Simple "Cost of DVC" Calculator

[aoconnor]

Hi All,

I created this simple spreadsheet to help prospective DVC purchasers quickly and easily see the effective cost of buying DVC. All you have to do is enter the information in blue and it will produce the effective "cost per night" you are paying for the room.

The true cost of ownership is comprised of three components:

1) The Initial Buy-In Cost
2) Annual Dues
3) Opportunity Cost (i.e. the return on the money you would save by not purchasing DVC)

Number 3 is often overlooked but is a SIGNIFICANT portion of the true cost of owning DVC-- in fact, in most cases it represents 25-55% of the true cost of ownership (assuming buy in costs of $75-$145 per point and rates of return of 3.0 - 8.0%).

Below is a screenshot of an example for BLT purchased at $115 per point, staying in a Lake View studio during Magic Season (~18 points per night):

Let me know if you guys have any comments or think I'm missing something.


LINK: https://we.tl/knTxKrusDd

 

[aoconnor]

By the way, when you look at the cost this way here are the resorts ranked from cheapest to most expensive:

Yes, this factors in the fact that annual dues over time add up to more than the buy-in cost.

This is why opportunity cost is an important factor. You see a lot of people saying BLT is the second 'cheapest', which it would be if you only took the cost divided by years remaining plus maintenance fee. But the buy in cost at $115 is significantly more than say AKV at $85, and that's critical. The money you save up front can more than offset a difference in maintenance fees or years remaining.

 

[disneynutz]

Buying DVC can cause you to increase your number of vacations per year and/or cause you to increase the number of expensive Disney vacations taken each year. While we are looking to buy DVC for a resort cost savings, Disney knows that DVC ownership actually increases their profit far more than non DVC guests do. That's why they keep building and converting resort rooms to DVC.

Bill

 

[DVCjj]

You forgot #4) The Emotional Value - which leads to Happy which helps lead to Healthy which saves you money. 8=)

 

[BillPA]

Nice job, but I think you need to factor in the cost to stay in the units. A studio at the Poly or GF is much more than BW or SSR or AK. It get more noticeable if you need a GV and stay at OKW. All the price 'tools' I've seen, don't account for the 20-35% difference in the number of points needed for stay of the same length, in the same size unit, Studio, 1 BR... The number of years remaining shouldn't factor in, you accounted for that cost in the opportunity cost. Why count it twice?

 

[CarolMN]

You have assumed that the decision is to purchase or not to purchase.

My decision was how to best use the money allocated to vacations. Some of it was going to be spent on lodging, so there is no return on money saved by not purchasing, at least none the way I understand the formula you're using is calculating it.

 

[CarolynFH]

You have assumed that the decision is to purchase or not to purchase.

My decision was how to best use the money allocated to vacations. Some of it was going to be spent on lodging, so there is no return on money saved by not purchasing, at least none the way I understand the formula you're using is calculating it.

I agree. If we had not bought BWV we would have spent those dollars - and more! - on WDW hotel rooms. That's why we bought - we had visited every year for four years and had outgrown a regular hotel room.

 

[supersnoop]

Two issues:
1. Where are you earning a consistent 5%? The best I'm finding outside of the market is about 1.25%
2. How do you account for the rising cost of accommodations at Disney resorts? If resort rates increase at the same rate as your opportunity cost, then the "41%" becomes 0%.

 

[OKW Lover]

I prefer to exclude opportunity cost in the analysis. Its so difficult to actually put a number on that. It could be 5%, but likely won't be. Yes, today's market returns are pretty good but who knows about tomorrow's?

Perhaps @aoconnor would be kind enough to insert a column the table in post #2 showing the total before opportunity cost to give us the best of both worlds?

 

[OKW Lover]

One other thought for this: my comments about opportunity cost aside, should this include analysis make an assumption about the annual increase in maintenance fees?

 

[ktmo]

You have assumed that the decision is to purchase or not to purchase.

My decision was how to best use the money allocated to vacations. Some of it was going to be spent on lodging, so there is no return on money saved by not purchasing, at least none the way I understand the formula you're using is calculating it.

Yes, this is my thinking. If I was not using this money on DVC, I would be using this money on vacations. So, it is not investment money, this is my vacation money. I am not "losing" money by not investing. I guess I am, but I am not going to give up Disney/vacations. So, I don't factor that in to my cost analysis.

 

[aoconnor]

You have assumed that the decision is to purchase or not to purchase.

My decision was how to best use the money allocated to vacations. Some of it was going to be spent on lodging, so there is no return on money saved by not purchasing, at least none the way I understand the formula you're using is calculating it.

Well of course the decision is to purchase or not purchase, that's topic of these forums And it it's still about the money you allocate to vacations-- just whether you spend tens of thousands up front or pay for them individually over time.

By the way I think resale DVC is a great value! This tool is just to help prospective purchasers see what they are effectively "paying" per night when they are looking at a contract, since it's not so apparent up front. In the example in my first post it came out to ~$250 a night for a lake view studio at BLT, which of course is far less than you would pay for a cash room at CSR.

 

[aoconnor]

Nice job, but I think you need to factor in the cost to stay in the units. A studio at the Poly or GF is much more than BW or SSR or AK. It get more noticeable if you need a GV and stay at OKW. All the price 'tools' I've seen, don't account for the 20-35% difference in the number of points needed for stay of the same length, in the same size unit, Studio, 1 BR... The number of years remaining shouldn't factor in, you accounted for that cost in the opportunity cost. Why count it twice?

This calculator is not meant to compare costs between the resorts-- it's meant to take a specific contract and break down what you are effectively "paying" per night depending on the room type & time you are visiting. If you download the spreadsheet you can toggle the number of points per night to see the effective cost per night. In my example in the first post it came out to $250 a night for a lake view studio at BLT during magic season.

