and remember all the times that you went and had a fantastic time without DVC, and remind yourself that not having DVC isn’t going to prevent you from having great vacations, and great family time – it hasn’t stopped you before, it’s not going to stop you now. Not getting something, something that you don’t have now, and don’t actually NEED, isn’t going to change your life in any way! Go to the resort boards and read the “fan” threads for the non-DVC resorts you have stayed at, or will stay at instead and get excited about those again. IGNORE THE DVC BOARDS! Lol Don’t let other people’s enthusiasm make your financial decisions for you!

And, don’t let other people’s financial positions make you feel differently about your own, good or bad. The only person in our lives that any of us has to answer to at the end of the day is our self. Just because someone else can afford DVC and you can’t, doesn’t make them better, and doesn’t make you any less than them. For many of us on the DIS, considering DVC, this is an easier thing to lose track of than many people would realize. I repeat, don’t let other people’s enthusiasm make your financial decisions for you!

 

[bumbershoot]

See, we were considering financing DVC on this same way of thinking, but when we factored in the cost of meals, tickets, airfare, etc., the cost of the monthly payments of DVC took all of that money as well. Do you save for that stuff too, separate from your DVC payments?

You have to save for those things, of course! Just as an idea, we have 160 Bay Lake points, preferred 10 year financing (we just paid off our car, and as soon as this trip is done we're paying off DVC as fast as possible) and normal down payment, and we pay 226 for the payment and 46 in dues per month.

For awhile it felt hard to find the money for the actual trips along with that, but then we actually started telling our money where to go (we financed DVC *just* before news of a layoff hit, then we found Dave Ramsey but decided to keep DVC, and it's been an interesting year to say the very very least!) and realized we had more "extra" money than we ever knew we had...and then saving for trips became easier.

Not everyone wastes as much money as we were wasting so not everyone has that "extra" floating around once they get bonked with a clue stick like we were, LOL (not that anyone else needs that...but WE did!). Anyway, if we hadn't had our interesting year we might be making payments on Bay Lake without any way (we thought) to pay for the actual trips...so you definitely have to look at YOUR budget.




Dean, you meant "finances", not "financing", yes?

 

[Dean]

My bro's suicide had nothing to do with money and I do not expect (nor really want) sympathy. It was a selfish act and I do have a lot of anger more then grief, but it put things in perspective that life is too short.

I think you're stretching the number one cause of suicide to fit your statement. The number one cause is money, not financing. It could be a loss of a job/income (self devaluation), making a poor financial decision with liquid assets and yes, it can be in part by debt, but it is not just anyone of these items.

If debt/financing didn't exist, in a broad sense - not just DVC, the world would not be as nearly as advanced as it is. Debt and the multiplier effect of it fuels growth. Now there is a healthly level of debt (again, broad sense) and excessive, we saw that latter during the financial meltdown.

I realized up front your situation did not seem financial related, I had hoped my wording would have conveyed that realization. If you'll reread my post you'll see that I referenced money issues (actually the stress associated) in general terms as ONE issue for some suicides and as the number one issue for Divorce. I don't know where money stands for suicide. No timeshare has ever been foreclosed without a loan, however, financing is only one issue of many. No doubt there are many others, and some beyond anyone's control, this is one that can be controlled by those willing to do so.