Share your DVC Financial formula!

[DisneyHoneyMoon]

Well, i'd like to make some kind of model that would show us if DVC is financially worth it for us, and how long it would take us to break even.
How did you guys do it? Did you just take the cost of a vacation to disney and account for 3% inflation and then figure out how many trips it would take to break even? We're uncertain about any other discounts we would receive (AP cost with discount and when an AP would be "worth it" over Park Hoppers). Also, we don't know how to account for dues and everything.
If anyone has recently done this, could you tell me your formula? I was never a big fan of that whole future value, present value kind of thing, so i'm hoping someone has already done this! Boardmail me if you don't want to post it on the board.

DisneyHoneyMoon

 

[JimC]

There are many different ways to do this. Probably as many ways as there are people to crunch numbers. There is a great program on TUG in the advice section. It is probably the best that I have seen.

If you want something simple try this.


1. Determine how many points you need to replicate how you normally vacation at Disney (season, resort type, # of nights, number of trips per year). Add the cost of purchasing your points. If you pay cash it is the deposit plus final payment. If you finance it is the deposit plus the sum of all payments on the note. Add 10 years of maintenance fees (# points times maintenance fees per point times 10). This is your total cost of DVC.

Don't worry about inflation for the moment -- we are working in present dollars only.

2. Figure in ten years you may be able to sell your points for your current purchase price now (net of commission and transfer fees). This is historically very conservative. Unlike most timeshares purchased from the developer DVC points have risen significantly in value over the past ten years. Subtract this number from #1 above. This is your net cost of using DVC for ten years.

3. Take the amount you spent on lodging and resort tax for your trips last year (assuming that is your comparison for determining points). Multipy that by 10. This is your total cost of status quo.

4. If you paid cash (no debt -- DVC or otherwise) multiply the purchase price times 8% and then again times 10. This is roughly the opportunity cost of prepaying for vacations. Subtract this number from the result of #3 above. This assumes that the same amount of money sunk into DVC is invested and you use the income to reduce your cost of lodging at Disney. Ignore taxes for now to simplify the analysis.

If #1 is less than #4 it is a great deal.

If #1 is less than #3 it is an very good deal.

If #2 is less than #4 it is an good deal.

If #2 is less than #3 it is an okay deal.

Other thoughts:

a. Ignore the other discounts as they can and do chnage. If you get them it makes the program just that much more magical.

b. Forget analyzing longer than ten years. You have no idea what your travel needs or desires will be then. Nor what the travel industry will be like then.

c. If you visit WDW at least every other year and stay on property at deluxe resorts then this program will likely benefit you.

d. If you stay at moderates the costs will likely be about the same but you will be in much larger and nicer villas.

e. If you do not stay on property there are other Orlando timeshares that are very nice resprt, with very good staff that will cost you less than DVC. They are not as well themed nor are they on Disney property.

 

[CarolMN]

Here's another view of "break even" -

IMHO, calculating break even points doesn't make sense unless you will be very, very disciplined about how you will use your DVC membership. Most who post here are not, LOL.

* Will you continue to visit WDW for the same number of days / at the same times you have been used to doing? Most members end up visiting more often - an thus end up spending more. That is not saving money, LOL!

* Will you continue to stay in a studio? Most members end up upgrading from a studio to a 1 bedroom or inviting friends/family along (need bigger or more rooms) and again end up spending more than they have in the past. Again, that is not saving money!!

IMHO, the above help explain why so many end up adding on to their initial membership.

I am willing to bet that only a small precentage of DVC members actually save money or even spend about the same amount on WDW accomodations as they did prior to their DVC purchase.

I am NOT saying DVC isn't a good thing - I am just saying that most of those who think/say DVC is saving them money are just kidding themselves. They are spending more on WDW vacations than they did - yes, they may be getting upgraded accomodations and making wonderful memories, but they are still spending more than they did. That is not saving money or "breaking even"!

I also think paying monthly for accomodations (instead of at the end of the trip) helps the perpetuate the illusion. When you check out with no bill, it is easy to think of the accomodations as "free" and forget about the monthy deductions that paid for them. It's a little harder to do if you pay in a lump sum in January, but it's easy to forget about that after it's paid, too!

