Running some numbers on DVC

[Grandbuddy]

Trying to be realistic as to the economic advantages of buying in. So, if I can get a resale of 250 points for cash at somewhere around $20,000 +/-, and I pay 45.5 years of annual fees at SSR, @ average of $6 per point (I know it's nowhere near that now, but it'll go up), my outlay over the life of my contract is somewhere around $87,500. My DS is going to WDW the week after T'giving and staying in a value resort - they're taking My DDL's brother and his family, and at least DS's family has opted for a suite. If they booked a 2 BR at SSR for the whole group, they'd have a lot better accommodations, and their total outlay for lodging only would be $3180. If I booked that same villa through DVC, it would cost me 212 points - so for this stay, the points would have an effective value of $15@.

Over the course of 45 years, I will accrue 11,250 points. At $15 a point (not assigning any increment for the increasing cost of lodging over a 45 year period), those points would be valued at $168,750. That's $81,250 more than my total cost for the DVC - and as noted that does take into account some increase in "dues," but does not take into account the rise in the value of the points based on increased costs of the lodging, if you were paying cash.

Someone who is actually good in math (not my best subject): Is this a fair way to look at this, or am I missing something?

 

[Boardwalker]

Trying to be realistic as to the economic advantages of buying in. So, if I can get a resale of 250 points for cash at somewhere around $20,000 +/-, and I pay 45.5 years of annual fees at SSR, @ average of $6 per point (I know it's nowhere near that now, but it'll go up), my outlay over the life of my contract is somewhere around $87,500. My DS is going to WDW the week after T'giving and staying in a value resort - they're taking My DDL's brother and his family, and at least DS's family has opted for a suite. If they booked a 2 BR at SSR for the whole group, they'd have a lot better accommodations, and their total outlay for lodging only would be $3180. If I booked that same villa through DVC, it would cost me 212 points - so for this stay, the points would have an effective value of $15@.

Over the course of 45 years, I will accrue 11,250 points. At $15 a point (not assigning any increment for the increasing cost of lodging over a 45 year period), those points would be valued at $168,750. That's $81,250 more than my total cost for the DVC - and as noted that does take into account some increase in "dues," but does not take into account the rise in the value of the points based on increased costs of the lodging, if you were paying cash.

Someone who is actually good in math (not my best subject): Is this a fair way to look at this, or am I missing something?

Wow, for someone not good at math you sure know how to make my head spin!

Back when we first bought in, and I was young and still had the textbook to my college Finace class, we did a projection that said that in our situation, our original investment would be pay for itself within the first seven years... and that was 10 years ago.

So now, it is essentially that my vacation lodging costs me only the cash outlay for my annual dues, which is one heck of a bargain, regardless of what size accommodation I choose for whatever duration.

And to top it off, the resale value of my points would return a sizeable portion of my original investment should I ever decide to sell.

Most of the time I feel like I must be at the top of a pyramid scheme or something, because I feel that I am SO far ahead. But then, when I stay in a room that looks a bit ratty and I wonder about how much maintenence really will be needed to keep my accommodations desirable and the resale value of my property strong....

Still, I really have gotten more than my share out of my investment, regardless, and had more fun with this investment than any mutual fund or CD could provide!

 

[Grandbuddy]

That would be pretty disappointing. Our room at All-Star Movies was well-kept, back in Early December, and it is a "value" resort.

 

[tidefan]

That would be pretty disappointing. Our room at All-Star Movies was well-kept, back in Early December, and it is a "value" resort.

Both our 2Bdr at OKW last September and our studio at SSR in January were immaculate.

 

[tiggerrr]

Trying to be realistic as to the economic advantages of buying in. So, if I can get a resale of 250 points for cash at somewhere around $20,000 +/-, and I pay 45.5 years of annual fees at SSR, @ average of $6 per point (I know it's nowhere near that now, but it'll go up), my outlay over the life of my contract is somewhere around $87,500. My DS is going to WDW the week after T'giving and staying in a value resort - they're taking My DDL's brother and his family, and at least DS's family has opted for a suite. If they booked a 2 BR at SSR for the whole group, they'd have a lot better accommodations, and their total outlay for lodging only would be $3180. If I booked that same villa through DVC, it would cost me 212 points - so for this stay, the points would have an effective value of $15@.

