Share your DVC Financial formula!

[bcvillastwo]

Our experience seems to be similar to the that of the majority of posters to this thread so far, DVC is probably costing us more money than what it cost us prior to owning at DVC and for many of the same reasons.

Never the less I do have some comments about the break even point.

1. Try to compare apples to apples as best you can and be conservative in your approach.

Cost of your non DVC accomodations. Start with the amount you are most likely to pay for the accomodations you typically stay in now including the tax you pay and then add a reasonable inflation factor for the cost of the rooms. I would suggest trying to find how the room rates have increased over time would be an acceptable approach for estimating the increases. Then spread these costs over the life of whatever DVC contract, either 37 (all other DVC resorts) or 49 (SSR) years.

Cost of DVC accomodations. This is where you get lots of advice and different points of view. My suggestion is to stary by including "all" of the costs directly assciated with your purchase. For example, if you are financing you include the total cost of your payment each month plus the dues costs right on through the end of your contract just like you did for the non DVC accomodations. Some people are going to tell you to factor in what you might have earned from investing the money you borrowed for Disney. I believe they refer to this as opportunity cost. If you know how to do that then I think it's a good idea but not everyone is that proficient.

2. Then if you like you can figure in other costs that aren't related to your accomodations. But, if I were doing this I would keep the accomodation and non accomodation costs separate. Remember, there are some people who say they save money by cooking in their rooms vs. buying food in the parks. If you reasonably think that applies to you then factor this into your calculations.

If the breakeven point is something that is very important to you, then in my opinion finding an approach to collecting and analyzing the financial aspects of this transaction that will satisfy "you" and your family situation is definitely worth the time and effort.

Remember, it's what works best for you. While I agree with the general principle that most people don't save money after they buy into DVC, I do believe that most people save money on their accomodations and that their accomodations savings will grow over time. For us this means that we spend any savings on other things.

 

[ClarabelleCow]

I have just learned to not try to JUSTIFY my DVC to anyone, we bought it because we found we were going to WDW and Vero beach every 12 to 18 months, and have become spoiled when it comes to traveling. Having other timeshares, staying in a hotel room without a kitchen and second TV doesn't seem like vacation!!! So we researched it, I knew I really wanted VWL, bought a resale 2 years ago for 66 a point, then added on twice to get to 260 points. My inlaws live in Vero and we hate staying at their house because we like our "space", so we always paid cash for Vero, now we use points there as well, and it is great. Am I saving money, probably not, because we are going more, but I know this coming trip, Dec 29- Jan 4, we would have never paid cash for those nights in a 2 bedroom. We would have probably paid the same to stay at the Contemporary, so while I am not saving money, I am getting a larger accomodation, and the comforts of eating/snacking in the room, washing clothes, etc.!!!

 

[crisi]

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

Actually several accountants here (pumpkinboy springs to mind) have done just that. There is a nice analysis of just that over on Mouseplant. And functionally, DVC can save money if used in a disciplined fashion - at least bought at the price point of several years ago - and provided that you have full intent of taking annual vacations to WDW. It is, I believe more complicated than we generally make it. For instance, the 150 point minimum is too many points (!) for staying a week every year in a studio. If what you do pre DVC is stay every week in a studio, you'll end up with extra points if you use it in the same fashion. A disciplined user would rent those points, turning a small profit to be used against their own annual dues. Most of us upgrade to a one bedroom, or stay more days, or give the points to relatives or.....

But several people have posted in the past that they save with DVC and while I don't, I don't have any reason to doubt them, given what they describe as their before and after behavior. Someone used to get connecting rooms at the Poly for their larger family - a DVC two bedroom is cheaper than that. I never used codes, the best I ever bothered with was the AAA package.

 

[WithFaith50]

Just curious:

"...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..."

1) Isn't this reasoning assuming that a person would have invested the money if he/she had not bought into DVC? That's not necessarily true (I certainly would not have! I probably would have bought my DH that ATV he keeps asking for !).

2) Even if a person did invest the money, this reasoning assumes that the person would make money on his/her investment and that's not necessarily true...right...?

I guess if a person bought into DVC as a financial investment they may want to talk to a financial advisor to compare the purchase to other investment vehicles, but I think (& I may be wrong !) most people buy DVC as part of an overall vacation strategy (ie. to make vacation planning easier, etc.).