All that said, I am glad we bought DVC - I have no regrets (I just don't kidd myself that DVC saves us money).

Best wishes -

 

[crisi]

I agree, Carol. As well as the cash flow issue. Having no large cash outlay for accomodations when you travel, its easy to spend all that "extra" money on food, souvieniers, whatever.

 

[erikthewise]

There are many ways to calculate "break even", some more sensible than others. A good analysis will include an annual percentage rate for financing, cost of annual dues, annual increases in dues and the cost of alternative accommodations, and a computation of remaining principal. If you are paying cash, a good way to handle it is as a "loan from yourself" with interest rate representing average investment gains (which you don't get since you spent the cash).

Even doing all this there are several alternatives.

(1) You can compare the cost of owning DVC to the cost of renting points. Based on computations I did at the $75 level when I bought, I don't think you break even (ever) against renting at $10/pt if you buy at $90+/pt. But the cost of renting may increase unpredictibly and it will get harder and harder to rent at $10/pt. Also I think the lack of control and aggravation involving in renting do not make whatever savings result worthwhile.

(2) You can compare the cost of owning DVC to the cost of whatever alternative accommodations you were likely to use. This is a valid way to determine whether buying DVC actually saves YOU money, but it is comparing apples to oranges as the DVC rooms you get are likely to be much better than what you would have had otherwise. So DVC may not save money compared to Caribbean Beach but would almost certainly save money compared to Grand Floridian.

(3) You can compare the cost of owning DVC to the rack rate cost of DVC rooms. This is a "feel good" approach because buying definitely saves money from this perspective. But it's not a useful comparison because very few DVC members would have typically paid rack rates for DVC rooms on a regular basis, even assuming they were available.

(4) You can add up the total number of points you get throughout the remaining life of your contract, divide the total into your cost, and compare the resulting cost per point to renting. This is completely delusional from the point of view of standard accounting practices, even if you include annual dues somehow. But if it makes you happy, you're welcome to it.

And in all of this the type of room you get (studio, 1BR, 2BR) and the percentage of weekend nights plays a big role.

The bottom line I think:
If you're committed to at least annual trips to WDW, would like to have high-quality on-site accommodations, and are happy with the nature of DVC rooms, then the cost is reasonable, whether or not you officially "break even" at some point. But don't imagine that it's some sort of incredible bargain. Disney is not giving anything away here. They are making big bucks on DVC and are not afraid to charge what the market will bear.

And I agree with JimC. If you don't think you'll get your money's worth in 10-15 years, put your money somewhere else.

PS Did I mention I'm a very happy owner? I bought in 2002, when deluxe rooms could be had for a song and dance. (We're talking $149 for AKL savannah and $179 for Polynesian GV.) I had no idea how much deluxe room rates would increase in just 3-4 years as the discounts dried up.

 

[JimMIA]

2. Figure in ten years you may be able to sell your points for your current purchase price now (net of commission and transfer fees). This is historically very conservative. Unlike most timeshares purchased from the developer DVC points have risen significantly in value over the past ten years. Subtract this number from #1 above. This is your net cost of using DVC for ten years.

I would definitely NOT use this assumption...even though Jim qualified it by saying "...may." Although I agree that people who bought in on the ground floor have nice paper profits today, and some have made actual profits, I remember tech stocks. Just because something happens for a period of time doesn't mean it will continue.

When I did our calculations, I considered the fact that we would probably get something back as just icing on the cake. To me, the potential resale value is like the current DVC benefits -- yep, they're here now...but don't bet the farm on them.

I also agree with Carol and Crisi regarding the OTHER costs of a Disney vacation. Even if you consider DVC "free" lodging, a Disney vacation is still an expensive proposition.

The more you go the more you know, and you are no longer satisfied with three days of Theme Park Commando. Now, you've got to stay 10 nights; eat hearty every night at fine dining restaurants; a visit wouldn't be a visit without at least one "behind the scenes" tour; and you certainly have to do 2-3 character meals; plus Cirque du Soleil! To save money, you can stay at the resort one day and rent a pontoon boat or water mice.

