Spreadsheet fun!

[Rupan]

As a fellow math geek I applaud this thread. :

Thanks for putting all of this info together. Yes it is true that DVC will change your vacation habits. It is something that my fiancee and I are considering in the near future for the inevitable trips to WDW with the kids.

For us it seems like a logical step. We know we will be going. It is a question of how often and not if. We know that we will be going at least every other year as the kids grow up. That is a minimum of 8 or 9 trips.

Because we probably wont be going every year I think we will start small with a resale contract for about 100 points. That way we can bank and borrow in order to get to the number of points that we need for that particular trip. If we find that we are using it more often we can always add on.

I know I wont have to convince her to be ok with that.

 

[magicron]

I just bought 160 points at BLT during a recent cruise on Disney Magic. I spent the last fours years (well not continuosly) looking at the numbers. Now my kids are four years older, and wishing I had done this sooner. I think if DVC would have been a bit more agressive after my initial contact, perhaps they could have closed the deal sooner.

Anyway. Another aspect to consider in the financial calculation is the value of the assest purchased. In the example of about $20,000 spent on year 1, how much could you sell your DVC contract for (not rent points). I'm new here, so am sure someone here has a better feel for this. But, after year one, perhaps you could sell it for 90% (just a guess), of what you spent for it, less real estate sales commission.

But say you decided to sell it at year 10? Could you sell it for $30,000? 40,000? I suppose you could make some assumption about this by seeing what others are selling their points for now, and how many years into the contract they are. So, assuming the real estate value goes up 5% per year, if my math is right, today's 160 points, at year 40 is now worth about $141,000. But, since there's only 10 years left, someone won't pay this much.

I'd be really interested in seeing if an experience DVCer with some real estate knowledge has thought this through. We own an asset that is worth something, and grows over time, then starts to decline in value as you approach year 50. The person who goes to WDW year by year, spends the money, but has no asset. I suppose it's a little like renting an apartment year after year, vs buying a house or condo.

p.s. If my basic assumptions are way off base, I apologize in advance for my newbie ignorance.

 

[disney4metoo]

Okay...I'll bite. The number's ain't pretty though. Here is what I came up with:

• Current 8 day Park hopper price: $281 Adults and $246 Kids for a week
• Current Dining Plan Price: $39.99 Adults and $10.99 Kids per day
• I assumed an average souvenir/"drinking around the world"/misc. expenses cost of $20.00 per person per day
• I assumed airfare of around $250 (this will vary wildly based on where you are located, time of year, fuel prices, etc.)
• I assumed your average family that would occupy the studio with 2 adults and 2 kids. Every year.
• All vacation expenses increased by 5% each year (rising ticket prices, dining plan costs, inflation in general).

The number's ain't pretty



Obviously the numbers will fluctuate with everyone's individual vacationing style. I just picked numbers at random that I felt were representative of the most number of members here. Also as new family members are added, kids grow up, grand kids, etc. change, so will the expenses.

The GOOD news is, if you DIDN'T have DVC and paid cash for your rooms, your total cumulative cash cost of all your vacations at WDW would be: $1,314,981. DVC saves you $457,988.73 (or 35% of your life-time total vacationing expenses.)

Wow, very cool! You are awesome!

Would you be willing to do a spreadsheet on DP, DDP TIW vs out of pocket cash? That would be another interesting one to see, since there is always an ongoing debate about which one saves the most money!

Thanks for doing the other spreadsheet! Is there anyway to save it for future use!

 

[YourEveryDayAdam]

I just bought 160 points at BLT during a recent cruise on Disney Magic. I spent the last fours years (well not continuosly) looking at the numbers. Now my kids are four years older, and wishing I had done this sooner. I think if DVC would have been a bit more agressive after my initial contact, perhaps they could have closed the deal sooner.

Anyway. Another aspect to consider in the financial calculation is the value of the assest purchased. In the example of about $20,000 spent on year 1, how much could you sell your DVC contract for (not rent points). I'm new here, so am sure someone here has a better feel for this. But, after year one, perhaps you could sell it for 90% (just a guess), of what you spent for it, less real estate sales commission.