Over the course of 45 years, I will accrue 11,250 points. At $15 a point (not assigning any increment for the increasing cost of lodging over a 45 year period), those points would be valued at $168,750. That's $81,250 more than my total cost for the DVC - and as noted that does take into account some increase in "dues," but does not take into account the rise in the value of the points based on increased costs of the lodging, if you were paying cash.

Someone who is actually good in math (not my best subject): Is this a fair way to look at this, or am I missing something?

I think that is a fair start to the assessment. Basically as I read it, you are comparing your actual cost per point by buying into DVC against a market value for the points based on current cash rates. This does give you a reasonable start to the value of buying into DVC. The gap is probably much larger than that because you are locking in a significant portion of the purchase now, where as your cash rates will always increase every year.

Most assessments I've seen on the financial value of DVC, including the one I did, are based on comparing equivalent accomodations, like you did with SSR. If you try to compare value resorts, the analysis will break down. The same week at a value resort suite may only cost $1700. Now the comparison doesn't look so good.

From our point of view, having a full kitchen and full laundry and more room than a family suite at a value resort is very valuable, but not everyone will feel this way.

 

[Grandbuddy]

The "numbers" as I run them mean DVC membership will help me to have deluxe accommodations at a pretty reasonable price until I'm dead and my oldest grandchildren are nearly 50. So, not only is it a benefit I can have for my family now and for a long time to come...but it also means I'll be booking nicer, more spacious accommodations, whether DW and I are going alone, or we're taking family and friends. 'Cause when I go online to book a cash reservation, I'm always going to end up at a value resort, when my normally frugal self looks at the difference between 6 nights at the GF and 6 nights at AllStar Movies .

 

[PhantomBlot]

the analysis I did had us breaking even after seven years...the same figure Boardwalker mentions and a figure I've seen from several other posters.

One thing I hadn't counted on in my calcualtions though is that being a member seems to really motivate you to spend more time - and therefore spend more $ - at Disney (I'm sure that's Disney's intent).

In other words, you're getting ice cream at a bit of a discount, but it encourages you to buy more - and spend more $ on - ice cream than you would have otherwise.

 

[Boardwalker]

That would be pretty disappointing. Our room at All-Star Movies was well-kept, back in Early December, and it is a "value" resort.

No, I didn't mean to imply that the room was dirty, just that wear and tear on the most used rooms is becoming more apparent as time goes by. The last room I was in I really took a good look around. There was chipped paint on the walls and a broken floor tile in the kitchen. I had to have the fridge fixed when I was there and have had appliances replaced on previous stays.

My point is that my home property is 10 years old and just as it is at home, the cost of repairs and mantenance will need to be going up at this point. With the relative age of DVC being so young, we don't really have
a track record of how far our annual dues will go in terms of refurbishments, which is something that I really don't know how to factor into the equasion.

 

[Grandbuddy]

In other words, you're getting ice cream at a bit of a discount, but it encourages you to buy more - and spend more $ on - ice cream than you would have otherwise.

At least, in this case, the increase in ice cream isn't accompanied by all those extra calories. So it's allowing me to enjoy the ice cream, without the need to continually buy new pants .

 

[rstackjd]

Before buying I did a fairly complicated present value analysis using an assumed dues increase of 2% per year and basing the comparasion on a moderate resort at $185 per night for 7 nights per year, and using a 4% annual price increase on the moderate resort. DVC membership based on 160 points at AKV. I did not factor in the developer points which was cearly an added value.

Using a discount rate of 6% I got a Net Present Value of the DVC membership at about $2K - in other words, over the 50 year life of the Membership, discounted to today's dollars, the membership is more or less a break even compared to planning to spend a week in a moderate resort, every year for the next fifty years.

Of course, with the DVC you can get more than 7 nights a year depending on the time of year, and you get a higher level of accomodation than you would at the moderate resorts (but that's where normally would have stayed) so realistically, the value is even better.