I would never recommend someone buy DVC primarily as a means of "saving money." Disney knows a lot more about this business than any of us, and they darn sure did not create DVC to save people money.

 

[Laurajean1014]

I used something totally different that all of the above about 10 years ago, when we bought. I will have to try to dig it up, but from memory - our break even was 5 years.

 

[bethsg]

The one issue which really helps me look back and think we did the right thing buying into dvc, (besides the fact we purchased in 1998 and paid almost 1/2 what others are paying now) is that DVC has provided us with regular family vacations. We have gone to Disney for Thanksgiving, Christmas, during the summer, on 2 Disney cruises, we have been skiiing in Keystone Colorado, celebrated birthdays, and anniversaries, taken our parents etc. I know we would not have done the vacations without DVC. It forces us to take the time to plan a vacation, and spend time with our family, which is very crazy since we have 4 children, 3 of them teenagers.

 

[OneMoreTry]

Don't figure in any perks like AP. They will likely disappear.

DVC is NOT the least expensive way to vacation at WDW. If you're motivation is purely financial you should invest in a balanced mutual fund.

We like DVC because we like the condo set up with a kitchen. We also like the 2 bedrooms. It's superior to staying any motel room -- even those at the "deluxe" Disney resorts. Staying in the same bedroom with kids is not for us. And the kids like their own room, too. We are really spoiled by the 2BR set up.

In the future, we'll be able to bring grandkids.

I'm afraid to try the Grand Villas. We'll probably have to buy more points once we do.

We're already thinking add-on after staying at HH. It is DVC's best-kept secret. Actually it's not much of a secret if you read the reports on DVC community board.

 

[BostonDisneyKid]

CarolMN Wrote: "I am willing to bet that only a small precentage of DVC members actually save money or even spend about the same amount on WDW accomodations as they did prior to their DVC purchase."

I am in the high percentage CarolMN is referring to in that I thought I would save money only to find I have more cash flow when taking vacations so I am actually spending much more than anticipated (without regret I might add). My accomodations are covered (paid cash - no financing) so now my cash goes to tours, specialty cruises, shows, etc. When you don't have to put out the extra $2500 - $3000 twice a year it makes it so much easier to add days/events to the trips. I had crunched the numbers over and over again before buying and what I found is that it was a solid investment in vacations (it is not a finacal investment) for my wants/needs (disney nut) as I was going twice a year staying in mod/del resorts on-site with no end in sight.

 

[utahkennedys]

When I bought my small OKW resale, I figured we would go to WDW about every other year. I made a spreadsheet detailing what my points would "cost" me, including the initial cost per point plus maintenance fees, for each room type and whether I went each year or every other. The room rates came out so low! Plus, factor in that there are NO other taxes or fees (which quickly added up for us this last April at the Poly!!!), and it was really a no-brainer for me. Now, having said that, I am not sure that would have been the case if I paid $15k for my points...that would be a different calculation entirely. I like the flexibility I have now of adding points by renting or transferring from others as needed. For our trip in Sept. I bought 60 points to make up the 110 I needed for a 2BR at OKW for 5 nights. Cost $600 (which actually my parents paid for their 1/2 of the room). Works great for us!

 

[Y-ASK]

I think, if I've figured it correctly, the break even point where the timeshare has paid for itself by renting all the points at $10 per point is like 14.5 - 15 years or something like that. That includes using part of your rental income to pay for the maintenance fees. Having just gone to Disney last week I don't think I would want to wait the 14.5 years before using the points for myself and my family .

Y-ASK

 

[Geyser Gazer]

Here's my favorite rationalizaion:

1. One night in a 2BR VWL value season with tax cash costs around $600.
2. Annual dues for 150 points is around $600
3. With 150 points I can get 5 2BR nights value season annually.

This is a buy one at rack rate, get 4 nights free proposition as long as dues inflation stays about the same as room inflation once the initial investment is paid off. Getting "paid off" with interest for us required commiting to pay the equivilant of rack rate for around 6 years of vacations. It ain't cheap, but if you can swing it, it's pretty nice in the long run.