But say you decided to sell it at year 10? Could you sell it for $30,000? 40,000? I suppose you could make some assumption about this by seeing what others are selling their points for now, and how many years into the contract they are. So, assuming the real estate value goes up 5% per year, if my math is right, today's 160 points, at year 40 is now worth about $141,000. But, since there's only 10 years left, someone won't pay this much.

I'd be really interested in seeing if an experience DVCer with some real estate knowledge has thought this through. We own an asset that is worth something, and grows over time, then starts to decline in value as you approach year 50. The person who goes to WDW year by year, spends the money, but has no asset. I suppose it's a little like renting an apartment year after year, vs buying a house or condo.

p.s. If my basic assumptions are way off base, I apologize in advance for my newbie ignorance.

This is an EXCELLENT point. Once you've broken even on your savings from owning DVC, you still have an asset that is worth something. Obviously, predicting the future is difficult but lets propose another "what if":

There are two factors that weigh in on what your DVC is worth, if you were to sell it:

1) How many years you have left on your contract.
2) The value of the accommodations that your points represent.

To elaborate factor #1: Each DVC contract has about 50 years of accommodations. Each year that goes by, it's real value is less, because there are less years in the contract to use. This helps to drive the resale price down.
To elaborate factor #2: Each year Disney raises their prices. This actually helps increase the cash value of your remaining years. This is realized in higher per-point rental rates or the cash savings between what the annual dues and cash rates are. This helps to drive the resale price up.

For example:

If you look at my initial spreadsheet, you'll see that the initial cost of DVC was $20,384. If you look at rack rates vs. annual dues, you will see that in the last year, the savings between rack rates and the dues is $24,955. This means that you could sell your DVC to someone with just your last year of points left for the same price that you paid for it, and the person who bought it would still save $4,571.

My guess on what you'll see with the value of your DVC:
You'll initially be able to sell your DVC for about 2/3-3/4 the cost of what you paid for it... As in, if you were to buy it today, and then immediately turn around and put it up for resale, after all the closing costs and expenses, you'll get about 2/3-3/4 of what you paid for it back.
That cash price will increase with the cost of inflation. This will put you back to your purchase price at about 7-10 years.
The cash value will then increase at about the same price as Disney raises their rack rates.
About 7-10 years before the expiration of the contract, you'll start to see the value decrease. Slowly for the first 2-3 years they start to decrease, but then each year will see a pretty dramatic bite taken out in value each subsequent year. Until, the last year when it will be worth about 50% of the current rack rates.
By this estimation, this puts the resale cash value of the initial BLT contract of 182 points I used in my initial spreadsheet to be about $96,000 in 2050.

You can already see evidence of this increase in price:
DVC Price point history:

Pre-Sales $48.00
October 1991 Old Key West Opens
October 1991 $51.00
July 1992 $54.50
November 1992 $56.00
July 1993 $57.50
June 1994 $60.50
November 1994 $61.50
July 1995 $62.75
...

You can see that the most that Old Key West sold for, initially, was $62.75. If you look at Old Key West contracts on The Time Share Store, they are going for about $70 per point.

So, anyone who bought Old Key West back when they bought have now stayed every year at Disney for a fraction of the rack rates (annual dues) and get back their initial investment, and more, almost 20 years later. Also, any of the OKW owners who bought in when the price was $48 or $51 are doing very well now.

I would also suspect right now that the numbers on the Time Share Store are lower than what they normally would be, because of the economy, so that's another thing to consider.

There are, of course, MANY factors that come in to play in the resale value of DVC: Current sales price for new resorts, Disney's ROFR, current incentives, the economy, etc.

Overall: You'll take the initial hit on what DVC is selling new vs. used, however once you take that hit, you'll see an increase in value over time until near the very end when it will start to decrease in larger chunks until the contract expires and there is nothing left.

 

[circhead]

I have to agree with this point. I bought VWL in 2001 and there were dollar off incentives. When I look at the resale boards now VWL resale is selling for more than I paid. I've gotten 9 years of vacations (averaging 2 trips a year), and have definitely saved money by not paying rack rates. I've saved my sanity by having a separate bedroom where the kids could go to sleep at night and I could actually stay up and have a cup of tea because I wasn't distrubing anyone.