The opportunity costs and years remaining are unrelated. Opportunity cost only applies to the initial cash outlay, so it's the price per point and opportunity cost that are related.

 

[Roxyfire]

Well of course the decision is to purchase or not purchase, that's topic of these forums And it it's still about the money you allocate to vacations-- just whether you spend tens of thousands up front or pay for them individually over time.

By the way I think resale DVC is a great value! This tool is just to help prospective purchasers see what they are effectively "paying" per night when they are looking at a contract, since it's not so apparent up front. In the example in my first post it came out to ~$250 a night for a lake view studio at BLT, which of course is far less than you would pay for a cash room at CSR.

Thank you for this, it's very timely for me! I'm using the sheet now to help me determine which would be the best "home resort" to choose. I know I want to do resale but not sure if I want to take the plunge.

 

[aoconnor]

Two issues:
1. Where are you earning a consistent 5%? The best I'm finding outside of the market is about 1.25%
2. How do you account for the rising cost of accommodations at Disney resorts? If resort rates increase at the same rate as your opportunity cost, then the "41%" becomes 0%.

1) You can toggle the 5% to whatever is appropriate for you. If you're just going to leave money in a savings account, then of course you're not going to do much better than 1%. There are plenty of fixed income options that pay 5-6% (preferred shares in big banks, munis, etc etc) or of course equites vary widely year to year but the long-term historical return of the S&P is well over 5%.

2) That would partially offset it, but the the maintenance fees also increase every year and those are a larger piece of the puzzle over time.

 

[APiratesLifeForMe2]

2. How do you account for the rising cost of accommodations at Disney resorts? If resort rates increase at the same rate as your opportunity cost, then the "41%" becomes 0%.

One other thought for this: my comments about opportunity cost aside, should this include analysis make an assumption about the annual increase in maintenance fees?

My husband and I used both of these when we calculated the "value" of DVC ownership. This was a few years ago when we first started discussing it and mapping out if it really made sense. We researched historic data for room rates (wow have those increased) and maintenance fees to factor into our price.

 

[supersnoop]

One other thought for this: my comments about opportunity cost aside, should this include analysis make an assumption about the annual increase in maintenance fees?

I'd argue no. You're accounting for maintenance fees in today's dollars. The net present value of future inflation-adjusted costs is the same as today's price. If you want to figure in some difference between dues increase and inflation (or some other rate of return), then the numbers might be slightly different.

 

[crisi]

You have assumed that the decision is to purchase or not to purchase.

My decision was how to best use the money allocated to vacations. Some of it was going to be spent on lodging, so there is no return on money saved by not purchasing, at least none the way I understand the formula you're using is calculating it.

A way better way of looking at it. But I think then its worth exploring the opportunity costs for vacations.

If today you spend $5000 a year on vacation - with DVC or without DVC - and the cost of that vacation increases 5% a year, in 20 years, if you'd invested it and got an 8% return and skipped vacations, you'd have about $150k in the bank.

Now, if you can afford to not have $150k 20 years from now - if you aren't worried about kids college, and your retirement is a settled thing (if you are looking at retirement and are young - 45 years of $5000 a year vacations is half a million dollars), a $5000 a year vacation is a wonderful thing. You are probably giving up things like eating out at fancy restaurants. I drive a car I don't really like - its a newer car, it has less than 75k miles on it, but I don't like it. Buying a car I do like would mean giving up vacation dollars. I also really should replace my carpet sometime - but that again, is our vacation dollars and the carpet shampoos.

If the opportunity cost of these vacations is that your kids will graduate with $40k each in student loans, or that you will be living off $28k in social security payments when you retire, or that you have a high deductible health insurance plan that will throw you near bankruptcy if there is a major issue, then you might want to think about scaling back the vacations.

Vacations are important, but its also important to understand what you are giving up to take them.

With DVC, you get tied into Disney vacations - which aren't cheap. And if its affordable, great. There are things you can do with DVC, like renting out your points, to keep you from being tied in. You may buy in the belief (and with the numbers backing you up) that you'll save money - and you may, or you may change how you vacation. Being technically able do so, and the discipline to do so are two different things. Once the points are there, its like the ice cream in my freezer when I'm trying to loose weight.

Opportunity costs is one of my favorite economic concepts - its one that can be applied to everything from time (if I spend time doing this, I won't have time to spend doing this), to diets (I'm going to eat fewer calories this week so that when we go to that party on Friday, I can have a drink or two and snack), to money. And there aren't really right answers - maybe going on vacation today is worth living off your social security check with no other retirement funds in the future. But you have to understand what choice you are making.

 

[CarolMN]

crisi - Couldn't agree more. I cringe every time I read about some DVC purchases that really aren't made with discretionary funds ( at least from what is posted). Those folks are/will be the first to get in financial trouble when "life happens" - we saw a lot of examples of that when so many lost jobs during the last recession.

Our vacations came (and continue to come) from discretionary funds. We took care to make sure all the important areas were covered (like a solid emergency fund, disability insurance, life insurance, health insurance. long term care insurance, education, retirement savings) before we committed to luxuries. We were fortunate to be able to do so. I have no regrets re our DVC purchase.

There are lots of ways to vacation (and even to do so with Disney) without the big financial commitment of DVC. It's not right for everyone.

 

[disneynutz]

For our family we would vacation once in awhile but since buying DVC, we vacation at WDW at least a couple times per year. While vacations are nice our vacation spending has increase by thousands and thousands of dollars because of DVC. My guess is that Disney knows this and our family is not alone. That's why DVC has become such a profit center for Disney and why they are converting cash rooms to DVC and why new DVC resorts will continue to be built.

Bill