Bottom line, as long as you've resigned yourself to "Disney Based Vacations" for the rest fo your natural life (and why woudn't you????) the DVC becomes an excellent value. As for us, since we are both late 40s, the membership will actually benefit our children and grandchildren even after we're gone, which was sort of a nice intrinsic factor as well.

My two cents

 

[White_Sox_Fan]

I personally think your a little low on your maintenance fees. For 250 points at SSR using this years MF's of $4.21 and an inflation rate of 3% would give you a total of $105,667.00 in total maintenance fees.

 

[Mtnman44]

Pretty good, but for one number you are trying to account for some measure of inflation but for the other number you are using 2008 prices for all the years. That results in skewed figures. Either adjust both for inflation or compare both using 2008 dollars.

I did a quick spreasheet using your initial figures and applying a 3% increase in both DVC dues and the cash cost equivilant for the stays. by year 45, your total DVC expenses, including the initial $20k purchase is $118k. The cash cost of those stays, based on your initial figure of $3180, totals about $295k by year 45.

I feel this is a conservative estimate as Hotel rates seem likely to increase much more than 3% annually while DVC dues increases have proven to stay close to that average.

However, for advanced students, we really need to factor in that initial $20k in the pay with cash scenario in order to really make a fair comparison. In the DVC scenario, we start with $20k and invest it in the DVC purchase. So, in the pay with cash scenario, we should start out with $20k aslo and invest that in a similar risk investment, let's just say 5% after tax. If kept until year 35, you could actually use this money to pay the last 10 years of your vacations which would reduce the total cash cost to about $192k.

Trying to be realistic as to the economic advantages of buying in. So, if I can get a resale of 250 points for cash at somewhere around $20,000 +/-, and I pay 45.5 years of annual fees at SSR, @ average of $6 per point (I know it's nowhere near that now, but it'll go up), my outlay over the life of my contract is somewhere around $87,500. My DS is going to WDW the week after T'giving and staying in a value resort - they're taking My DDL's brother and his family, and at least DS's family has opted for a suite. If they booked a 2 BR at SSR for the whole group, they'd have a lot better accommodations, and their total outlay for lodging only would be $3180. If I booked that same villa through DVC, it would cost me 212 points - so for this stay, the points would have an effective value of $15@.

Over the course of 45 years, I will accrue 11,250 points. At $15 a point (not assigning any increment for the increasing cost of lodging over a 45 year period), those points would be valued at $168,750. That's $81,250 more than my total cost for the DVC - and as noted that does take into account some increase in "dues," but does not take into account the rise in the value of the points based on increased costs of the lodging, if you were paying cash.

Someone who is actually good in math (not my best subject): Is this a fair way to look at this, or am I missing something?

 

[Grandbuddy]

[/QUOTE]I did a quick spreasheet using your initial figures and applying a 3% increase in both DVC dues and the cash cost equivilant for the stays. by year 45, your total DVC expenses, including the initial $20k purchase is $118k. The cash cost of those stays, based on your initial figure of $3180, totals about $295k by year 45.

I feel this is a conservative estimate as Hotel rates seem likely to increase much more than 3% annually while DVC dues increases have proven to stay close to that average.

However, for advanced students, we really need to factor in that initial $20k in the pay with cash scenario in order to really make a fair comparison. In the DVC scenario, we start with $20k and invest it in the DVC purchase. So, in the pay with cash scenario, we should start out with $20k aslo and invest that in a similar risk investment, let's just say 5% after tax. If kept until year 35, you could actually use this money to pay the last 10 years of your vacations which would reduce the total cash cost to about $192k.

[/QUOTE]

Still looks as if it saves me, my children and my grandchildren a pretty good pile of money - especially since I'm not likely to put that $20K into an investment account that I, my boys, and their kids would agree to dedicate solely to making family memories through quality vacations.

 

[Mtnman44]

No question, if you know you are going to visit every year and stay in Deluxe accomodations, by prepaying it absolutely does save you money in the long run, assuming certain assumptions about hotel costs increases.