I'm glad I did it when I did - but now my kids are grown and I have a grandchild - I can't wait to add on.

 

[YourEveryDayAdam]

Wow, very cool! You are awesome!

Would you be willing to do a spreadsheet on DP, DDP TIW vs out of pocket cash? That would be another interesting one to see, since there is always an ongoing debate about which one saves the most money!

Thanks for doing the other spreadsheet! Is there anyway to save it for future use!

This is actually a VERY difficult one to do. Simply because all of the different restaurants at all of the various locations around WDW all cost differently. Also, the entrees at each restaurant are all different.

Ultimately, this will vary wildly for each person based on the types of food they like, the way they eat (once a day, twice a day, 4 times a day, etc.), if they want to sit down and eat, or if they just want to grab-and-go, etc.

Ultimately, this is the way I like to look at it:

Regular Dining Plan: You are committing to Disney one sit-down meal per day. You prepay for this, and in return, Disney will give you one "free" Quick-Service meal, and one free snack per day.
Quick Service Dining Plan: You are committing to two quick-service meals per day. You prepay for this, and in return, Disney will give you two "free" snacks per day, plus a resort refill mug for free.
Deluxe Dining Plan: You are committing to Disney two sit-down meals per day. You prepay for this, and in return, Disney will give you one "free" sit-down meal, appetizers for all your meals and two free snacks per day.

The dining plans work out well for you if you enjoy FULL meals. This is because the counter service meals and table service meals include drink and desert. If you are on the Deluxe plan, then the meals also include Appetizer. The dining plan makes the most sense if: You don't want to worry about prices and you want a more "all-inclusive" style vacation, and/or you travel alone or as a couple no kids. It also makes more sense if you go to WDW only once/twice a year or less. It can also make sense if you don't drink alcohol.

TIW is more like the "entertainment" style discount card or a frequent shopper discount program. You pay for your membership, and you are committing to disney to eat there frequently. In return, they will give you a flat rate off the bill. This makes more sense if you have a large family (one price covers your entire table), order alcohol, go frequently throughout the year (one price covers multiple visits), etc.

In Disney's eyes, these two programs have two different purposes:
The dining plan is to encourage that the less-frequent park visitors to eat in the parks, rather than stop at a grocery or ordering food from a take-out place.
The TIW plan is more to encourage the frequent visitors to the parks, and the florida residents, to eat in the parks when they come and visit. Or, even to a degree, to encourage the florida residents to visit at all. This is evidenced by the fact that you NEED to have an annual pass or be a florida resident to get the TIW card. Once you buy the TIW card, you are subconsciously motivated to make the most of it and use it often. "Oh, I have TIW, so i'll go to Boma instead of ordering from Dominoes".

 

[logan115]

Here's my basic and far from complex scenario for estimating a resale value :

Let's say you're talking about 160 points at SSR (like I'm looking to buy), these are going for around $70 (resale), so figure $12K (or $75 per point)with costs and first years MFs.

10 years from now, let's say that hypothetical the resale value is cut in half to $35. EXCLUDING the commissions I'd pay as a seller to sell the contract, that's roughly $6K. Now put yourself in the shoes of a buyer : For $6K, in 2020 with 34 years left, would I pay $6K for 160 points ? YES, as even without any inflation I could pay that amount in rack rates for the room today . Renting those points from an owner at the current rate of $10/pt would mean that in 4 trips I would've paid off the principle, and in 6-7 trips would've recouped the MFs.

So let's say I can sell for $50/pt, that's still only $8K and means that the break-evens get pushed back another trip or two, but still a decent value to be had for 34 years.

Now, let's say I see more value than $50, but buyers only value it at $50 - guess what - it's only worth $50 ., but, if I sell it @ $50 here's what I see :

"Lost" $4K(paid $12K, sold @ $8K)
Paid 10 year of member fees @ $700/yr so $7K
So $11K, PLUS some TVM (the time value of money accounting for the interest I would've made on the my money if it was in the bank instead of buying DVC and also on the MFs). But, all of that money would be gone by now as I would've been using those funds to "rent ressies" along the way.

