Question about the value of DVC

[crisi]

We 'do' Disney every year (since 2002), have always stayed value and only once at POFQ. DH has always said, "these are your points" since I was the one who wanted DVC. So it is my luxury of a lifetime....I don't care if I break even. We do not have children and would never be able to have a second vacation residence, although we have decent long term jobs. DH loves Disney like I do so it is a given that our love will continue through the years. Since purchasing DVC, he has talked about it almost daily out of excitement. His Mom and brother will be traveling to their own studio when we go in October. So we purchased emotionally...for me...because I wanted it. At 40 with good jobs it is my reward. So when I need a new car in 3 years it will be a Camry not the Infinity I get becasue of our purchase...knew that going in and pleased as punch. Could I be saving $300 a month and putting it toward retirement, sure? But I take care of sick people all day long and have learned life can change very quickly. We have retirement savings in place, a nice home and cars. So I want to enjoy things now while I can...jmo.

I think that there is a huge emotional component in a lot of people's ownership of DVC - and that is worth a lot. And if making an emotional decision isn't going to put your family in financial jeopardy or make you regret the purchase later - who really cares if you 'break even' - who 'breaks even' on ANY vacation they take.

In the end, it isn't about Return on Investment - its about Value - and there is Value in the subjective attributes of ownership. Its subjective, which is why we can continue to discuss it for years on end. But its silly to say that their isn't Value there.

 

[Maistre Gracey]

One should figure lost opportunity costs OR interest as a minimum. Of course it's not a simple calculation because you'd be using PART of those dollars for vacationing anyway. It's certainly not hogwash but it might or night no apply to everyone in the same way.

Surprise.. We agree on this. Of course, it's only part of my arguement against figuring opportunity costs... Don't forget the "reverse loss" after tyhe break even point, and the people who figured lost opportunity and purchased last September. <-- They are looking good about now.

If we figure lost opportunity on our purchases.... Does that mean my toaster really cost $400 because I had it for many years?
How much money would that $20 have made if I figured opportunity loss in the 80"s??

MG

 

[kaffinito]

And you do give up some things. You are tied into Disney or using points for vacation. It becomes hard to say 'this year its a staycation year' when you have points you could loose. You might be better served putting that money into a retirement fund.

DVC is a luxury purchase. It is one that MIGHT save you money on luxury purchases in the future. But any luxury purchase needs to be measured in opportunity costs against those unexciting necessities of life - those might vary from person to person, but things like setting aside money for emergencies and retirement, paying off consumer debt, making sure DVC payments are not going to mean an unacceptable cut in the grocery are on a lot of people's lists as unexciting necessities that should be taken care of before buying DVC - eating the vegetables before getting dessert.

Excellent points.

DH and I bought DVC because:
1) we love to vacation at Disney
2) we love to stay in suites
3) we have many family & friends who love to vacation at Disney

The value of DVC is what you make it to be.

Very true.

If you buy into DVC because you love Disney, or because you think there is a cache in owning DVC then you might want to rethink your decision to purchase. DVC is partly an emotional purchase, but the cache is an uninformed view of membership on the part of non -members IMO.

Think of it this way. If it will be cost effective for you to purchase DVC rather than renting points or taking advantage of one of the promotional deals, then by all means purchase. You can use your points at Hilton Head or at Vero Beach, as well as at WDW or DL. If you will be giving up something that should be a priority - a better car or putting kids through college, then don't purchase.

I bought DVC because I wanted to go more than one time a year. I'll go twice with my boys and once to HH or VB with DH for a nice getaway trip, so for me buying DVC was a no brainer. The kids both have college funds, I don't need a fancy shiny new car, and our financial needs are being met. We live simply, aside from my Disney addiction. And best of all, we could afford to pay cash for the purchase.

Take your time and good luck with your decision!

 

[crisi]

Surprise.. We agree on this. Of course, it's only part of my arguement against figuring opportunity costs... Don't forget the "reverse loss" after tyhe break even point, and the people who figured lost opportunity and purchased last September. <-- They are looking good about now.

Or someone who bought after the market crashed, and sold in June - I think I made 30% on the market over nine months. Anyone who bought DVC points in from Disney in October can now sell them on the resale market for a loss.

 

[Poorman]

I want to hop on the "listen to Dean" bandwagon. When I first bought into DVC 7 or 8 years ago, it was Dean that gave me much valuable advice that made my decision much easier to make. It is people like Dean that make the Dis a nice place to visit.

Rich

Thanks - you made my day I actually feel "smarter" knowing that you agreed with me
Over the past few years that I've been here on DIS I learned soooooo much, and without a doubt here is the most important thing I've learned :

When in doubt, I tend to value Dean's responses at the top of my list - as he will always provide an unbiased and extremely well thought out view that really helps put things in perspective.

