Opinions on financing

[jlewisinsyr]

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.

Confused...from reading your first sentence it sounds like you are stating the timeshares are not foreclosed on without a loan. But I think you're forgetting failed payment of dues/taxes...which can be a huge portion of foreclosures with or without a loan balance.

 

[Dean]

Confused...from reading your first sentence it sounds like you are stating the timeshares are not foreclosed on without a loan. But I think you're forgetting failed payment of dues/taxes...which can be a huge portion of foreclosures with or without a loan balance.

Foreclosure would be on a mortgage, that's why I said it was only one of a number of factors.

 

[Ka-chow!]

You guys made have made some good points. I like those arguments that we use finance for life's necessities when we must, but pay cash for life's luxuries. All things Disney are entertainment and therefore, fall in that "luxury" category. I love that Dave Ramsey's quote, "Act your wage." We all would like more than we have, but we have to keep that urge in check.

 

[marynvince]

You guys made have made some good points. I like those arguments that we use finance for life's necessities when we must, but pay cash for life's luxuries. All things Disney are entertainment and therefore, fall in that "luxury" category. I love that Dave Ramsey's quote, "Act your wage." We all would like more than we have, but we have to keep that urge in check.

One could argue that a 3,000 sf house is a luxuy vs a 2,000sf house. What about a car that provides anything more than basic transportation.

It all comes down to personal choices and perspective. We all rationalize the decisions we make and then we try to confirm those rationalizations by seeking confirmation from others.

 

[crisi]

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.

Ours are a lot more - and we just have dues. Not that I'm complaining, but DVC changed the way we do Disney. We go more often, stay for longer, eat out at nicer places (especially now that nicer places are the only place to get edible food). Its a good value, but it hasn't saved us money.

There has also been a lot of inflation in the costs associated over the past ten years - park tickets, food and airfare have all gone up a lot. We've been fortunate in that our incomes have more than kept up with inflation, but the "average" American has had stagnant wages over that period of time.

Had we not owned DVC we'd have stopped going to Disney by now and stopped spending our money on Disney. We are holding on because we have friends we've promised to take when their children are old enough....and they haven't had children yet (not for lack of trying)... and my daughter isn't quite done. But the end is, I think, in sight now for us. I used to be pretty undecided on keeping it when the kids were gone, but unless something changes at Disney, its gone when the kids leave.

marynvince - those things ARE luxuries. No one is saying you shouldn't have luxuries. You shouldn't purchase luxuries on credit. If you NEED a car, you should finance the least amount of reliable car that will get you to work - assuming you can't pay cash. When that is paid off and you've saved up, if you want to buy a BMW, go for it. My first house was 650 sq feet.

 

[rsinj]

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. ...

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. ...

I don't want to re-quote your entire post for space purposes, but you are entirely correct. It is easy to become a member of the cult-like culture here and not necessarily do what's right. In general, all timeshares operate similarly.

When we purchased 10 years ago, I ran the numbers over and over to understand if/how we'd be saving and understanding where that savings came from. We purchased entirely with cash (ok - entirely on credit card before bill was due in a few weeks, which was immediately paid) and made back the initial purchase price probably two or three times over by managing our points/stays.

I think that in many (maybe most) cases where people buy DVC, they do it for the wrong reason, they really cannot afford it, and then you end out with the sea of contracts which are currently listed on the resale board.

Key point which people need to take away from your post, is that DVC is an option. It is not a requirement, and most people should probably think longer about it, if they really need it, if they can really afford it, and if it will really make such a difference in their enjoyment to justify the cost.

Again, great post.

 

[Dean]

One could argue that a 3,000 sf house is a luxuy vs a 2,000sf house. What about a car that provides anything more than basic transportation.

It all comes down to personal choices and perspective. We all rationalize the decisions we make and then we try to confirm those rationalizations by seeking confirmation from others.

Exactly, many of the other things in life ARE luxuries and we all must make those choices. The current economic issues are in part du to people who bought houses they couldn't afford and the lenders who were complicit. IMO, that people make other bad choices only makes it more important that they not finance fringe items like timeshares.

