Psychological traps of DVC

[Girlstar30]

I personally will never pay for trip insurance again.

I was in Poland when the border shutdown when Covid hit and almost got stuck there. We raced to the border and there were no flights to LA. Our only hope was a flight to London in hopes that they had a flight to LA.

I was scrambling looking for anywhere nearby, Las Vegas, etc and nothing. Flew to London and thank God found a flight out of London to LA the next day.

Trip insurance refused to pay. I looked thru their policy with a fine tooth comb and border shutdown wasnt an exclusion and no mention of a pandemic.

I Noticed they added onto their policy right after that border shutdowns were an exclusion after the fact. Total scam. Never again. The tour company gave us our money and reimbursement for the flight anyways so no need for it.

I could have sued them, but since I got my money back I just didnt have the energy. Left a bad taste in my mouth ever since.

 

[Girlstar30]

One advantage of owning is that you actually own something of value that you can sell, often for quite a bit more than you paid for it. Suppose you bought your 100 PTS (or whatever amount) at $99 a point and now some 20 years later you are tired and retired and decide you don't want them any more. The going rate for your resort is now $180 a point so you decide to sell and make about $16,000 after fees and such. Not a bad deal for 20 years of vacations that initially cost you $9900 plus fees and the MFs over the years.

How much higher can the dang rack rate go lol studios are alr3ady at $700 something are we really going to see over a thousand in the next few years, its insane.

People aren't stopping going to Disney, they offer payment plans for the vacation packages, tickets and everything included, i suppose prices can continue can climb because a payment plan makes it possible, im so glad I bought dvc, the greed never ends

 

[Girlstar30]

One advantage of owning is that you actually own something of value that you can sell, often for quite a bit more than you paid for it. Suppose you bought your 100 PTS (or whatever amount) at $99 a point and now some 20 years later you are tired and retired and decide you don't want them any more. The going rate for your resort is now $180 a point so you decide to sell and make about $16,000 after fees and such. Not a bad deal for 20 years of vacations that initially cost you $9900 plus fees and the MFs over the years.

I just have to make sure I sell before it gets close to running out. Im hoping with all these restrictions and new rules coming og contracts will be a hot ticket.

 

[DoubleBaconBLT]

Except that the argument is not "invest vs. buy DVC". The argument is "pay as you go or pay up front."

Here's the basic idea. Suppose you know you want to stay in a DVC 1BR for a week every year during Spring Break. There are two ways to do that. One way: Buy enough DVC points to make that work and pay your Dues each year. The other way: Put the purchase price into an investment account of your choice, and add what you would have spent on Dues each month from then on going forward. Then, each year, you rent a DVC 1BR from the supplier of your choice---a private owner, a rental broker, or Disney.

The question is: which one "costs less"? You have to make a few assumptions, but (a) they are not that difficult and (b) the answer isn't particularly sensitive to small variations in them. After that it is just 10th grade math plus a little bit of economics.

Every time this comes up, people seem to want to cast Option Two as "invest and never vacation," and that's not it at all.

This is such a good take. People love to talk about buying DVC vs investing and not spending the money, then concluding that the latter results in a better long term financial position. That's super obvious and silly at the same time.

I ran the math you described and landed at a 19% internal rate of return for my DVC contract when compared to rack rates. It's 12% vs the "standard" 25% discount.

 

[emchen]

It's 12% vs the "standard" 25% discount.

I was following till this sentence. Please explain.

 

[Brian Noble]

Short version: "Yes, you still save vs. booking rooms at a 25% discount off of rack, but not as much."

Note that "not as much" by PP's math is still "better than the long term after-tax rate of return of the SP500."

 

[DoubleBaconBLT]

I was following till this sentence. Please explain.

It's quite common to find discounts of 25% off rack rate on deluxe resort stays at WDW. For most of us, the bounceback offer will get you there. The annual passholder, Visa cardholder, etc can also work sometimes. So it doesn't really make sense to look at the "cash value" of your DVC points in terms of undiscounted rack rates. Without any discount, my DVC contract yields me 19% return vs buying those same stays at rack rate. If I assume a 25% discount is available, my DVC contract only yields 12% because the extra value it provides is lower vs assuming I would pay rack rate without DVC.

 

[Takeitforgranite]

Except that the argument is not "invest vs. buy DVC". The argument is "pay as you go or pay up front."

Here's the basic idea. Suppose you know you want to stay in a DVC 1BR for a week every year during Spring Break. There are two ways to do that. One way: Buy enough DVC points to make that work and pay your Dues each year. The other way: Put the purchase price into an investment account of your choice, and add what you would have spent on Dues each month from then on going forward. Then, each year, you rent a DVC 1BR from the supplier of your choice---a private owner, a rental broker, or Disney.

The question is: which one "costs less"? You have to make a few assumptions, but (a) they are not that difficult and (b) the answer isn't particularly sensitive to small variations in them. After that it is just 10th grade math plus a little bit of economics.

Every time this comes up, people seem to want to cast Option Two as "invest and never vacation," and that's not it at all.

Yeah, when I came to the conclusion that my my wife was not wavering with her love for WDW, and our teen daughters still love it, it became a “pay as you go or pay up front” math problem.