So for 10 years of points, (1600), I "paid" $11K, or about $6.875/pt or about 68% of what a "rental" costs now and a HUGE savings over going direct thru Mickey. Keep in mind that I also got the benefit of controlling my own ressie, possibly taking advantage of the other perks like discounted APs, free valet, and some other goodies along the way, but wait - there's a few other little things :

We get to take multiple trips to WDW with my family (and perhaps extended family), created memories that will last a lifetime (how much is it worth to have your kids go to WDW with Grandma and Grandpa ??? - we can still do this without DVC, but paying for 2 moderate rooms is gonna cost at at least $3K for a single trip !!), stayed in great accomodations that allow us to spend our week completely submerged in all things Disney (can get great deals offsite but for us I don't mind paying up to be onsite), and it doesn't appear that if we use it correctly that it will be a huge financial loss that is typically associated with timeshares.

Are my figures exact - nope - not really. Am I going to make money - nope, and not expecting to. With two kids, ages 5 and 5 months, does it give me the opportunity to have many great trips over the next 10-15 years at a price that is within my budget, but allows me to stay in much nicer accomodations - yep. Can I sell it if something changes and I have to "get out" yep.

The numbers help, but if you tell me that in 10-15 years I could've "done it cheaper" without owning DVC you may be right, but I feel pretty good about our decision to take the plunge.

Everyone's situation is different, good luck to all that are on the fence right now.

Chris

 

[TSMIII]

This is an EXCELLENT point. Once you've broken even on your savings from owning DVC, you still have an asset that is worth something. Obviously, predicting the future is difficult but lets propose another "what if":

There are two factors that weigh in on what your DVC is worth, if you were to sell it:

1) How many years you have left on your contract.
2) The value of the accommodations that your points represent..........

There are, of course, MANY factors that come in to play in the resale value of DVC: Current sales price for new resorts, Disney's ROFR, current incentives, the economy, etc.

I think it is abit more complicated than that.

A few other factors also play into the equation:

1. Popularity of the resort -high demand resorts like BWV & BCV command higher prices due to their location, amenities, etc. despite having shorter terms than SSR & OKW 2057. VB sells at a lower price point than its 2042 siblings due largely to its off-site location and higher maintenance fees which make it less popular.

2. Size - larger resorts see more contracts available for resale (supply/demand). SSR sells at a lower price than VWL, BCV or BWV even though SSR has a 12 year longer term. And AKV & BCV are listed for roughly the same price point when AKV has a 15 year longer term.

3. Contract size - it is well known that a smaller contract (25, 50, 75 points) can command a higher price than a larger one (160, 270, 350) for the same resort.

I think it's an impossible mission to attempt to forecast the exact value of a contract beyond the very near term.

 

[logan115]

I think it is abit more complicated than that.

A few other factors also play into the equation:

1. Popularity of the resort -high demand resorts like BWV & BCV command higher prices due to their location, amenities, etc. despite having shorter terms than SSR & OKW 2057. VB sells at a lower price point than its 2042 siblings due largely to its off-site location and higher maintenance fees which make it less popular.

2. Size - larger resorts see more contracts available for resale (supply/demand). SSR sells at a lower price than VWL, BCV or BWV even though SSR has a 12 year longer term. And AKV & BCV are listed for roughly the same price point when AKV has a 15 year longer term.

3. Contract size - it is well known that a smaller contract (25, 50, 75 points) can command a higher price than a larger one (160, 270, 350) for the same resort.

I think it's an impossible mission to attempt to forecast the exact value of a contract beyond the very near term.

Agree on the impossible to forecast point - and if there's anyone that can predict the value of a timeshare in 10 years would you mind telling me where the Dow Jones will be trading

I just kinda did a back of the envelope type guess and said "do I think someone would pay XX in 10 years ?"

 

[Rupan]

Trying to forecast the future value of anything is rolling the dice. I think it is fair to say though that even a DVC contract with 5 years left still has value. At the very least I would say that a weeks worth of points would be equal to one weeks rack rates in that scenario. The person buying it could still get 5 years out of the DVC points so it would seem like a no brainer to me.