 

[mike9950]

Just to chime in my 2 cents on financing this kind of purchase:

Ideally, I would recommend simply paying cash as the "ownership" would feel more "magical" in my opinion.. It's like you suddenly own the points and are all set. However...

If you are going to finance, and you really want to purchase points I would say go for it only if the monthly payments and dues place no financial burden on you. In otherwords, if you have a habit of going out to dinner to a fancy restaurant once per week (which could cost $150/month) and you decide to cut back on that expense to replace with the purchase of your DVC points I do not see any problem with it.

Of course, it's a personal decision -- but life is short. Enjoy life but don't make decisions which would cause you financial stress.

 

[Ka-chow!]

One could argue that a 3,000 sf house is a luxuy vs a 2,000sf house. What about a car that provides anything more than basic transportation.

It all comes down to personal choices and perspective. We all rationalize the decisions we make and then we try to confirm those rationalizations by seeking confirmation from others.

I appreciate there are gray areas, and sometimes it is nebulous to determine what is a necessity and what is a luxury. I do like how you used the Argument of the Beard (i.e. taking baby step toward the other end of the spectrum) in your first paragraph. However, that's a fallacious way to make a point.

I generally agree on your 2nd paragraph. People can rationalize anything, even paying a 10-13% interest rate on a timeshare (oops, sorry, I meant to write "real estate interest"). But the thread is about whether DVC financing is a good or bad financial choice. If 10-13% works for somebody, go ahead, it their right.

If you are going to finance, and you really want to purchase points I would say go for it only if the monthly payments and dues place no financial burden on you. In otherwords, if you have a habit of going out to dinner to a fancy restaurant once per week (which could cost $150/month) and you decide to cut back on that expense to replace with the purchase of your DVC points I do not see any problem with it.

Of course, it's a personal decision -- but life is short. Enjoy life but don't make decisions which would cause you financial stress.

Good points.

 

[Sandisw]

Just to chime in my 2 cents on financing this kind of purchase:

Ideally, I would recommend simply paying cash as the "ownership" would feel more "magical" in my opinion.. It's like you suddenly own the points and are all set. However...

If you are going to finance, and you really want to purchase points I would say go for it only if the monthly payments and dues place no financial burden on you. In otherwords, if you have a habit of going out to dinner to a fancy restaurant once per week (which could cost $150/month) and you decide to cut back on that expense to replace with the purchase of your DVC points I do not see any problem with it.

Of course, it's a personal decision -- but life is short. Enjoy life but don't make decisions which would cause you financial stress.

To an extent, this was how we looked at it when deciding whether or not we would finance. We ended up not having to because I used my Disney Visa which gave us the time needed to have all the money to pay it off in cash.

However, we knew we would continue to vacation at WDW every year and I always paid cash for the trips. My vacation budget averaged $5000 - $7000 a year.

What we decided was that if we could buy DVC, financed or not, and still all our costs (MF's, monthly payment, airfare, tickets, food, spending, etc) come within this same figure, then we were in no different spot.

To us, whether we paid the money toward a hotel room or toward a DVC payment, was immaterial as both were considered "vacation" expenses. Now, I agree that when you take on the payment, you are committed, but our situation was such that we were comfortable that our pattern of vacationing and paying for it would continue.

I think everyone has to decide how to budget their own financial resources and at the end of the day, be comfortable that the decision is right for you.

 

[crisi]

Just to chime in my 2 cents on financing this kind of purchase:

Ideally, I would recommend simply paying cash as the "ownership" would feel more "magical" in my opinion.. It's like you suddenly own the points and are all set. However...

If you are going to finance, and you really want to purchase points I would say go for it only if the monthly payments and dues place no financial burden on you. In otherwords, if you have a habit of going out to dinner to a fancy restaurant once per week (which could cost $150/month) and you decide to cut back on that expense to replace with the purchase of your DVC points I do not see any problem with it.

Of course, it's a personal decision -- but life is short. Enjoy life but don't make decisions which would cause you financial stress.

