Resale prices and savings

[linzjane88]

The end result is everyone seems to agree in your example that the simple calculation comes out 155/26 = $5.96

However, that simple calculation ignores the time value of money.
If you borrowed the $155 at 5% interest, you would need to make 26 annual payments of $10.78 to pay off that loan.

For those who say but I am not borrowing the money, I have the cash available, the calculation is basically the same.
If you invested that $155 in an account that paid 5%, instead of using it to buy one DVC point at $155 you could withdraw $10.78 a year from that investment account for 26 years, so that is what you are giving up on an annual basis for the next 26 years when you spend $155 per point on a DVC contract that expires in 26 years. (at a 5% rate)
Plus you still have to add in the annual dues.

You could do this for any cost per point, or any interest rate you wanted to use.
At $115 per point for 26 years at 5% it is $8.00 per point per year. (not $115/26 = $4.42)
At $155 per point for 26 years at 2% it is $7.70 per point per year (not 115/26 = $5.96)
At $160 per point for 50 years at 5% it is $8.76 per point per year. (not $160/50 = 3.20)

The point being the simple calculation of "price per point/years of life" understates the true cost.

But I don't think many people look at their vacation fund and think "DVC VS. invest all of it and never go on a vacation". If I have, say 10k that I am going to spend on vacation lodging over the next five years (either by DVC or a hotel) isn't it a moot point to look at what it could have earned me if I invested it? Investing was never an option for those dollars.
Maybe for a casual vacationer who may or may not be a repeat Disney visitor it would be worth looking at. I venture to say that the majority of those considering DVC are pretty hard core Disney vacation fans who WILL be spending X$ over the foreseeable future.

 

[dismedvc]

But I don't think many people look at their vacation fund and think "DVC VS. invest all of it and never go on a vacation".

I did not mean to suggest never going on vacation. I thought Post 1 of this thread was asking whether it would be a savings to purchase DVC and prepay part of your vacation, compared to using those funds to "pay as you go" for future vacations.

In your example, if you pay as you go, you would spend that 10K over time along with the earnings and additional funds to pay for future vacations.
You could then compare that amount to using the 10K upfront to purchase DVC and paying yearly maintenance fees.

If you did not purchase DVC you would not just put that 10K in a box in your closet and take it out when you needed it to pay for your future vacations. Therefore, if you do purchase DVC you need to factor in what you could have earned on those funds in the time between your DVC purchase and the time you would have used those funds for your pay as you go vacations.

 

[linzjane88]

I did not mean to suggest never going on vacation. I thought Post 1 of this thread was asking whether it would be a savings to purchase DVC and prepay part of your vacation, compared to using those funds to "pay as you go" for future vacations.

In your example, if you pay as you go, you would spend that 10K over time along with the earnings and additional funds to pay for future vacations.
You could then compare that amount to using the 10K upfront to purchase DVC and paying yearly maintenance fees.

If you did not purchase DVC you would not just put that 10K in a box in your closet and take it out when you needed it to pay for your future vacations. Therefore, if you do purchase DVC you need to factor in what you could have earned on those funds in the time between your DVC purchase and the time you would have used those funds for your pay as you go vacations.

OK, I get that. I actually think I had someone explain that to me a few weeks ago in my own DVC thread....I forgot I love number crunching and budgeting but once you start gettin' fancy on me....well then I get confused and say 'screw it'. Do what makes you happy that you can afford. Haha. I guess those things all add up over time but the time value of money is one of those things that is never going to click for me (like knowing what an adverb is, how to spell diarrhea, and a handful of other unteachable things)

 

[crisi]

But I don't think many people look at their vacation fund and think "DVC VS. invest all of it and never go on a vacation". If I have, say 10k that I am going to spend on vacation lodging over the next five years (either by DVC or a hotel) isn't it a moot point to look at what it could have earned me if I invested it? Investing was never an option for those dollars.
Maybe for a casual vacationer who may or may not be a repeat Disney visitor it would be worth looking at. I venture to say that the majority of those considering DVC are pretty hard core Disney vacation fans who WILL be spending X$ over the foreseeable future.

