Resale Purchases - Pay In Full or Finance?

[AC168]

I would borrow if I could get the money at 5% or less.

 

[Epcot Forever Forever]

If you have the liquidity but are choosing to borrow at a favorable rate to make money on the rate spread, that’s fine.

If you have no idea what that sentence means, probably don’t finance.

 

[wnielsen1]

I have never financed a DVC purchase, but in hindsight I wish I would have back in 1999-2000 when I was thinking about it.

You only live once.

 

[HyperspaceMountainPilot]

I understand the argument for financing if you can do it at a negative real interest rate, but we personally won’t buy any luxury/entertainment/travel that we can’t afford to pay cash.

We have put past direct purchase on credit cards for the points and paid off in 30 days, and once we clear ROFR on our pending resale, I will pull the money from our money market accounts and wire it into escrow. I do regret not knowing about/taking advantage of the DVC direct 30/60/90 payment option…gave away a few hundred bucks we could have made in interest over that time.

 

[TeamRiley]

If you can get a rate less than 5%, and can pay it off in 3 years or less, financing is an option.
If you cannot meet those criteria, you should not do it.

 

[sethschroeder]

Finance responsibly. Prices now are lower. By the time you have cash for a full payment, prices might be higher. The interest cost could be a wash at that point. But by then, you'll have a few years worth of memories with your friends and loved ones. Do your research and find a lower interest rate that you can afford.

Except I am betting pricing going down.

Also there is no requirement to not go on a vacation. You could rent in the meantime or try a different vacation location that is less expensive to more quickly save for the cash purchase.

Additionally anytime you finance you are taking on additional risk that the math won't show. What happens if you lose your job? If you paid cash you just rent the contract to cover MFs. Can you rent it high enough though to cover MFs + Monthly Financed costs?

 

[J-Dog]

At current interest rates it's hard to make a case for financing. When I bought in 2021, I didn't see much value in pulling money out of investments to avoid a 4% loan for 2-3 years, so I financed. But it would be tough to swallow at 8-10%. But as someone said, most likely prices would be higher by the tie someone saved up the cash.

For a short term with a heavy down payment I don't think it's a disaster if it fits comfortably into your finances. "fits comfortably" is a judgment everyone has to make for themselves. I don't run the math against renting every time or Swolphin because I don't consider them the same product. Waiting 2 or 3 years and saving has its own drawbacks.

I would completely agree with this.

2 years ago, I would have said "finance now, because saving money and waiting will just result in higher prices when you do buy". But now, with crazy interest rates and pretty cheap resale contracts out there, I would probably pay cash if that was a possibility.

I was one that financed with a HELOC loan, which at the time was 2.25% interest. Now my loan for new draws is 8%, so I'm not touching it again anytime soon.

 

[HyperspaceMountainPilot]

One of the reasons I don’t see resale pricing (aside from VGC) going up anytime soon is because of the high interest rates, which seem to be weighing especially heavily on the larger contracts.

Between Disney World trips getting more expensive (cost per day of food, tickets, Genie+/LL, etc all going up dramatically) and the financing going for over 10%, it’s going to squeeze out a lot of marginal buyers entirely, and shift others from using half as many points as they might have in the past.

I would be very curious to see if someone has done the math about breaking even in cash flow renting your points after annual dues at current financing rates if you borrow 50/75% of the cost.

 

[EYL]

Additionally anytime you finance you are taking on additional risk that the math won't show. What happens if you lose your job? If you paid cash you just rent the contract to cover MFs. Can you rent it high enough though to cover MFs + Monthly Financed costs?

Absolutely agree,100%, that financing is an additional risk. That's why I say "finance responsibly". Here's how I see it: I would never spend my kids college savings on it, but I would put a good sized down payment, find a good rate, and repay the loan within 3 years if I have some disposable income/savings. Yes, a lot can happen in that time like losing your job, but you can still sell it. No matter what the price, you can still recoup some money (and possibly already enjoyed a vacation or two) and that's the best part of DVC.