That’s when DVC actually became an option. I’ve been spreadsheeting this thing for 3 months trying to choose between resale or direct. If we go direct, it will be for less than the target yearly points, so addonitus will be there immediately, and I don’t really want to start that way.

 

[Girlstar30]

With rundisney falling during my travel dates, i may just have to pay out of pocket for a couple of nights at akv and thats gunna cost $300 a night out of pocket on top of selling my points that I would have used for it.

Im not loving that, plus I cant even use all that money towards the stay, cuz the rental companies dont pay you until after the renters travel (with good reason for them ofc)

I would never pay these rates without dvc thats why im so glad I bought.

Im also staying in a one bedroom vgf villa for a week and when i calculated how much i would have to pay cash for that during Easter season I almost fainted

 

[emchen]

It's quite common to find discounts of 25% off rack rate on deluxe resort stays at WDW. For most of us, the bounceback offer will get you there. The annual passholder, Visa cardholder, etc can also work sometimes. So it doesn't really make sense to look at the "cash value" of your DVC points in terms of undiscounted rack rates. Without any discount, my DVC contract yields me 19% return vs buying those same stays at rack rate. If I assume a 25% discount is available, my DVC contract only yields 12% because the extra value it provides is lower vs assuming I would pay rack rate without DVC.

That makes total sense. Thanks for elaborating!

 

[Carouselofplanning]

Yeah, when I came to the conclusion that my my wife was not wavering with her love for WDW, and our teen daughters still love it, it became a “pay as you go or pay up front” math problem.

That’s when DVC actually became an option. I’ve been spreadsheeting this thing for 3 months trying to choose between resale or direct. If we go direct, it will be for less than the target yearly points, so addonitus will be there immediately, and I don’t really want to start that way.

This is so true. If you don’t buy in until your kids are a little older, direct’s “break even” comes a little too late in the game.

 

[Brian Noble]

That’s when DVC actually became an option. I’ve been spreadsheeting this thing for 3 months trying to choose between resale or direct. If we go direct, it will be for less than the target yearly points, so addonitus will be there immediately, and I don’t really want to start that way.

If you are looking at this purely dollars-and-cents, I don't think there is a credible argument for direct points. That doesn't mean it wouldn't have value, only that the value is not dollars-and-cents.

(Full disclosure: ultimately about half of my points will be direct, maybe a little more depending on where I end up.)

 

[Takeitforgranite]

The cost of APs with direct vs resale is the thing that keeps direct in the picture for me.

BUT, adding on smaller resale contracts means additional closing costs and paying more per point. I just keep coming back to prioritizing getting the most points I can afford on my first contract.

 

[Takeitforgranite]

I will add that I would only buy direct if I can get to the 150 pt threshold for perks.

Our target point need is 200 pts.

 

[DoubleBaconBLT]

Yeah, when I came to the conclusion that my my wife was not wavering with her love for WDW, and our teen daughters still love it, it became a “pay as you go or pay up front” math problem.

That’s when DVC actually became an option. I’ve been spreadsheeting this thing for 3 months trying to choose between resale or direct. If we go direct, it will be for less than the target yearly points, so addonitus will be there immediately, and I don’t really want to start that way.

I think you need to break this down more actually. Decide if you want direct or not first. Then figure out how many points direct vs resale. Are you out of state? If so, would you buy the Sorcerer's pass if you had a direct membership? That alone can make direct worth it because it saves ~$500 per person per year. If you're not going to buy the Sorcerer's pass, or you already live in-state, then I do not recommend buying direct.

I also think you should be realistic both with your budget and with how many points you want. Remember that if you need more points, you can always buy more points, buy one-time-use points, stay with cash, rent points, and borrow points when you need more. If you find you have too many, you can also sell a contract, rent out your points, or bank them. That ends up being quite a bit of flexibility, more than any other timeshare I'm aware of.

So don't feel like there's only one chance to get it exactly right - you can take that flexibility as you go and adjust year by year. If you know you want direct, then get your 150 direct and look to add on later to get to whatever level you want to land at. If you decide direct isn't worth it, then just buy resale - but remember that you have flexibility with that too and you can also buy resale in multiple stages.

 

[Girlstar30]

I like that i bought resale first so that i could have more points.

150 points just isn't enough for someone that wants to go twice a year and stay in one bedroom/two bedrooms sometimes. Id rather have the nicer rooms than little extras, but thats just me.

I also like that we will get a discount for being resale first and that we can save for a 20% or more down payment while we wait a year to add direct and get the same financing rate as someone with stellar credit from DVC.

It was an all around win for us to be resale first even tho I do feel a little left out from the lounge use and MMB perk which I want, that time will come soon enough and we plan to have direct before our next trip, so need to buy direct right away.

Since Riviera isn't somewhere were really wanting to stay at again in the next few years and vdh tot will always have us choosing vgc first, there just isn't any hotel that is enticing us for direct at the moment.

My sense of urgency is more about PIT being the last resort thats unrestricted or not in a trust or with ToT and that still has a couple more years left before a sell out and hopefully better incentives on the horizon. So I have no issue being resale first and felt that was the better decision (for us)

With them making resale suck more and more, im glad I got in now before a new set of rules hits and hopefully ill be grandfathered into something Now if they change the direct point minimum for perks ill be kicking myself, but I dont see that happening anytime soon