 

[magicron]

Thanks for the good discussion. In addition to the euphoria of being on the cruise, I think the idea of resale is what pushed me over. I'm willing to pay to go on a nice vacation, that's a given. But, if we decide in 10 years that we're done going to WDW on a regular basis, I stand a good chance of recouping much of my initial investment, and if I'm lucky maybe a little more. Two options:

1. Sell at the going rate
2. Rent the points at likely a higher rate than today.

The sales person also made a point that during low season, you could stay almost a month at some of the resorts, with a reasonable number of points. This could be in lieu of renting a condo for a month in Florida.

Now I've got to start figuring out when/how to use my 160 points and my developer points in the near future.

 

[YourEveryDayAdam]

I think it is abit more complicated than that.

A few other factors also play into the equation:

1. Popularity of the resort -high demand resorts like BWV & BCV command higher prices due to their location, amenities, etc. despite having shorter terms than SSR & OKW 2057. VB sells at a lower price point than its 2042 siblings due largely to its off-site location and higher maintenance fees which make it less popular.

2. Size - larger resorts see more contracts available for resale (supply/demand). SSR sells at a lower price than VWL, BCV or BWV even though SSR has a 12 year longer term. And AKV & BCV are listed for roughly the same price point when AKV has a 15 year longer term.

3. Contract size - it is well known that a smaller contract (25, 50, 75 points) can command a higher price than a larger one (160, 270, 350) for the same resort.

I think it's an impossible mission to attempt to forecast the exact value of a contract beyond the very near term.

Trying to forecast the future value of anything is rolling the dice. I think it is fair to say though that even a DVC contract with 5 years left still has value. At the very least I would say that a weeks worth of points would be equal to one weeks rack rates in that scenario. The person buying it could still get 5 years out of the DVC points so it would seem like a no brainer to me.

I agree with both of you. There are many, MANY, factors in play that ultimately determine the resale value of the resort. And certain characteristics of contracts (banked points, lower total points, etc.) will command higher resale values because of their desirability in the resale market. They are all things to consider.

However, OKW is one of the biggest DVC resorts, has plenty of resale availability, and it's currently selling for more now than it was when you bought. I wasn't trying to put a specific value on any of the resorts. I was simply saying: In general, the resale value of DVC will go up every year, and will (eventually) exceed what you paid for it.

Certain resorts will command more for resale than others, and will be a better resale value than others... But ultimately, I think that the cash value of your DVC membership will (generally) increase over time until about 10 years before the end of your membership.

 

[disney4metoo]

This is actually a VERY difficult one to do. Simply because all of the different restaurants at all of the various locations around WDW all cost differently. Also, the entrees at each restaurant are all different.

Ultimately, this will vary wildly for each person based on the types of food they like, the way they eat (once a day, twice a day, 4 times a day, etc.), if they want to sit down and eat, or if they just want to grab-and-go, etc.

Ultimately, this is the way I like to look at it:

Regular Dining Plan: You are committing to Disney one sit-down meal per day. You prepay for this, and in return, Disney will give you one "free" Quick-Service meal, and one free snack per day.
Quick Service Dining Plan: You are committing to two quick-service meals per day. You prepay for this, and in return, Disney will give you two "free" snacks per day, plus a resort refill mug for free.
Deluxe Dining Plan: You are committing to Disney two sit-down meals per day. You prepay for this, and in return, Disney will give you one "free" sit-down meal, appetizers for all your meals and two free snacks per day.

The dining plans work out well for you if you enjoy FULL meals. This is because the counter service meals and table service meals include drink and desert. If you are on the Deluxe plan, then the meals also include Appetizer. The dining plan makes the most sense if: You don't want to worry about prices and you want a more "all-inclusive" style vacation, and/or you travel alone or as a couple no kids. It also makes more sense if you go to WDW only once/twice a year or less. It can also make sense if you don't drink alcohol.

TIW is more like the "entertainment" style discount card or a frequent shopper discount program. You pay for your membership, and you are committing to disney to eat there frequently. In return, they will give you a flat rate off the bill. This makes more sense if you have a large family (one price covers your entire table), order alcohol, go frequently throughout the year (one price covers multiple visits), etc.