Although there is a big difference there in that one is a discretionary line item in your budget and the other is an obligation. If you get laid off and you have expensive dinners in your budget, you cut them - its one of the easy places to cut. But a mortgage on DVC is an obligation - you'll need to keep paying on it, or sell (likely at a loss at this point), rent the points (which carries its own headaches or risk), or let Disney reclaim the contract (and loose your downpayment and whatever payments you made).

A lot of people over the past two years thought that the payments they undertook originally easily fit into their budget, and ended up having a lot of financial stress over them. Its hard to have a crystal ball, and life IS short, but its also economically uncertain - especially right now.

 

[jerivera]

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.

...

You can't get the time back that you mssed, or the memories you would have created, especially with kids, if you wait until you have the money.

I say finance smartly and enjoy your time on earth. Good Luck.

Ditto.

I really don't know why cash vs finance is such a big issue. If you can afford it, buy it. If you have the cash, then use cash. If you don't, finance.

If you can't afford it, don't buy it, either with cash OR through financing.

What is the big deal? This is a weird thread in a way. At a point, the discussion turned from "cash vs. financing" to "suicide is caused by financing". Freaky!

Anyway, enjoy your Disney vacations everyone! Not a DVC member yet, but will be next year. And will finance.

 

[mike9950]

Although there is a big difference there in that one is a discretionary line item in your budget and the other is an obligation. If you get laid off and you have expensive dinners in your budget, you cut them - its one of the easy places to cut. But a mortgage on DVC is an obligation - you'll need to keep paying on it, or sell (likely at a loss at this point), rent the points (which carries its own headaches or risk), or let Disney reclaim the contract (and loose your downpayment and whatever payments you made).

A lot of people over the past two years thought that the payments they undertook originally easily fit into their budget, and ended up having a lot of financial stress over them. Its hard to have a crystal ball, and life IS short, but its also economically uncertain - especially right now.

You made a great point. The only other thing is because things can change at anytime, if financing, I would target to pay off the contract ASAP (by adding extra payments as quick as possible, etc). This way if something does happen, it'll hopefully be paid off by then or almost paid off.

 

[crisi]

You made a great point. The only other thing is because things can change at anytime, if financing, I would target to pay off the contract ASAP (by adding extra payments as quick as possible, etc). This way if something does happen, it'll hopefully be paid off by then or almost paid off.

Although at that point:

You can EASILY fit the payments in your budget.
You are going to pay it off early and fast.
Payments PROBABLY means you are buying direct.

You can quite possibly delay DVC for one year and manage to find a resale contract without needing to finance at all. It may not be at the current resort or your favoritest resort, it may not be as many points as you'll eventually end up with. It may mean skipping a Disney trip for a year and doing something else, or skipping the Deluxe stay and staying offsite in a skyauction condo.

 

[jodifla]

Really, it's NOT that big a deal to finance. Some people sure like to get up on their high horse about it.

I'm not so sure I'd finance at these high rates though. Because we made our decision so long ago, when points were roughly HALF of what the they are going for now, the financing was only 5 years and the payment was small...200ish a month?

We simply funneled our vacation money that we would spend into lodging into DVC. And we mainly took DVC trips during that time, so we weren't spending other money.

Of course back then, the economy was strong, we both had great jobs, and we weren't worried about not being to meet the obligation.

Financing for us was VERY SMART, because we have a paid off asset now, unlike the people who have been just "looky lous" for the past 14 years.

 

[crisi]

Really, it's NOT that big a deal to finance. Some people sure like to get up on their high horse about it.

I'm not so sure I'd finance at these high rates though. Because we made our decision so long ago, when points were roughly HALF of what the they are going for now, the financing was only 5 years and the payment was small...200ish a month?

We simply funneled our vacation money that we would spend into lodging into DVC. And we mainly took DVC trips during that time, so we weren't spending other money.

Of course back then, the economy was strong, we both had great jobs, and we weren't worried about not being to meet the obligation.

Financing for us was VERY SMART, because we have a paid off asset now, unlike the people who have been just "looky lous" for the past 14 years.

