Pay cash or finance

[808blessing]

Closing costs are a bummer on the small contracts. I'd have to sell for 30% above original pp purchase to cover high closing and sales commissions. If you know what you definitely want 100% then go for the big one! If not sure, bite-sized pieces are great. I did a small contract because I jumped at DVC resale availability once I found out about it and did the math for what it looked like to keep it. Later I found out what 'else' I wanted, so I took those add-on opportunities too. I wish I could erase all the closing costs but I really like the combo of points I got (resale, direct, resale). I will likely never sell, though having a small contract gave me a bit of insurance in case I did want to or needed to do a quick sell in the future. So it was just part of the journey. I am an all-cash, no car payment/college loans kind of person so that's always the answer for me. I like one steady stepping stone at a time. I now know selling is not such an easy/profitable thing unless you bought a long time ago, even with a loaded contract.

 

[DLgal]

Get a personal loan through your bank or credit card, if you have good credit. AMEX keeps offering us a personal loan up to $20,000 at 5.9%. I'd use something like that or a combination of charging it and using credit card balance transfers at low rates (like 0% for 18-24 months with a 1 or 3% transfer fee). I'd charge it to my Disney Visa, take advantage of the 0% for 6 months, get those Disney points (2% back with Premiere Visa) then balance transfer for another year or two until it is paid off. After taking into account the Disney rewards, you'd be paying an effective 1% interest on a 3% balance transfer fee by using the balance transfer strategy, assuming you have large enough lines of credit.

There are smart ways to finance things.

 

[TheEnforcer92]

What are everyone's thoughts on starting off with a small contract (50-75 points) as cash via resale and then adding on more each year (provided UY is the same) VS buying a larger contract and needing to finance with a larger down payment accordingly?

 

[stwaldman]

What are everyone's thoughts on starting off with a small contract (50-75 points) as cash via resale and then adding on more each year (provided UY is the same) VS buying a larger contract and needing to finance with a larger down payment accordingly?

You still have the closing costs issue which is up to you how much that is a pain worth tolerating. A larger contract may be harder to offload of that matters at all, so that may tip you in favor of smaller contracts. Also consider if you're a person who may consider multiple short visits each year (i.e. maybe you benefit from 75 points on the monorail loop and 50 near Epcot) or if you plan a week+ trip (and may benefit from the booking power of one big point contracts at 11 months). These are things that are up to the purchaser

Editing to note only you know your specific finances/cash flows as well. Multiple contracts may keep you more liquid, but keep in mind each year of park visits mayy involve $1-2k of tickets and meals, etc. so you may not be able to bank on an annual cash purchase depending on your vacation budget.

 

[fumanchu2488]

We were a bit naive when we purchased in 2019. We bought 100 points direct at RIV at $188 per point. We decided to finance through Disney but put it on a very fast payoff track. We put 20% down to get the lower rate (9%) and paid it off in 10 months. In total we paid a few hundred dollars in interest.

We are looking at a small add on of around 60 points. We found out a way to extend payments with no interest. First, if you talk to a manager when working with your guide they can spread out your payments over 60 days. I have heard that some even go 90 days. Then you can put remainder on Disney Visa with 6 month 0 interest. Essentially you end up with about 8 months of time to pay with no interest. So for us, with closing costs our contract will be about $13k and we will pay that off within our 8 months.

Not financing through Disney also means you don’t have to deal with the mortgage and notary and stuff. You can do everything with docusign as long as you don’t need a mortgage.

 

[fixerupper]

I would never do the ten year at 12% or whatever Disney tries to get you to sign on for. I got a LightStream loan, paid about 1/3 up front and paid off the remainder in less than a year. About $450 in interest. Sitting poolside at BLT on our first DVC trip as I type this, so I think it was worth it

 

[808blessing]

I had to do a notary when I paid cash for Aulani. For resale I took care of it at my bank and the direct one was via Disney online conference call.

 

[AdamsMum]

but with the rate at which prices are climbing, my wife and I went for option #2.

I agree. How would you be paying for your Disney vacation? Do you go every year? I was going every year, and I wanted to stay in a better resort (that was BWV). I didn't finance my purchases through Disney I'm in Canada and that seemed too complicated. My first one, I had enough saved to pay cash outright. I bought small contracts, paid what I could out of vacation savings, used my low interest line of credit, paid it off within a couple of months then looked for another contract. I purchased 2 resale, and 2 direct this way. In those days the prices were only increasing a few dollars per point each time, but I'm not comfortable with big debt, and the minimum buy in at the time was 160 points for new members. Now point prices increase substantially sometimes more than once a year. I now have contracts that are worth twice what I paid for them. Can you get a decent interest rate and afford to make the payments? Bear in mind that the room is only a part of the cost of your vacation. It's a personal decision, only you know what will work for you.

 

[emilymad]

We did two small contracts 9-10 years ago and now we are looking to another small add on. We are in the camp of if we can't pay cash we can't afford it. It has served us well and it has allowed us to see exactly how many points we use and need instead of over buying. We are trying for a 50 point add on now instead of the 100-125 points we may really want because it is what currently fits our budget.

 

[EYL]

In general, I advise to finance responsibly. Know that the interest of your loan goes against any savings you perceive. Know that a 10-year loan of $10,000 at 10% interest (a typical Disney loan) means that after the whole term, you would have paid over $5800 in interest. Know that if you add an extra 10% to your monthly payment for that same loan, you will save close to $1000 in interest after the whole term. Know that you can take out a personal loan, or use a home equity loan to save significantly on interest. Know if you can make timely payments. If the value of that additional expenditure is in your benefit, then I say "go for it"!