In Disney's eyes, these two programs have two different purposes:
The dining plan is to encourage that the less-frequent park visitors to eat in the parks, rather than stop at a grocery or ordering food from a take-out place.
The TIW plan is more to encourage the frequent visitors to the parks, and the florida residents, to eat in the parks when they come and visit. Or, even to a degree, to encourage the florida residents to visit at all. This is evidenced by the fact that you NEED to have an annual pass or be a florida resident to get the TIW card. Once you buy the TIW card, you are subconsciously motivated to make the most of it and use it often. "Oh, I have TIW, so i'll go to Boma instead of ordering from Dominoes".

Thanks, YourEveryDayAdam! I appreciate you input!

 

[edk35]

What a great thread. Thanks for sharing.

 

[Rupan]

Certain resorts will command more for resale than others, and will be a better resale value than others... But ultimately, I think that the cash value of your DVC membership will (generally) increase over time until about 10 years before the end of your membership.

Agreed 100%.

 

[happy place]

from the DH - warning, a bit technical so be warned that your eyes may glass over! Only since you are a math geek, I'll throw a monkey wrench into your methodology for you to consider. Your method will give only a rough approximation to compare the options. A true financial analysis would be a bit more sophisticated mainly by taking account of the time value of money. When looking at a series of cash flows over time, a financial analyst would calculate the net present value (NPV) of each payment and add them together to determine how much each 'costs'. The formula is NPV equals payment at time t divided by ((1+i) to the power of t) where i is the annual interest rate and t is the number of years from the present. Another way to view this is that finance attempts to account for inflation. In other words, $1000 today buys more than $1000 will in ten years from now and so is 'worth' more now. That being said, the results are greatly affected by the chosen interest rate which is not the same as the interest rate Disney would charge for their financing. What rate to choose is not simple since, as you can tell from the last year alone, interest rate changes quite a bit over a time horizon as long as 50 years. So it's all very complicated and nuanced but I would think in the end there's no doubt that the DVC option still ends up way ahead.

 

[HilsNPaul]

. When looking at a series of cash flows over time, a financial analyst would calculate the net present value (NPV) of each payment and add them together to determine how much each 'costs'. The formula is NPV equals payment at time t divided by ((1+i) to the power of t) where i is the annual interest rate and t is the number of years from the present.

If someone is interested in this calculation, this is the technical formula: PV = Sigma FVt /(1 + r)t for a series of years. You do have to calculate the FV= Full value, including costs and benefits multiplied by t. Then divide by (1+rate) multiplied by time. This sounds complicated, but is extremely simple on excel; just input 'npv' as the formula.

The reason that you have to calculate the full value is because this theoretically includes all of the associated benefits of a project. This would include such things as happiness, quality of life, etc. In terms of Benefits and Costs, there are always things that cannot be measured. I cannot emphasize this enough. Math fails when we are looking at measures of happiness, memories, love, etc. For some people, these benefits may outweigh the actual long term costs. Thus, NPV might fail to account for these intangible benefits.

For the non-math folks: If I were advising a friend or client, I would suggest that owning DVC is more akin to owning a car. It is a depreciating asset. Your car is useful, and you will likely use it for many years. The car makes your life better. The longer you own and use your car, the less it is worth over time. I personally think DVC is very similar. Depending on which resort you buy into, you may be able to sell your DVC for 3/4 or 2/3 the cost of its purchase price. You may get less or more, depending on the demand for the resort. Over the years, you will enjoy the car, perhaps you might even gain happiness from driving it. This adds benefit and value to you as the owner, but it may not add to the physical cost of the car.

 

[HilsNPaul]

That being said, the results are greatly affected by the chosen interest rate which is not the same as the interest rate Disney would charge for their financing. What rate to choose is not simple since, as you can tell from the last year alone, interest rate changes quite a bit over a time horizon as long as 50 years.

To clarify, the rate accounted for in NPV is the discount rate, not the interest rate. The discount rate attempts (emphasis on attempts!!) to account for inflation (in costs and currency), which may or may not be influenced by changing interest rates.

 

[Lynn5700]

WOW. Your spreadsheet is awesome! You did a great job.

Very interesting. I like it lol.

 

[dairyqueenmom]

My DH is in love with the OP!!! He is a math/financial geek himself. This was the most entertaining thread this morning. Most of this went over my head, but my DH really got a kick out of it.