Yep, you financed in a different time when there were different risks.

I'll pull numbers out of the place made up statistics come from.

A very small minority of the people who finance DVC are making a WISE decision. They are using leverage, understand the risks. We've seen those folks here in the past - they DO exist. They are usually the ones that COULD pay cash, but are getting a decent return on their money, don't use Disney's expensive financing, and come out ahead in the end.

Another group of people - a bigger group - but my guess is its still a pretty small minority - are making a good decision to finance DVC. These are people who are sitting about as stable in this economy as you can, who have the budgets to easily afford the payments, are making the "right" financial moves for long term stability (have savings, are funding their retirements, etc.) but not the liquid cash on hand. This is probably where you were. And for anyone who is offended by this, put yourself in this group.

The majority of people are not making a good decision. They are financing a luxury in order to have it NOW - which is not a good sign regarding their overall financial discipline - what else will they finance to have it now? They wouldn't dream of making a short term sacrifice (for instance, one year without Disney) to get long term gain - which makes me wonder how fast they'd be able to trim the fat from their budget if they really needed to. They are not in a stable place regarding assured continued income (and as you noted that group has gotten a lot bigger over the past few years - where people who thought they were recession safe are looking for work). They don't have savings and look at the idea of saving $15,000 to pay cash as an "impossible" task - which should clue them into $15,000 being a lot of money for them.

There are probably a few more less common cases out there - we had a "transition loan" for about a week waiting for cash we knew was coming to arrive. It was a timing thing and probably not great, but not horrible given the source of the money and where we were financially. I think we ended up paying $17 in interest.

 

[jodifla]

Yep, you financed in a different time when there were different risks.

I'll pull numbers out of the place made up statistics come from.

A very small minority of the people who finance DVC are making a WISE decision. They are using leverage, understand the risks. We've seen those folks here in the past - they DO exist. They are usually the ones that COULD pay cash, but are getting a decent return on their money, don't use Disney's expensive financing, and come out ahead in the end.

Another group of people - a bigger group - but my guess is its still a pretty small minority - are making a good decision to finance DVC. These are people who are sitting about as stable in this economy as you can, who have the budgets to easily afford the payments, are making the "right" financial moves for long term stability (have savings, are funding their retirements, etc.) but not the liquid cash on hand. This is probably where you were. And for anyone who is offended by this, put yourself in this group.

The majority of people are not making a good decision. They are financing a luxury in order to have it NOW - which is not a good sign regarding their overall financial discipline - what else will they finance to have it now? They wouldn't dream of making a short term sacrifice (for instance, one year without Disney) to get long term gain - which makes me wonder how fast they'd be able to trim the fat from their budget if they really needed to. They are not in a stable place regarding assured continued income (and as you noted that group has gotten a lot bigger over the past few years - where people who thought they were recession safe are looking for work). They don't have savings and look at the idea of saving $15,000 to pay cash as an "impossible" task - which should clue them into $15,000 being a lot of money for them.

There are probably a few more less common cases out there - we had a "transition loan" for about a week waiting for cash we knew was coming to arrive. It was a timing thing and probably not great, but not horrible given the source of the money and where we were financially. I think we ended up paying $17 in interest.

I think this is a good assessment that sums it up nicely.

For me, I get aggravated when people try to claim ALL financing is ALWAYS bad for luxury items. Now, you might make the case that it is now because of the times we live in. But back in 1996, in our case, where we had no kids, a small mortgage, and two very stable jobs, we saw our window of opportunity that would not be there once we had a child.

So now, I see all these people who have been saving for 10 plus years, when they could have financed and had the whole thing paid off five years ago or more. Meanwhile the points have climbed and climbed and climbed in price.

Particularly if you live in Florida, WDW can be pretty inexpensive deal that makes DVC very worth it. We went 3 to 5 times a year when we lived in Fla. or shorter trips. We drove, we took food, we had our Fla. resident passes. It was a pretty cheap vacation for what we paid outright.

We have to fly now, so our trips tend to be a year off, with two to three trips in 12 months on an AP, then a year off, etc.

