Price of points question

[Amy&Dan]

I am sure this has been asked before but I can't get the seach to give me a darn thing!

I have a question about how to figure the cash cost equivalent of your points values. My rep (total idiot, never know what to believe that he told me) said that based on the cost of our points for our late 2004 purchase at SSR, when using those points to book anything in the DVC or Disney Collection to figure a cost of $5.5 a point. That is how I have been doing my math.

However, a poster on another thread said that is wrong, that its $10 per point. I thought that was the cost of renting someone else's points, not using your own. I have been using points at the Disneyland Hotel in CA. At say 22 points per night, I have been figuring my cost if I were thinking in dollars vs. points would be $121 a night. Which is a steal given the rack rate, resort fee and high taxes in So. Cal. But have I been wrong? Should it be $220 a night in cash terms? That would still be good given the high rates but not as good.

This is driving me nuts, I am complete idiot when it comes to points, but I see so many questions on this over on the Disneyland side and wonder if I have gotten this wrong all along. My husband thinks the same thing based on what our idiot sales rep told us.

Thank you!

 

[CarolMN]

Good question - I'm sure you will get lots of different answers, because members seem to value their points in different ways.

Some value their points based on what they could get for renting them. That's probably why the poster on the other thread said $10. Actually, I think you could get more than that if you rent, but $10 used to be the standard and it is easy to figure, LOL.

Others value their points based on some formula that takes the original cost into consideration as well as the maintenance fees. I think they "adjust" the cost every year when the maintenance dues for the coming year are released. From the $5.50 figure you posted, it sounds like this is what you are doing - and it's what I do as well.

For example, we bought late in 1999 and paid $65 / point. We received 42 years worth of points, so that's $1.55 per point. Our annual dues are currently $4.85 per point, so our cost is about $6.40 per point.

In the end, it's up to you. You bought them and you spend them. Don't let anyone else influence you too much. FWIW, I think using points at the DLR is a pretty good deal, too. It's the only place outside of the DVC resorts that I've ever used our points and even at the $10 per point figure, I thought we got a very good deal!

 

[salmoneous]

Several different questions here

1) What is the value of a point to Disney?
2) What is the value of a point worth to someone else?
3) What is the value of what you paid for your points?

You points aren't worth that much to Disney; they don't do a good job of turning points into cash. As such, Disney doesn't really want your points, and usually doesn't give you very much trade value for them. I suspect this is what your guide had in mind with his $5.50/point comment. Normally, when you trade your points to Disney for the Disney Collection / DCL / etc. they value of what you get for your points is small - $5.50 sounds about right. But, as you've discovered, there are some things where the value is better than that - the DL hotels can be one of them.

Second, what are you points worth to someone else. Other people will give you more than Disney will for your points - $10 is what people normally use, but it can be more or less than that. But you shouldn't figure your value at $10/point. In order to get that for your points, you would have to do some work, take some risk, etc. So the $10 represents (the value of your points) + (value of your labor) + (value of risk you are taking). I'd figure the value of your points to be about $9. If you put more work into renting them, the total value goes up and you can get more than $10/point - but it's still about $9 for the points and the rest for your risk and labor.

Finally, there is the value of what you paid for the points. I do this sort of calculation for a living and there is never one right answer. There is a range of "reasonable" answers. You plug in all your assumptions about time value of money, opportunity costs, future resale price, taxes, etc. and come out with a number. But you could plug in different, equally reasonable assumptions and come up with a different number that is no more or less valid that then first one. You'll find many such calculations out there. With all the ones I've seen or done myself, I think anything from $8 to about $11 is very reasonable.

 

[Amy&Dan]

Thanks guys, my dh figured the cost based on our current dues now, and with the rise in that cost, our current price is now about $5.80 a point. So I am pretty happy. I just prefer to figure it based on what I am paying/ have paid for my points. Even with the $8 to $11 per point, I would still be okay with that however. Given that my per point cost was between 22 and 26 points a night, and rack rate at the DLH would have been a tad over $300.

Thanks again, facts and figures aren't my thing, and even though dh is very mathmatically minded, of course I just can't take his word for it, I need disboards experts!

 

[crisi]

Several different questions here

1) What is the value of a point to Disney?
2) What is the value of a point worth to someone else?
3) What is the value of what you paid for your points?

You points aren't worth that much to Disney; they don't do a good job of turning points into cash. As such, Disney doesn't really want your points, and usually doesn't give you very much trade value for them. I suspect this is what your guide had in mind with his $5.50/point comment. Normally, when you trade your points to Disney for the Disney Collection / DCL / etc. they value of what you get for your points is small - $5.50 sounds about right. But, as you've discovered, there are some things where the value is better than that - the DL hotels can be one of them.

Second, what are you points worth to someone else. Other people will give you more than Disney will for your points - $10 is what people normally use, but it can be more or less than that. But you shouldn't figure your value at $10/point. In order to get that for your points, you would have to do some work, take some risk, etc. So the $10 represents (the value of your points) + (value of your labor) + (value of risk you are taking). I'd figure the value of your points to be about $9. If you put more work into renting them, the total value goes up and you can get more than $10/point - but it's still about $9 for the points and the rest for your risk and labor.

Finally, there is the value of what you paid for the points. I do this sort of calculation for a living and there is never one right answer. There is a range of "reasonable" answers. You plug in all your assumptions about time value of money, opportunity costs, future resale price, taxes, etc. and come out with a number. But you could plug in different, equally reasonable assumptions and come up with a different number that is no more or less valid that then first one. You'll find many such calculations out there. With all the ones I've seen or done myself, I think anything from $8 to about $11 is very reasonable.

And some of us do the third and ignore the TVM part. Its isn't good accounting or finance to do so, but its easier to understand - that's what Carol is doing - You'll come out a little low from that $8-11 if you ignore TVM. We do that as well figuring that the TVM on the original investment is a wash - we'd have spent that money on SOMETHING and not invested it - i.e. our assumption is that the interest we are getting on our money is zero.

You can now, just in case talking about time value of money isn't complex enough, start figuring in your costs of financing if you didn't pay cash - which you SHOULD do even if you ignore the TVM over the 35-50 year contract.