I'll say something related to that. It is much easier to skip a vacation if the points are not burning a hole in your pocket. If you get a year in which you have a few months of unemployment, or an illness or a sudden need to replace your roof, with cash you are pretty likely to skip vacation that year. Its easy money to cut out of the budget and use elsewhere. With points, you have the points - a lot of the trip is paid for, it becomes easy to justify a trip. This might be good if you have the discipline to do the trip you imagine doing when money is really tight - drive, grocery shop, and no parks. But its easy to overspend on vacation. Its also easy - and frankly easier now than it used to be - to rent your points out - if you don't have a loan you'll even have a positive cash flow for the year - if you get into that situation. But its still hard to skip a vacation with the points burning a hole in your pocket.

To paraphrase Dean, timeshares are an exercise in psychology. Disney in particular has emotional strings for a lot of us which can make a huge difference between saving money - which is easy to do on paper and harder to do in reality - and being an effective way for Disney to increase its share of the money in your wallet.

 

[ldo]

here is our fuzzy math for DVC for our 160 AKC resale contract. I took the # years left and dividd that into my purchase price per point. For me that was $2 per year. I add that to the annual fees of $7. I then take that $9 times # of points per night. And then I asked myself if I would be spending at least that $ for that trip per night on a typical trip. One year, we took a trip we likely would not have paid OOP for, but had extra loaded points to use up points and it was a splurge trip--but we cooked some meals in the room to compensate. Other years, our points rate is much less than we would have paid for other lodging. I do not calculate the $ I would earn with interest, etc. And, for the price of a moderate, I would much rather be @ AKV. If I am in a studio, it frequently is less than a moderate.

 

[crisi]

I'll say something related to that. It is much easier to skip a vacation if the points are not burning a hole in your pocket. If you get a year in which you have a few months of unemployment, or an illness or a sudden need to replace your roof, with cash you are pretty likely to skip vacation that year. I

I'm going to expand on this thought.

This is particularly risky when you are going to undergo a major life change. A young two income couple without kids buys DVC, then has kids - which add to the budget. A empty nest couple in their high earning years buys shortly before retirement when they will see a drop in income. You finally get kids through daycare, go back to work, and college is on the horizon.

For non timeshare owners, what happens is that your disposable spending decreases, and vacations is an easy place to cut. Before kids, with two incomes, staying in a Deluxe hotel every year was doable. With kids and the related increase in daycare expenses or decrease in income if one person stays home, you could go less often and/or stay offsite. Retirees might discover that in addition to less income, they have more time - and want to stretch their vacation dollar to last a lot longer than what they can get at Disney. Timeshare ownership can lock you into a spend rate that the life change may not support. Be especially careful about evaluating future savings when you know your future won't be like your present. (I think a ten year time horizon is a good amount to project out over)

 

[ldo]

I would echo crisi's points. Kids cost A LOT! Plus time off for sick kids can start to come out of vacation days. Also, your vacatoining habits could change. We bought 2 fixed summer beach timeshare weeks and thought we would use them every year--and it was great with elementary age kids. Then our kids got older and none of the 3 liked the beach anymore. After a year or two of still going to the beach, we re-evaluated and now take national park and mountain vacations. Our eldest also tired of WDW and didn't even go with us on our last trip. The great thing about DVC, at least now, is that you can sell fairly easily for a decent price (esp. if you buy resale). This is unlike our other timeshares, which had little to no value on the resale market.

 

[suebeelin]

Dvc hasn't saved us a dime but it forces us into a decent family vacation.

Our income has dropped significantly 2yrs ago when I stopped working due to relocation and hubby entered his residency. Yes, this income drop is expected to be temporary, but we nevertheless survive, as a family with two small children, on a residents salary.