 

[CharlesTD]

We wanted DVC and were not concerned with break even point etc it was something we wanted so we did it and have not regretted a single minute of it.

 

[milachy]

My formula:

family + good times + Disney = Happiness

 

[bbowers]

milachy -

You beat me to it - that's my formula, too! I never once did any calculations - my heart said "buy it" and my husband didn't say "no"!

 

[mom23boys]

My formula:

family + good times + Disney = Happiness

I agree, my other formula: Not having to share one room with four males and not having to dress and undres in a Value or Moderate bathroom all the time.

 

[Daitcher]

Here's another view of "break even" -

IMHO, calculating break even points doesn't make sense unless you will be very, very disciplined about how you will use your DVC membership. Most who post here are not, LOL.

* Will you continue to visit WDW for the same number of days / at the same times you have been used to doing? Most members end up visiting more often - an thus end up spending more. That is not saving money, LOL!

* Will you continue to stay in a studio? Most members end up upgrading from a studio to a 1 bedroom or inviting friends/family along (need bigger or more rooms) and again end up spending more than they have in the past. Again, that is not saving money!!

IMHO, the above help explain why so many end up adding on to their initial membership.

I am willing to bet that only a small precentage of DVC members actually save money or even spend about the same amount on WDW accomodations as they did prior to their DVC purchase.

I am NOT saying DVC isn't a good thing - I am just saying that most of those who think/say DVC is saving them money are just kidding themselves. They are spending more on WDW vacations than they did - yes, they may be getting upgraded accomodations and making wonderful memories, but they are still spending more than they did. That is not saving money or "breaking even"!

I also think paying monthly for accomodations (instead of at the end of the trip) helps the perpetuate the illusion. When you check out with no bill, it is easy to think of the accomodations as "free" and forget about the monthy deductions that paid for them. It's a little harder to do if you pay in a lump sum in January, but it's easy to forget about that after it's paid, too!

All that said, I am glad we bought DVC - I have no regrets (I just don't kidd myself that DVC saves us money).

Best wishes -

I couldn't agree more with your post. ANYONE who gives an example of how DVC saves them money is crazy. THERE ARE NO TIMESHARES ANYWHERE THAT ARE GOOD DEALS. Anyone who disputes this should go talk to an accountant or financial planner. The examples you see given never factor in what the buy in amount would grow to over the next 50 years if invested in stocks and bonds. Now take your annual dues invested over 50 years and you have a windfall. Subtract out vacation money every year from this pile. Watch how it grows over 50 years. This doesn't even count airfare spent and spending money. You are also "locked in" when you buy into a timeshare. You are now spending money at WDW every year. People rationalize somehow that "this trip is already paid for" and end up spending much more on property than they had in the past. Annual passes, backlot tours, souvenirs, you name it. We love DVC and bought in to have access to everything it offers. We are happy with our purchase for sure but lets get serious, IT IT NOT SAVING US MONEY, NOW OR EVER.

DAVE

 

[bcvillastwo]

...............earlier someone made the following comment.

You can add up the total number of points you get throughout the remaining life of your contract, divide the total into your cost, and compare the resulting cost per point to renting. This is completely delusional from the point of view of standard accounting practices, even if you include annual dues somehow. But if it makes you happy, you're welcome to it.

The person who posted this made an assertion but didn't back it up with any facts. So, I'm curious why would this approach be delusional from the point of view of "standard accounting practices". Frankly, I douibt if there is any pronoucement that covers this type of situation. If you can find one, it's likely applicable to some other situation and the user is simply adopting that accounting treatment and attempting to apply it to this situation.

Please enlighten me, I need some direction and guidance.

 

[DVCconvert]

IT IT NOT SAVING US MONEY, NOW OR EVER.

This has not be my experience. When I compare the gross dollars I have spent on rooms during prior year visits (non DVC) to my current cost with DVC, I am in fact saving money. DVC is not an "investment", it is not intended as a wealth building medium, it can however provide an avoided cost both by an inflation hedge and gross dollar cost per night's stay -- depending on your visitation habits.