But if you wait for 3 years to buy, there's also a risk that a lot can happen to resale DVC. In 2 years, what if they get creative and give resale 9 months home resort advantage rather than 11 months? (Never say never!) Or if "politics" results in some new exorbitant closing costs for new buyers? Would the financial risk you could have taken now then be worth it? Maybe...maybe not...

A lot can happen to life also in 3 years...and I don't mean just losing a job.

When asked "what would you do differently," one of the more popular answers is "I wish I bought into DVC sooner." If the risk and the finance cost is worth it to create memories at Disney earlier, then I don't see financing as a monster.

 

[thelionqueen]

I will go against the grain here and say financing is an individual decision and not a blanket “Font buy if you have to finance” mentality. I guess I’m just poor, but I don’t have $20-40k laying around to throw at DVC. However, have bought and sold 6 contracts over the years, and financed them all. My goal was always a short term finance, which worked out in general.

Here’s my point. If I couldn’t finance my purchase I’d never have been able to buy in, period. I made money (a significant amount actually) on EVERY SINGLE contract I sold. In fact, my profits paid for over 40 nights staying in a studio, a Disney cruise for 3, all fees, closing costs & interest, AND put money in my pocket. Additionally, it allowed me to take advantage of great deals when I saw them come up (like right now). I’m financing my current resale but will pay it off in full within a year, most likely in January. But, even if I don’t, the cost savings from buying now when the market is red hot for buyers, and snagging phenomenal deals, FAR outweighs the negligible interest in paying to get the buying power I need to pull the trigger.

Don’t let cash buyers make you feel like a loser or “less than” because you finance. Do what works for your situation and what makes you happy

 

[RoseGold]

I made money (a significant amount actually) on EVERY SINGLE contract I sold. In fact, my profits paid for over 40 nights staying in a studio, a Disney cruise for 3, all fees, closing costs & interest, AND put money in my pocket.

Well sure, the last decade had DVC going up like a rocket. I don't think it's realistic to expect that in the future, especially with DVC increasing the the resale restrictions.

Resale is very high, expecting it to appreciate quickly isn't a great expectation. And loans were cheaper when you did this. With loans at 15-20%, gulp, I don't even this historic DVC can keep up with that. Maybe if you bought VGC at open and paid it off in a few years, probably not even that unicorn example.

 

[thelionqueen]

Well sure, the last decade had DVC going up like a rocket. I don't think it's realistic to expect that in the future, especially with DVC increasing the the resale restrictions.

Resale is very high, expecting it to appreciate quickly isn't a great expectation. And loans were cheaper when you did this. With loans at 15-20%, gulp, I don't even this historic DVC can keep up with that. Maybe if you bought VGC at open and paid it off in a few years, probably not even that unicorn example.

Of course circumstances were different than today, as were buy in costs. My point remains, what one considers the “right” way does not equate for everyone. Could I save for 3-5 years to pay in full? Yes. If I did that, would the prices be higher than buying right now? Almost certainly. Would the money I paid in interest to save on purchase price be more or less than waiting 5 years? Who knows? What I do know is that buying resale right now, at never before seen value and Disney not buying fire sale contracts, is a once in a lifetime opportunity. How I manage the details after buying add on points at ridiculously low buy in costs, I can manage in a way that best suits my situation. Long story short, to each their own. If you think financing is a horrible decision, don’t do it. Explain why that works for you and perhaps others will find guidance and follow your advice..perfect! But that solution and reasoning is not a “fits all” scenario. Would never be an option for me. Had I followed that advice, I’d have missed out on dozens of memories made with my young children (now adults) and a lost a very profitable ownership. In my case, even if I paid the full 10 years of interest on my current resale add on, I’d still be at a net plus monetarily over my entire DVC membership. Each of us has different ideas, situations and motivations on how we choose ownership, and all are justifiable imo

 

[RoseGold]

Of course circumstances were different than today, as were but in costs. My point remains, what one considers the “right” way does not equate for everyone. Could I save for 3-5 years to pay in full?