Still looks as if it saves me, my children and my grandchildren a pretty good pile of money - especially since I'm not likely to put that $20K into an investment account that I, my boys, and their kids would agree to dedicate solely to making family memories through quality vacations.

 

[AnimalPrincess]

We financed so it is not going to pay out as quickly for us, however we got a good discount (CM's). Anyways we used our developer points etc for our honeymoon cruise which would have cost us a little over $4000, if we had paid cash that would have been almost half of of our 170 points, seems like a good deal to me!!

 

[tidefan]

Before buying I did a fairly complicated present value analysis using an assumed dues increase of 2% per year and basing the comparasion on a moderate resort at $185 per night for 7 nights per year, and using a 4% annual price increase on the moderate resort. DVC membership based on 160 points at AKV. I did not factor in the developer points which was cearly an added value.

Using a discount rate of 6% I got a Net Present Value of the DVC membership at about $2K - in other words, over the 50 year life of the Membership, discounted to today's dollars, the membership is more or less a break even compared to planning to spend a week in a moderate resort, every year for the next fifty years.

Of course, with the DVC you can get more than 7 nights a year depending on the time of year, and you get a higher level of accomodation than you would at the moderate resorts (but that's where normally would have stayed) so realistically, the value is even better.

Bottom line, as long as you've resigned yourself to "Disney Based Vacations" for the rest fo your natural life (and why woudn't you????) the DVC becomes an excellent value. As for us, since we are both late 40s, the membership will actually benefit our children and grandchildren even after we're gone, which was sort of a nice intrinsic factor as well.

My two cents

Also, don't forget to add taxes to the Room Cost of the hotel stays. Most people do when doing comparisons...

 

[Reginak]

First of all, dues do not increse by 3% every year and have occasionally gone down a little, although I understand that you may be figuring a worse case scenario.

I believe this is how I figured ours:

1. I figured the total of the contract price as well as all of the interest that we would pay over the life of the loan.

2. I multiplied the current years dues by 54 (yrs. left on contract at that time) and added that to the previous total.

3. Then, I divided the total by 54 and compared answer to current room rates with a passholder 40% discount (what we paid on previous trip) for what we would be able to rent with points. (I realised that inflation rate of hotel rooms will probably far outstrip the inflation rate of dues increases, but I figured that this would be a conservative analysis).

4. I don't remember exactly what the result was but I believe that I figured that we would break even within seven years. I was wrong, so far we are way ahead.

Finally, I wouldn't put too much stock in my figures - I am just a lowly HS Math and English teacher with a primary degree in English Lit. The left and the right sides of my brain are constantly at war with each other and therefore I am not always particularly reliable.

Regina

 

[White_Sox_Fan]

First of all, dues do not increse by #% every year and have occasionally gone down a little, although I understand that you may be figuring a worse case scenario.

Well, yes and no (I assume you accidentally cap locked the 3 and got the # sign and you meant 3%).

Looking back at OKW over the course of 17 years the average annualized increase is 3.55%, for BWV it's 2.6% and for VWL it's 3.77%. These are the DVC resorts (at WDW) that have been there the longest and provide the longest track record, so the 3% assumption isn't unrealistic and may be a bit low. The numbers are only estimates, however, since it assumes a steady increase and in real life it will fluctuate which will change the numbers a little.

 

[Reginak]

Well, yes and no (I assume you accidentally cap locked the 3 and got the # sign and you meant 3%).

Oops! I forgot to proofread. I fixed it.

Regina

 

[robinb]

Before buying I did a fairly complicated present value analysis using an assumed dues increase of 2% per year and basing the comparasion on a moderate resort at $185 per night for 7 nights per year, and using a 4% annual price increase on the moderate resort. DVC membership based on 160 points at AKV. I did not factor in the developer points which was cearly an added value.

Using a discount rate of 6% I got a Net Present Value of the DVC membership at about $2K - in other words, over the 50 year life of the Membership, discounted to today's dollars, the membership is more or less a break even compared to planning to spend a week in a moderate resort, every year for the next fifty years.

We did the same kind of analysis with slightly different percentages.