My financial formula: (5 to 7 years of accomodation costs) - (DVC purchase + 5 to 7 years of maint. fees) =

WithFaith50

 

[whjoyjr]

Tug????

 

[DisneyHoneyMoon]

As the original poster, let me clarify some of my comments.
I'm not looking at DVC to replace my retirement savings. I'm going to visit Disney annually anyways... (I was raised this way and I'd like to continue it with my family). All I wanted to know was how most people calculated to see if DVC would be a cheaper way to visit disney once per year as opposed to staying in a moderate resort without DVC annually. I watched the video and they just don't get very specific with pricing.... especially AP discounts and maintenance fees.

Honestly I'm sold either way! I love the magic of Disney and it'd be great to go to Disney every year no matter what. On the other hand my wife has a degree in business... I'm trying to convince her. Come on guys! Help me out

 

[manning]

Financial matters can be very complex. the secret is to break it down to its simplist components. I managed to get it down to two. they were:

heads I buy or
tails I don't.

On a serious note, you will be torn with objective and subjective feelings.

 

[crisi]

Moderates, it will probably be a wash for a while. It will hit you on inflation and no one has the inflation crystal ball handy.

 

[hawkeye]

We just got back from Disney last week - Beach club. (Also went 2 prev yrs and a cruise). We did the SSR tour for the DVC. I have 20 years in banking and drove our poor guide nuts with the math questions. I too wanted justification. Here's what I did.
1. We are going to take a vacation every year.
2. We like nice accommodations
3. We love Disney but know that we can stay there and not do the parks if we want.
4. I used 200 points as my buy in at SSR for the math.
5. I took what it cost me this year for 6 nites at BC and figured in a 5% inflation rate. (Std room but they upgraded us to water view for some reason)
6. Took the annual dues and used 3% per year increase (curr $3.83)
7. At the 8th year my costs DVC vs deluxe resort room broke even (it was actually a little ahead)
8. After that I am ahead of the game. I am going to spend the money on vacation anyway so investing or comparing it to stocks and bonds doesn't make sense. Will I spend more on other things - maybe maybe not - we spend a lot now on other things but we're worth it. And when I die, my daughter and her family can enjoy a less expensive vacation. (I'm not ready to die and my daughter is only 9 - but someday!)
9. The papers are on my office floor ready to be mailed back for our DVC future. Good luck.

 

[JimC]

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.

JimMIA, I believe Disney will price support for another ten years. That would be about 23 years into the contract. Sometime after 25 years (the second half of the contract) I suspect we will see a decline in price support and the beginning of a decline in the market price of a point. This is just my opinion and I will probably be wrong BUT I will be in good company when it comes to forecast errors

Also my analysis is just whether you spend more or less on lodging with DVC based on historical vacation patterns. I agree with your comment that Disney did this to get us to spend more with them, not less and I suspect in the whole that is correct. They want to capture our vacation dollars and the program is an important element in doing that. Besides as a RTU timeshare they get their infrastructure and physical plant for these great resorts paid for by us by purchaseing points and then operated with our money for 50 years without giving up ownership and long-term control of their property. Makes one wonder why they don't convert the other resorts to DVC.

 

[Daitcher]

Just curious:

"...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..."

1) Isn't this reasoning assuming that a person would have invested the money if he/she had not bought into DVC? That's not necessarily true (I certainly would not have! I probably would have bought my DH that ATV he keeps asking for !).

2) Even if a person did invest the money, this reasoning assumes that the person would make money on his/her investment and that's not necessarily true...right...?

I guess if a person bought into DVC as a financial investment they may want to talk to a financial advisor to compare the purchase to other investment vehicles, but I think (& I may be wrong !) most people buy DVC as part of an overall vacation strategy (ie. to make vacation planning easier, etc.).

My financial formula: (5 to 7 years of accomodation costs) - (DVC purchase + 5 to 7 years of maint. fees) =

WithFaith50

One can only assume by these comments that your portfolio isn't exactly going in the right direction. Sounds like you are the type that feels any unspent money is burning a hole in your pocket. As for your #2 , I don't agree with you at all. Every ten year period since the beginning of the stock market, stocks and bonds have averaged almost a 10% annual return. Were there a couple of lean years, sure, but it ALWAYS bounces back and your money grows even further. I have averaged 8% return or better EVERY year. You could also put the money into CD's or other low risk places. I guess we do agree on one thing and that is that DVC is a great program. All the rationalizing just hits me kind of funny. There is no need to "show" friends and family how it is "saving" you money. All that matters is whether it works for you. Believe me guys DVC would not exist if it was "saving" us money. It is a money maker all right but not for us.