Sometimes we may get answers that we don't "want" to hear but really "need" to hear in terms of decisions that we're contemplating and he does a great job of showing us the big picture. In addition I've really enjoyed some of the comparisions he's made between DVC and (dare I say) other TS systems.

Keep up the great work Dean, really appreciate all the incite you provide here on DIS (and TUG for that matter).


Chris

 

[bangzoom6877]

DH and I did a lot of thinking and I did lots of research here on the boards before we bought DVC. We had gone to WDW last July with our sons for 5 nights. We spent 5 days at the parks. We stayed in Pop Century. DH and I enjoyed the trip, as did the children (they were 1 and 3 last summer). However, double size beds were not the most comfortable thing to sleep on after a hot long day at the parks, especially since we have a queen bed at home. DH turned to me and said, "Next time we come to Disney, we have to stay in a hotel that offers a queen bed and is closer to the theme parks". He also made it clear that he would only stay on property when going to Disney, since we did enjoy that aspect so much. So I told him that we would need to stay in a deluxe resort in order to stay in a hotel with a queen bed. He said that was fine.

When we came home, DH informed me that he also thinks we should do 10-night trips, with 5 or 6 days at the parks, to break it up more and have some relaxing days by the pool and exploring other areas like DTD, without the hustle and bustle of the theme parks every single day of the trip. I agreed with him. He asked me how much it would cost us to stay at the Beach Club resort or BoardWalk Inn for 10 nights. When I told him it would cost more than $300 per night in the summer (when we always vacation), he was floored. He asked me what I knew about DVC. I knew some by that point, but not a whole lot of understanding like I did after doing research. Our neighbor had recently bought DVC and he spoke to them about it too. DH and I also agreed that we should take the kids to Disney every other year as they grow up, since there is so much to do in that area for kids of all ages (and adults), and since it is the one place that we could see ourselves going to over and over again and not getting bored with it. I also love cruises, as does DH, but DH does not want to do a cruise every single year. He doesn't enjoy them as much as I do. The only other thing I enjoy as much as a cruise is Disney World.

So, when we figured that in order to stay in a deluxe for 10 nights, the hotel portion of our trip would cost us around $3400 before adding in tax. And that was in today's money. Surely, the hotel prices will go up through the years as my boys get older. We decided to go with a 150-point resale contract with Board Walk Villas as our home resort, so we could stay there every trip.

BWV was everything we wanted...walking distance to 2 theme parks; lots of dining and entertainment options right there; beautiful theming; low points for standard view rooms; low price per point on the resale. It was perfect for us.

Things I had learned from the wonderful people on these boards about DVC:

1. Do NOT buy DVC for the current member perks, which could change at any time.
2. Do NOT buy with the intention of always exchanging out. This costs a booking fee each time and is not a very good value.
3. DVC points are not a good value for the Disney cruise.
4. Buy where you would most likely want to stay each time, as availability at resorts is not guaranteed to be too great 7 months out as opposed to 11 months out.
5. Consider resale, as it could save you thousands (it saved us over $4,000 compared to buying through Disney!). As long as you have roughly 6 weeks that you could wait until officially becoming a member, resale is well worth the savings.
6. Consider also that you will always be paying the annual maintenance fees.
7. Keep in mind that although a DVC membership will save you lots of money compared to staying at a deluxe resort, the DVC resorts are different than the deluxes. You will not get daily housekeeping, it will be every few days for trash and towel and a full cleaning I believe on the 8th day. You must pay extra for daily full housekeeping.

Good luck with your decision! I know that DH and I are sure glad we decided to purchase a DVC membership! Can't wait until next month when I can book next year's July trip which will be our first trip home!

 

[Dean]

Surprise.. We agree on this. Of course, it's only part of my arguement against figuring opportunity costs... Don't forget the "reverse loss" after tyhe break even point, and the people who figured lost opportunity and purchased last September. <-- They are looking good about now.

If we figure lost opportunity on our purchases.... Does that mean my toaster really cost $400 because I had it for many years?
How much money would that $20 have made if I figured opportunity loss in the 80"s??

MG

I'll let you figure the loss on your toaster but there are MANY things that we often spend that is money down the drain, cars, toasters, clothes, etc. If you didn't use the toaster, it could have been a very expensive toaster in the long run, $400 might be conservative. My guess is you're assuming those dollars would be gone otherwise and that it's only $20, both invalid arguments IMO. It is my opinion that anyone who wants to go on vacation and truly can afford it, can figure out a way not to have to finance it, DVC or otherwise. The "savings" going forward should be considered but this is a different component than the lost opportunity costs and is essentially independent of that calculation though it may or may not go in the opposite direction and may or may not balance the lost opportunity costs. No doubt the cheapest option is not to vacation thus I realize this is all relative. My goal is to provide information, what anyone does with it is up to them. However, there really isn't a valid argument against considering lost opportunity costs other than one can't afford it anyway or can't get it together to save the money regardless of whether they buy DVC. DVC has never been such a good deal that you couldn't afford to wait a year or two, even with the free tickets last decade.