I look at dvc as a luxury item, one that we can luckily afford on our savings. We stay on site at properties we prefer. If we didn't have dvc fully paid for, we probably wouldn't vacation at all. A residents salary stretches very little when you have little kids.

That being said, I'm vacationing the way I expect and want to, as if I still had my job. That's value in itself.

 

[crisi]

Dvc hasn't saved us a dime but it forces us into a decent family vacation.

Our income has dropped significantly 2yrs ago when I stopped working due to relocation and hubby entered his residency. Yes, this income drop is expected to be temporary, but we nevertheless survive, as a family with two small children, on a residents salary.

I look at dvc as a luxury item, one that we can luckily afford on our savings. We stay on site at properties we prefer. If we didn't have dvc fully paid for, we probably wouldn't vacation at all. A residents salary stretches very little when you have little kids.

That being said, I'm vacationing the way I expect and want to, as if I still had my job. That's value in itself.

A residency is, as you said, a temporary situation that generally results in a much higher income at the end of it. If you project out ten years, you are likely to have done just fine, especially since you planned for it. And having savings isn't luck, its planning.

 

[pmaurer74]

I agree that owning a DVC changes how you vacation. I will miss the more spontaneous trips and having 6 months to pay for my trips but we would always be in studios and I got tired of waiting for discounts to come out. We are new DVC owners. Our first trip we will have two studios for 6 nights, taking my inlaws and staying at BWV on 2015 points... cost $1200 in Mfs (not counting initial buy in). Going in December using 2016/2017 points and getting two 2 bedroom villas and taking 14 people so $2400 in Mfs. (not counting buy in). I would never have been able to do that before. For what I paid I think I just calculated out that the original purchase price equals $686 per year. I am not worried about factoring those in yet as my DVC is worth more than what I paid just a few months ago. With a looming 2042 timeframe, I expect the value to go down in a few years). Being able to stay in larger units will be a greater benefit to us as the girls get older and likely need more space.

 

[DeeCee735]

DVC doesn't save me money. Never did. Never will.

I spend much more on Disney with my DVC account than I ever would without it.

DVC changes the way I do Disney.

DVC makes WDW a routine event in our family.

DVC makes it possible.

We might get tired of it someday. I just doubt that'll be soon.

I get the focus on evaluating the costs savings of DVC. It's just not how DVC works for me, and it never will.

I love this post! First I agree with what DVC did for us, it's the same.

While I understand that people look at the cost and the savings value, and that it is a deciding factor for them, I have to say, we didn't for a second look at buying into DVC as "how much are we saving?"!!! It was more like, "how much are we spending????!!!!"

Bottom line, we wanted it for vacations, and mostly Disney vacations. We didn't want it for any kind of savings value, and never even stopped to do any kind of math, other than affordability, as we paid cash and never looked back, because it was the best money we ever spent. We bought in at a whopping $65 per point, added on ALOT over the first 7 years of ownership, small contracts of 25 to 50 points each ranging from $79 to $96 (if I remember correctly) per point. Maybe I once or twice averaged out how much we paid per point, but....why?

It was never about that for us. It was about wanting to be in the World as often as possible, taking our children as they grew up, going together once they reached adulthood, bringing family and friends, hoping to one day take our grandchildren and the occasional trade out for places we would never go if it weren't for DVC.

Now, vacation planning is norm for me (I have to push hubby a little, he's just not a planner), and there's always some trip on the horizon. Recently, we've decided to trade out once or twice per year, as well as get to the world at least once, if not twice each year. As of now, there are 4 trips scheduled in 2016 with DVC membership. Two in the World, and two trade outs.

DVC also allows us to make small trips easier. 3 nights here, 4 nights there, a week in the World, etc. Now our children look at it and think ahead to a vacation schedule with "how can I use mom and dad's points" to book our next trip?" This is why we bought Disney. Whoever thought it would be $165 a point when we bought in, or looked at how much it would save over the years? Not us for sure, cause it isn't saving a dime! Our vacation dollars increased with ownership, simply because we can go more often and more places.

JMHO