DAVE

 

[wordzylady]

As DVC owners since 2002, we have never done any mathematical calculations or cost analyses. Before DVC we stayed at ASMo or CBR. We are annual visitors to Disney and after doing the DVC tour and seeing the accomodations we bought the number of points that we could afford on a monthly basis. We would never be staying in the hotels and have the kind of rooms we have now if we had not joined DVC.

Bottom line for us was how can you put a price tag on great family memories and hopefully future memories with grandchildren. We figure we hit the jackpot every year with great family vacations.

 

[WithFaith50]

One can only assume by these comments that your portfolio isn't exactly going in the right direction. Sounds like you are the type that feels any unspent money is burning a hole in your pocket. As for your #2 , I don't agree with you at all. Every ten year period since the beginning of the stock market, stocks and bonds have averaged almost a 10% annual return...

My portfolio is doing just fine, thank you ! As for #2, you are absolutely right...I must have been having a brain freeze to suggest otherwise...sorry... . Also, unspent money does not necessarily burns a hole in my pocket (okay...maybe sometimes ). I know tomorrow is not promised, so as I am on track with my retirement/savings plan, I will make "fun" purchases with "extra" money .

BTW...Averaging 8% return on your investments every year is GREAT!!!

WithFaith50

 

[spiceycat]

I brought in 93. I almost brought in 92 but got talked out of it by friends and relatives. then in 93 I took my brother's family to WDW for the first time. I spend around $3,450 for that trip. Took them back in Dec (dec was cheap then) spend around $750 for that trip.

My nephew had made it very plain that he wanted to come back to WDW. So I just decided in the LONG run it was cheaper to buy.

of course my plan was to always stay in a studio. Didn't last too long. then we got free tickets 2 for a studio or 1-bedroom, 4 for a 2-bedroom....

what worked for me doesn't apply for you. First of all DVC was alot cheaper plus we got the free tickets until 12/31/1999. that make it WONDERFUL.

DVC is still great - but then it was wonderful!!!

however you can do a compare prices were easily. What hotel are you staying at now? If a moderate or deluxe just use it's current price. Then increase it 5% each year for the next 10 years. multiply that price by the number of nights you stay - then compare that price to the DVC price (include the annual fee - also increase at 5%) * the points you are considering.

I don't do all the finance stuff - although I have a degree in financial...

anyway for me it was simply in 10 years would I save money. the answer with DVC was yes.

this is money on the hotels/rooms only!!! this is also money I would be spending in WDW even if I hadn't brought DVC.

 

[ColoradoBelle1]

Of course, the OP just wanted different opinions.
Because it is obvious that the true 'savings' of buying into DVC are very personal and subjective.

While I love Disney, I also love a good deal. So I looked at my purchase as an investment vehicle for 7-10 years. The market has sucked (compared to the last half of the 90's) for the last 4 years. Real estate is a good investment right now...but it takes more money to invest in general RE than in DVC.

If JimC is astute in his opinion that DVC will hold or increase in value over the next 10 years...and I personally believe he is correct....then one could buy into DVC for cash and then sell in 7-10 years for a break even or better.

If you were judicious in the use of your points AND your financial conscience dictated that you MUST break even on the maintenance fees too...it is certainly possible to rent out enough points so that that pays for MF and then use the balance of the points to stay FREE. Example: renting out 100 points at $11 per point gives you $1100 which pays MF for 275 points, leaving you with 175 points to use. During value season, you could stay in a OKW studio for 22 nights!

In the end, you would lose the investment interest, less tax, on the cash amount of purchase. And although you could buy into a great stock with the $20k investment, you could also buy a dog....so figuring 4% a year is more than reasonable. Which means, 22 nights in a studio for $800. (or 11 nights in a onebedroom OKW). And if you rented even MORE points, it would come out to even less. And all you'd have to do to protect the 'investment' quality of the equation would be to keep a close eye on the resale prices of your DVC. And when and if they fall below your cash plus closing costs purchase..you reevaluate your goals.