 

[ScottOKW2K]

We 'do' Disney every year (since 2002), have always stayed value and only once at POFQ. DH has always said, "these are your points" since I was the one who wanted DVC.

We've done disney every year since 1999 and started out at the moderates (DxL, POFQ). Recently we did a trip that combined 1 week at POFQ under the Buy4Get3 free deal, followed be a 5 night stay in a 1-bedroom at OKW. We've found that DVC has spoiled us - unless it's a moderate with a king bed for just my wife and I we will probably not do that again unless we are wanting to save those weeked points.

So it is my luxury of a lifetime....I don't care if I break even. We do not have children and would never be able to have a second vacation residence, although we have decent long term jobs. DH loves Disney like I do so it is a given that our love will continue through the years. Since purchasing DVC, he has talked about it almost daily out of excitement. His Mom and brother will be traveling to their own studio when we go in October. So we purchased emotionally...for me...because I wanted it. At 40 with good jobs it is my reward. So when I need a new car in 3 years it will be a Camry not the Infinity I get becasue of our purchase...knew that going in and pleased as punch. Could I be saving $300 a month and putting it toward retirement, sure? But I take care of sick people all day long and have learned life can change very quickly. We have retirement savings in place, a nice home and cars. So I want to enjoy things now while I can...jmo.

Might want to check out the Accord in addition to the Camry. My wife looked at both when we bought last July, and preferred the Accord. Honda made significant changes when they went to the 2008 model year. It is a sweeet ride.

 

[Jason@dvcstore]

I'm heading to the world in a month , I'm going to do the tour and consider buying into the DVC. If i go to Disney once a year, and typically spend about 2000 for my package, is it worth it for me IYO?

Enjoy your trip to WDW. Feel free to stop by to The Timeshare Store, Inc.®, while in Orlando, or call us at any time with questions or email us as well.

If you simply want the new listings emailed to you we can do that as well.

sales@dvcstore.com

Jason

 

[Brian Noble]

Put me squarely in the "money has a time-value" camp. You can quibble over what rate to use---consumer price index (aka "inflation"), long-term after-tax S&P500, etc. But to say that a dollar today is exactly the same as a dollar 10 years hence is simply wrong.

You can figure the costs without opportunity/time-value if it helps you sleep better at night but don't try to convince your accountant that is "correct."

Edited to add: Mary Waring, over at MouseSavers, has a very nice analysis comparing the cost of owning DVC to the cost of renting vacation lodging as you go, accounting for the time-value of money. It is very well done, and easy to understand. My MBA brothers both thought it was sound.

http://www.mousesavers.com/dvc.html

 

[crisi]

I think Mary's is one of the best overall analysis - she really isn't invested in believing DVC is a good deal - or a bad one. Some of the people from here helped her put it together, including at least one CPA.

 

[ambermatthews]

Great advice.. Thanks!

 

[Dean]

Edited to add: Mary Waring, over at MouseSavers, has a very nice analysis comparing the cost of owning DVC to the cost of renting vacation lodging as you go, accounting for the time-value of money. It is very well done, and easy to understand. My MBA brothers both thought it was sound.

http://www.mousesavers.com/dvc.html

While I agree with you, I think many on this board believe that Mary is prejudiced against DVC to some degree. Likely more an indictment of their skewed view on the topic than an honest appraisal of the situation, which I think is pretty much the essence of this discussion anyway.

 

[Brian Noble]

I don't read much of her stuff, but I can't recall anything she's written that speaks of such bias to me. About the only things you could quibble with in that analysis are the assumptions about long-term investment return and the expected increases in room rates/dues. But, she also hosts the spreadsheet that is the basis of the analysis, so if you'd like to play with different assumptions, you can.

For the record: I think her TMV figure of 7% is pretty close to on the money, but I know some prefer to use the (lower) long-term consumer price index increase instead. Also, history suggests that room rates rise faster than dues, but she uses the same figures for both. Even so, changing those doesn't make a huge impact on the overall set of conclusions---it just subtracts a little time from the payoff horizon.

 

[Dean]

I don't read much of her stuff, but I can't recall anything she's written that speaks of such bias to me. About the only things you could quibble with in that analysis are the assumptions about long-term investment return and the expected increases in room rates/dues. But, she also hosts the spreadsheet that is the basis of the analysis, so if you'd like to play with different assumptions, you can.

For the record: I think her TMV figure of 7% is pretty close to on the money, but I know some prefer to use the (lower) long-term consumer price index increase instead. Also, history suggests that room rates rise faster than dues, but she uses the same figures for both. Even so, changing those doesn't make a huge impact on the overall set of conclusions---it just subtracts a little time from the payoff horizon.