But we are sure grateful we have those DVC points for just our dues, particularly every time we walk into a Days Inn and spend $100 a night for a not very nice room.

 

[JWG]

There are probably a few more less common cases out there - we had a "transition loan" for about a week waiting for cash we knew was coming to arrive. It was a timing thing and probably not great, but not horrible given the source of the money and where we were financially. I think we ended up paying $17 in interest.

We did this when we moved last, it allowed us to close on the new house ahead of the old so we could move without having to figure out where to put our belongings between. It was a stress at the time, not because of the bridge loan, but because we were on the hook for two houses for two days. We also paid probably $15 in total interest.

For me, I get aggravated when people try to claim ALL financing is ALWAYS bad for luxury items. Now, you might make the case that it is now because of the times we live in. But back in 1996, in our case, where we had no kids, a small mortgage, and two very stable jobs, we saw our window of opportunity that would not be there once we had a child.

True, some luxury items have to be financed (2nd homes at the lake, a boat, a plane, etc.) typically. I think the previous poster's summary caught the big gap in this situation. DVC (and timeshares in general) appeal to that 3rd audience. The people who probably can't or shouldn't afford the type of vacation that the timeshare offers more so than some of those other items do. When you take that trip to Disney and you're in the middle of having such a great time -- you want to do nothing more than come back (and have a reason to come back).

I don't thinkg that group is represented heavily here. People who take the time to research, understand and learn don't put themselves into that situation. So far, most of the people here appear to pay their loans off quite quickly compared to their terms.

Often times, I don't think it's the DVC itself that puts people upside down, it's the unaccounted for costs - more travel costs (gas or plane tickets), more food (and expensive food if at the parks/resorts), more tickets, etc.

I don't think most of the "don't finance" people are trying to be "high and mighty" (at least I'm not), just trying to be sure those thinking about it aren't in that 3rd category.

We did think about financing our recent purchase. We could have done a larger points purchase then we did, and had things gone south, paid it off with other savings. Our decision was not to, to make sure we didn't have to dip into other funds/monies that we may want use in other places if need be.

Again - it's a personal decision and hopefully everyone makes a smart one, for real, not "smart" in their heart but not their head.

 

[crisi]

For me, I get aggravated when people try to claim ALL financing is ALWAYS bad for luxury items. Now, you might make the case that it is now because of the times we live in. But back in 1996, in our case, where we had no kids, a small mortgage, and two very stable jobs, we saw our window of opportunity that would not be there once we had a child.

My take is that the first two groups are so small, and generally know who they are, and the downside risk for the third group is severe enough that the generalization is not 100% accurate, but it doesn't do anyone any favors to encourage financing. If you are the type of person who fits into the first two groups, you know it and don't need to justify your financial decisions to anyone. (No one really needs to justify their financial decisions to anyone - well, maybe if you need to talk to the bankruptcy judge). But to dangle DVC in front of the third group and encourage financing in order to have it now - which plays into a lot of the reasons financing is a bad idea for that third group - that seems mean.

I got lucky in the genetic lottery and have a pretty good metabolism. Plus I exercise and am pretty fit. Which means I can splurge on dessert once in a while. But I don't go out with my overweight friends and say "oh, you should have dessert - its so worth it!" Financing threads around here often seem to be that - we don't really have much idea of the situation at the other end of the internet - but we throw numbers around to "prove" that DVC is such a great deal that you'd be foolish not to do it - even if you have to finance. Then we make it sound like everyone gets addonitis and ends up with 500 points at multiple resorts and goes a few times a year and - lets face it - most of us have an inner ten year old screaming to ourselves "but EVERYONE ELSE......" But we are strangers on the internet, we aren't the ones who have to live with the payments.

 

[Brian Noble]

maybe if you need to talk to the bankruptcy judge

Or, perhaps, your spouse.

I'm in complete agreement with Crisi. I suspect that for *most* people who ask "Should I finance?" the right answer is "Probably not." Those for whom it is not necessarily unwise probably aren't asking---they already know.