Prespectives on Financing

[toniosmom]

But keeping that extra money in the bank is gonna help if something happens and I end up NEEDING a new car or major repairs.

I agree with this point. With the economy as it is, and unemployment as high as it is, I'd rather have the money in my bank account "just in case" and make a monthly payment to DVC.

 

[redboxcar]

I'm not a DVC owner so I don't know how much my opinion counts (hehe) but while I would PREFER not to finance just because I think it's easier, I wouldn't MIND financing, even at Disney's rate, if I needed to.

I look at it like my car insurance.

I can pay one 6-month lump sum of $600 (rounded for easiness). If I want to pay it monthly, I have to pay $10 extra per month for breaking it up (that is, $110/mo). In the end, that's $60 in fees just for wanting to pay monthly. HOWEVER, it's worth it for ME, PERSONALLY, to pay monthly - even if I'm paying a 10% premium - because at any given time, it's EASIER for me to pay $110 per month rather than coming up with $600 once every six months.

Does that make sense?
It makes sense to me, hehe.

I guess what that means is: if I have $10,000 to pay for a DVC contract, then of course I'll pay it. But if I want to buy DVC and I don't have $10,000 sitting in the bank - but I DO have $500/mo spending money - then I'd rather pay the monthly, even if it means I pay more in the long run. (Yes, yes, I could save my $500/mo for 20 months and come up with $10,000 in savings, but that's just not as fun )

 

[texhanddoc]

I guess what that means is: if I have $10,000 to pay for a DVC contract, then of course I'll pay it. But if I want to buy DVC and I don't have $10,000 sitting in the bank - but I DO have $500/mo spending money - then I'd rather pay the monthly, even if it means I pay more in the long run. (Yes, yes, I could save my $500/mo for 20 months and come up with $10,000 in savings, but that's just not as fun )

I dont think that is the way to think about it. Lets just boil financing down to what it is: I dont have a lot of money and I cant pay for something I want, thus I am going to pay a bank extra money to lend me the money to buy what I want.

In the case of DVC at 10.75% interest, a 10 year loan on $20,000 principal, you are paying the bank over $12,000 EXTRA money. That is the reason why many if not all financial planners tell you not to finance on luxury items. It is normally higher interest rates AND you shouldnt finance luxury items you dont have the money for.

Just my 2 cents, but that is YOUR money, it is bad financial advice to pay $32000 for a $20000 item. Its that simple. Especially an item you dont NEED, like a house.

 

[bumbershoot]

redboxcar, that was basically our reasoning.

Made especially solid to us because we were ALREADY spending the money for disney vacations. That money is going to vacations in one way or the other. Was it always going to Disney? Not always. But we were spending $$ on vacay.

So...send it to hotel rooms, or send it to DVC? Was a fairly simple choice, once we found out how EASY it is to send extra principal payments to pay it off years ahead of time, and how relatively low the monthly payment would be.

We have one small CC for DH's work trips (he has a corporate amex but many businesses do not take that card) that we pay immediately. We do have a car loan that was taken out of absolute desperation when DH's long paid for car suddenly and dramatically died and even HE didn't trust it anymore. Other than that, we don't do the interest thing. But with DVC, because we were already sending that money to vacation (aka hotels), paying some interest was palatable as a "convenience" fee.

Do I advise others to do it? I can't say I advise it. But I also can't demonize it. Travel to us is barely a luxury; DH and I thrive on it, it's hard to breathe after a few months of not going anywhere. We would be happy to buy a nice boat and just live on the sea, going where we want, if DH could get a job that would be happy with him doing that. So for us, it's not really a luxury item. Big diamond ring? Luxury. Brand new BMW? Luxury. Travel? Not so much. So for us, in this case, based on what we were doing anyway...it worked. Not everyone has our particular circumstances, which is why I don't advise it, but I feel free to share our circumstances and experiences!

 

[redboxcar]

I dont think that is the way to think about it. Lets just boil financing down to what it is: I dont have a lot of money and I cant pay for something I want, thus I am going to pay a bank extra money to lend me the money to buy what I want.

In the case of DVC at 10.75% interest, a 10 year loan on $20,000 principal, you are paying the bank over $12,000 EXTRA money. That is the reason why many if not all financial planners tell you not to finance on luxury items. It is normally higher interest rates AND you shouldnt finance luxury items you dont have the money for.

Just my 2 cents, but that is YOUR money, it is bad financial advice to pay $32000 for a $20000 item. Its that simple. Especially an item you dont NEED, like a house.

I didn't say it was the smartest financial decision, but that's the way I think about it because I might never have enough money to buy in one lump sum. Does that mean I shouldn't be able to have this luxury? Maybe, but if I'd rather pay $160 per point rather than $100 per point, then that's a conscious decision I'm making. The breakeven point may take longer, or may not even come (who knows), but if it's the only way I can do it, that's fine by me.

I just can't sit around saving my pennies for 20 years, I'm not that type of person. I live for today as best as I can. [In this hypothetical situation], I can spare $500/mo. I cannot spare a lump sum of $20,000 probably ever in my lifetime. If $500/mo is my spending money, I see it better going towards DVC than maybe $200 towards DVC, and the other $300 towards other random things.

These numbers are all just hypothetical, but my point is - I'm aware the total cost of ownership would be significantly higher by financing, but the payments are what would fit my current lifestyle. Should I happen to get a promotion, win the lottery, or stumble upon a sack of money - then I'd pay it off early in a heartbeat.

redboxcar, that was basically our reasoning.

Made especially solid to us because we were ALREADY spending the money for disney vacations. That money is going to vacations in one way or the other. Was it always going to Disney? Not always. But we were spending $$ on vacay.

So...send it to hotel rooms, or send it to DVC? Was a fairly simple choice, once we found out how EASY it is to send extra principal payments to pay it off years ahead of time, and how relatively low the monthly payment would be.

We have one small CC for DH's work trips (he has a corporate amex but many businesses do not take that card) that we pay immediately. We do have a car loan that was taken out of absolute desperation when DH's long paid for car suddenly and dramatically died and even HE didn't trust it anymore. Other than that, we don't do the interest thing. But with DVC, because we were already sending that money to vacation (aka hotels), paying some interest was palatable as a "convenience" fee.

Do I advise others to do it? I can't say I advise it. But I also can't demonize it. Travel to us is barely a luxury; DH and I thrive on it, it's hard to breathe after a few months of not going anywhere. We would be happy to buy a nice boat and just live on the sea, going where we want, if DH could get a job that would be happy with him doing that. So for us, it's not really a luxury item. Big diamond ring? Luxury. Brand new BMW? Luxury. Travel? Not so much. So for us, in this case, based on what we were doing anyway...it worked. Not everyone has our particular circumstances, which is why I don't advise it, but I feel free to share our circumstances and experiences!

I agree 100%. I don't ADVISE financing - of course I'd LOVE to pay it all upfront. But I'm not totally against it either. Also, travel is a big priority with us, too. Where many other people our age are blowing money on alcohol, drugs, cars, etc - we're spending our money to fly across the country and spend a week in "luxury."

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Obviously the reason we're not owners yet is because we DON'T have the money/situation to buy right now, but when our credit card debt/car loan is paid off, then we'll re-evaluate our situation and hopefully, that's when we'll buy in.