This is math. Sure, when interest rates were low and DVC was taking off like a rocket, maybe you got a 3% HELOC. Sure, it wasn't a big deal. 3-5 years at current rates is a TON of money. It's not responsible to suggest resale can continue to appreciate at the crazy rates it did in the past (impossible I would argue), or to buy such a speculative "investment" at current rates.

 

[Epcot Forever Forever]

Could I save for 3-5 years to pay in full? Yes. If I did that, would the prices be higher than buying right now? Almost certainly

I waited for 2+ years to be able to comfortably pay in full and prices came down substantially in that time.

I’m glad you made money and I agree specific situations definitely exist where it makes sense, but, even if a buyer pays it off in 3 years, at current DVC interest rates (most people are getting about 13%) that buyer would have paid an extra $30 in interest per $100. So $150 per point becomes $195.

Anyhoo everyone is free to do as they please with their money, especially if it’s money you can afford to be without, so it’s just advice, not a commandment.

 

[J-Dog]

This is math. Sure, when interest rates were low and DVC was taking off like a rocket, maybe you got a 3% HELOC. Sure, it wasn't a big deal. 3-5 years at current rates is a TON of money. It's not responsible to suggest resale can continue to appreciate at the crazy rates it did in the past (impossible I would argue), or to buy such a speculative "investment" at current rates.

Yes, I suppose if you are a 100% objective financial professional, then it's math. And like I said earlier in this thread, I probably wouldn't finance at today's rates.

But everyone has varying degrees of subjectivity when it comes to purchasing, which may or may not lead to purchasing sooner/with financing. I admittedly let a certain amount of emotion guide my purchase - my daughter is young and into Disney princesses, and I have a very-long-hours-per-week job, so it's easy to "work my life away". DVC both makes me take a vacation with my family and subsequently fulfills my daughter's love of Disney. So for us it was a win-win to finance, rather than wait multiple years and let time slip by.

 

[RoseGold]

my daughter is young and into Disney princesses, and I have a very-long-hours-per-week job, so it's easy to "work my life away". DVC both makes me take a vacation with my family and subsequently fulfills my daughter's love of Disney. So for us it was a win-win to finance, rather than wait multiple years and let time slip by.

Sure, but the other option was to stay at Dolphin, not don't vacation. I'd argue renting points or hotels can be the better mathematical choice even if you do have the cash.

 

[KalamityJane]

Sure, but the other option was to stay at Dolphin, not don't vacation. I'd argue renting points or hotels can be the better mathematical choice even if you do have the cash.

It depends. It’s actually not the better mathematical choice once you need 1-3bdr. I’ve rented for years but now will be buying in because I can get a contract that is the same cost as 2-3y worth of lodging costs for us (renting points). If I can sell it for even half of what I paid for it after that, we are still ahead.

 

[NY Pirate Princess]

I don't take a trip to Disney unless the money for everything, plus contingency, is in the bank. Same with any other vacation. I plan to buy my first DVC contract the same way. Unless I freak out and drain my emergency fund one of these days pretending Future Disney Vacations Required has somehow become emergent!

I couldn't sleep at night with a loan for a timeshare. But that's the personal in personal finance. You get to decide what matters to you and how you want to handle it. No one gets to tell me what to do with my money. It's a personal decision between my spouse and me.

 

[DonMacGregor]

No one gets to tell me what to do with my money. It's a personal decision between my spouse and me.

True, but then we'd lose half of the most entertaining posts in the forum. It's like watching two fleas argue over who owns the dog.

 

[AC168]

If you get rates low enough, the NPV of what you spend with a financed DVC resale contract could easily be substantially less than the NPV of comparable hotel / rental stats. If you have steady cash flow from work such as an accountant or doctor, borrowing at low rates is usually a great idea. I always had needs for cash and / or high variation otherwise I would have borrowed way more in life. Borrowing to buy a resale could be a no brainer if you can weather any financial storms or don’t anticipate any large ones. The beauty of DVC resale is that the market value generally doesn’t approach zero in a nano-second.