When I purchased resale, I took out a personal loan with Lightstream that I returned quickly thereafter. Good thing I did, because I had put in an offer before Disney announced the resale restrictions and the contract went into ROFR before the January 19, 2019 deadline. Had I waited until I had all the cash in hand, my resale points would have been restricted to the O14 only. The extra interest that I paid, allows me to use my points at Riviera and at all future resorts, so it was definitely worth it to me.

What are everyone's thoughts on starting off with a small contract (50-75 points) as cash via resale and then adding on more each year (provided UY is the same) VS buying a larger contract and needing to finance with a larger down payment accordingly?

I think what everyone needs to consider now is "will Disney put more restrictions on resale points?" By buying a small resale contract now and planning to add on more resale points later, you are betting that future resale points will be equal to your current resale points. If you aren't willing to take that bet, then the value of that loan will be up to you to decide.

 

[sethschroeder]

Just have to do the math. It will then outline how much more or less you will be paying vs cash.

For resale I just paid cash and for direct I put it on the Disney Visa for the 6 month 0%. In addition with direct you can basically ask for extended payment terms up to 90 days for the majority of the contract cost to really get 9 months at 0% interest.

Bought in August just now taking the money out of my bank account.

I would say though personally I would never finance DVC but I know some people need to otherwise they would never buy DVC.

 

[Stargazer65]

I was saving to add on for a while, but ended up buying twice the points I saved up for last year. What I did was tap into the bond portion of my 401K with a general loan to bump up the amount I could spend. The upside to this is there is no interest on the borrowing, and what with bond yields being what they are, probably not a big loss in growth. The downside is I need to pay it off in 5 years, or I take a tax hit on the balance because I am only 55 right now and can't take it as a distribution without the 10% penalty. The risk of that is pretty low though. I probably would have tapped into it to add on in 5 years anyway, and ended up spending a larger amount for the same points. It seems like last year was a good time to buy resale so it may have been an okay choice. Generally I wouldn't recommend doing the same thing with your retirement fund, but I did lol... I don't know where you're at in life, or what options you have. (This post does not constitute financial advice, using funds from your retirement fund may involve the risk of loss, YMMV, blah, blah, blah)

 

[DianeW]

We paid cash on our first contract, and our paying cash now for our second. I hate acquiring debt for luxury items like DVC, so financing was never an option for us.

 

[cgodzyk]

We financed, but paid off the first loans in 10 months. The 2 contracts we bought this year will be paid off in roughly 7 months. For us, we knew we could pay off the loans within the year and we would use the points this year so it made sense.

There really is no right or wrong. Only what you are comfortable with.

 

[DonMacGregor]

I was already looking at a refi on my home mortgage, with all the great rates out there right now. Went from 4.875% down to 2.25%. Took $20k out in cash for DVC (still leaving $245k in equity), and STILL have a mortgage payment $400 less per month than I had. While I've obviously just financed my DVC for 30 years, it doesn't FEEL like it... LOL. And, I won't be in this house for that long anyway.

 

[LYSE]

Just make sure to factor in your interest in your cost per point per year calculation, we financed twice and had both loans for less than 1 year, it was mostly an instant gratification thing but with rising prices it worked out.

 

[sugliac]

Depends on the rate. I know that money is "cheap" right now so if you can get a good finance rate then it makes sense. Obviously Disney's rate(s) are terrible.

 

[meanwoodwhite]

As long as you can afford the payments and get a decent rate there is nothing wrong with finance.

If I had taken people's advice on here not to finance my resale contract and save to pay cash I would have to pay about 30-40% more today than 16 months ago. Which is wayyy more than the interest im paying.

 

[davidl81]

As long as you can afford the payments and get a decent rate there is nothing wrong with finance.

If I had taken people's advice on here not to finance my resale contract and save to pay cash I would have to pay about 30-40% more today than 16 months ago. Which is wayyy more than the interest im paying.

Yeah that's the kicker in all of these calculations. Clearly prices either direct or resale wont grow 30% per year, but it seems like in general DVC prices have risen about 5% a year if taken as an average over the last ten years (I sure that is not 100% correct math, but I bet it's not far off). So let's say you get a personal loan for 6% or heck let's go worse case Disney at 8.99% for 5 years. At 8.99% you basically have an effective interest rate of 4% when factoring in the increase in DVC prices. Then you can run the math of how much would you have "saved" by having access to your own DVC points five years earlier versus saving the cash (time frames of course will vary). Point is you can make the math work out with the assumption that DVC prices rise at it's basic historical rate.
Does anyone on here have an idea on the percentage of buyers overall who finance? My gut feeling is it would be something like 80% when buying direct from Disney, and a decent amount less on resale, but that is a total guess.

 

[zombieScar24]

I'll echo the common sentiment of being realistic of what you can afford. Yes, it's great to have $30K lying around. For some that can take a year plus. IF you know that is the case for you, then financing and paying off before the term of the loan is very viable. Like others mentioned, go the lightstream (Suntrust) or Egg loans which can get you around 5-6% depending on your credit. Another option that is very dependent on your overall financial situation is refinance with a cash-out option on your mortgage. Rates are so low right now that if you haven't refinanced in the past year, I don't know what you're waiting for. Real life scenario is that by taking out enough to pay off a car and a sizeable DVC contract would only net a higher monthly payment of less than $300. Very dependent again there, but with the payment savings and the knowledge that we can pay above min payments monthly made this a no brainer.
That said, if I was only looking at a smaller DVC purchase <150 then I would say just save enough to either pay it off, or set yourself up to pay it off in less than a year or two.