In other words, I guess I should be a DVCsalemen!

(I must hasten to add that IMHO, Disney is the ONLY developer of timeshares that this holds true. And it is MORE true, the cheaper you bought into your DVC . In my example I didn't include the rental of banked points that might have come with your contract...but renting out those (as I did my 2004 DVC points) could, in the example above, reduce the investment by 3k!!! giving you even better return)

Bottom line is the magic that Disney provides you and your family...and as the MasterCard commercial states: that value is PRICELESS!

 

[ddave]

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.

There you go! The formula in it's simplest form. DVC is not a financial decision.

Also, we have put our DD through college and a wedding, and now my DS is starting college. Money has been tight and is going to be tight for at least the next 4 years.

Taking a DVC 5 night vacation is simple, fun and cheap. Air + Rental Car (Optional), Room, Food - all for <$1000.
:thewave:

 

[Mike]

...it is certainly possible to rent out enough points so that that pays for MF and then use the balance of the points to stay FREE. Example: renting out 100 points at $11 per point gives you $1100 which pays MF for 275 points, leaving you with 175 points to use.

I'm not sure I agree with this strategy. Are you neglecting to factor in that in order to get these 100 extra points you will have to shell out (or finance) an extra $7500 - $9500. Plus these 100 points carry approximately $400 in annual MFs. Factor in the effort that you will have to go through every year to rent the points - for an annual net gain of $700 - and I don't think it is worth it. You are investing $7500-$9500 just to get $700 annually. Keep in mind that increases in MFs will eat into that profit but increases in rental costs per point will increase it. But from what I see, MFs do rise almost annually while, much to the chagrin of some folks, the rental price per point does not.
If it were me, I'd put that extra chunk of money in a money market and use it to pay the MFs for the 175 points that I needed.
Just my 2 cents.

 

[Daitcher]

BTW...Averaging 8% return on your investments every year is GREAT!!!

WithFaith50 [/QUOTE]



First let me start by apologizing for my post. It seemed a little harsh after reading it again. I just don't think timeshares are good buys. We love DVC but bought only for the memories and family times. Also 8% or more is great. I wish I could take credit for this but I've got some truly great people who put in a lot of time and effort to ensure these types of returns. Enjoy all your future trips.

DAVE

 

[ColoradoBelle1]

Hi Mike...
Yes, of course I factored in all expenses including the big initial chunk. Your idea to put $9500 in money market would net you$190 less taxes at today's rate...I doubt you could pay much in the way of MF fees.
As for renting...it was the easiest thing I have ever done...took 3 phone calls to transfer all 2004 and half 2005 points. Piece of cake.

Finally, the example was based on a model of $20,000 invested in mutual funds which have been gaining very little the last few years...so giving it a net of 4% (after tax) yielded only $800 on the entire cash invested in mutuals.

Not sure if my explanation confused you...but the renting of some points each year paid all MF so....after the initial outlay those 22 days were FREE. And again, the initial outlay (20K) in mutual funds...or worse, in money market would net you $800 a year at 4% net....So lets see: a not guaranteed $800 a year OR 22 days at OKW....hmmmmmm. Let me think about that! And then there is also the opportunity to forego 22 days and instead rent those points, netting you not a measly $800 but actually nearly
$2000 net. And still having ownership of DVC which SO FAR is still appreciating. Yes MF goes up...but so does rentals ( I do transfers at $11 and rentals at $12 currently)

However, all this talk is giving away some of my best investment strategy for free! If too many of us tried my strategy....well, it wouldn't be near as good.
Each to his own! And please pass the hanname!

 

[mlshields]

My calculation is easy.

Bought a resale in '99 - for 70 per point. Contract came with 400 banked.

We have done:

2 - 7 day Cruises on the Magic - Cat 8 rooms - for a family of four
11 days at OKW - 2 bedroom
5 days at HH - 1 bedroom
3 nights at the Hotel Del Coronado - San Diego
3 nights at the Grand Californian
1 night at the Boardwalk

I feel I have FAR exceeded my original payment of $14,700.

The two cruises alone would have come close to 12K!

Enjoyed every minute of it - and I might not be here tomorrow to enjoy it so I am going to LIVE while I can.