We've just seen several threads that refer to her analysis in a negative way over the past few years here on DIS. I too think it's a reasonable evaluation but also realize that not everyone's situation is the same. I think one difference is that many are looking for ways to rationalize their purchase or interest in DVC and anything that pushes against that tends to be received not very well by many. To me, it needs to be a slam dunk in favor of DVC to make the inherent risks reasonable for purchase unless one just has the money to throw away and are willing to consciously do so. I'd say a min savings of 20% over what you could get even with discounts would be my benchmark. Even then there are still cheaper ways to stay in the area in accommodations just as nice as the DVC resorts (sometimes even in DVC resorts) if cost is a major player, which you already know.

 

[Disney Doll]

You guys are great! so much info. ( some said they needed more detail for advice) I go once a year with myself, my 4 year old son, and a guest. I typically stay at moderates but it depends on the year, this year is akl , cuz i got a good deal. I would hazard a guess to say that my family will expand, most likely making my " guest" a more perm part of the family, and being 28 I expect to have at least one more child...

Well, DVC would give you the benefit of a 1 BR condo with a full kitchen and washer/dryer in your unit. That's a nice perk with a couple of kids.

I'll be realistic with you...DVC is a luxury. But, it can be an affordable luxury, depending upon how you like to travel. If you won't consider staying in a Value resort, then DVC could be good for you, because you get deluxe style accomodations at a good price. But you should never "stretch" to make DVC payments. When DH & I bought, it fit fine into our budget without any kind of hardship.

 

[Maistre Gracey]

Okay, I'm home..
I am not going to defend my position to each point made because quite frankly, I'm tired and will probably not change your mind anyway... as you will not change mine.

I will say that money itself will probably earn some level of interest if invested over a long enough period of time. As pointed out earlier, nobody knows what that percentage would be.

You see, people think they will invest this pile of cash and let it grow for 50 years. Problem is, they must subtract the cost of deluxe accommodations from that pile. Eventually, at the break even point, that opportunity cost will reverse, and you will lose interest on the money you are still spending on accommodations.

10 nights/year @ $500/night for a 1br... $5000 every year, plus inflation, over the course of 20, 30, 40 years??
Fair is fair. Don't forget to figure the lost opportunity on that money.
I'm thinking 0% may be generous when you figure it over 50 years of membership.

MG

 

[Brian Noble]

Of course. This is exactly how I think you should compute it---and exactly how Mary Waring's spreadsheet does too. That's why, even accounting for opportunity cost fairly conservatively, DVC breaks even and ends up in the black at some point along the way for those comparing against even discounted Deluxe resort stays.

But, you can't just call it 0% and use that as your time-value-of-money figure. You actually have to work out the details to get the true cost.

 

[Doctor P]

I'll be one of the people pushing the hogwash as it definitely needs to be included into the equation IMHO. It adds about 4-5 years to your hypothetical break-even (for us about 10-14 years based on different interest rate assumptions), although that didn't deter us from buying into DVC recently.

If you take money from a savings/brokerage account you are giving up the interest you would otherwise earn on that money when buying DVC - whether it is significant to you or not is another question, especially with rates as low as they are now as well as what rate of return you would otherwise be generating on this money.

There are multiple ways that people can/do model DVC and for my analysis I did factor in the time value of money, and I also placed a higher weighting on current points (next 10 years) as opposed to those I'll be using in 40 years (again factoring in the TVM and "discounting" points I won't be using for 30-40 years). I compared keeping the money in a savings/brokerage account, and using that money (and the interest/return it generates) to "rent" points for our trips. As mentioned above depending on various assumptions that money would be "gone" in about 10-14 years if we continued renting. If we were to buy, at the same point in time (10-14 years from now) we would still have our points, and if we could sell our points for roughly the same amount of money as the MFs we've paid over that time we'll come out ahead in the long-term.

I can't help it, I'm a numbers geek, I'm not saying my way is the best by any stretch. Also had trouble "modeling" or putting a price on countless memories that DVC will enable our family to enjoy

Chris

Opportunity cost in the analysis is generally hogwash as Maistre Gracey said, at least in terms of its explicit inclusion. Just because one does things in a spreadsheet does not make things more correct or more accurate. I know this bugs purists who want to do things perfectly "right" but the intractability of the "right" calculations for the average person makes the quick and dirty method not only easier but not appreciably worse in doing your calculations (and certainly not different from a qualitative decisionmaking perspective).

 

[Doctor P]

I think Mary's is one of the best overall analysis - she really isn't invested in believing DVC is a good deal - or a bad one. Some of the people from here helped her put it together, including at least one CPA.

That's an indictment right there. For most CPA's, their weakest area of background is economics and finance (relative to the other areas the CPA exam teaches). This is an economics and finance question, not an accounting question.