Spreadsheet to track contract value

[naman1221]

Thanks for doing this and sharing. I am back and forth on DVC and today is a day where I want to buy. For Column G [
Cash Price or Point Rental Price for Equivalent Room(s)] do you think it's safe to just use a rental price of $19 per point? I referenced the board sponsor and it is $19 booking seven months out, $21 eleven months out. With a 7% ROI opportunity cost, it seems it may never be worth it (i.e. For my calculations of a 130 point contract @ BW for $125 a point, I would have saved ~$19k while investing would have netted me $86k over that same timeframe). Am I looking at this wrong?
I appreciate your insight.

Misunderstood how the model was working! apologies

 

[Brian Noble]

If you are truly taking that 16k and investing it and never touching it,

That's not the comparison. The comparison is between two (hypothetical) people:

• Person A buys a contract, pays Dues, books some set of DVC stays, and holds until expiration.
• Person B invests an amount equal to Person A's purchase in an investment account. Each year, they add exactly the amount of Person A's Dues to the account. They rent (from other owners) exactly the same DVC stays that Person A books.

If Person B has money left over at the end, buying is a bad (financial) idea. If Person B has to throw in extra money at the end, then buying is a good (financial) idea.

Of course, there are other reasons to decide to buy or rent.

 

[WeIcomeHome]

Brian explained the opportunity cost accurately above. If you aren't going to go to Disney at all or less often in the situation that you don't buy DVC then the analysis is completely different.

When talking about the value of DVC there is more to account for than just money. Everyone will place value on things differently. Some people might be willing to pay hundreds or thousands of dollars to save a few hours on a trip. Other people may value money more than time in the same situation. Similar situation with contracts in DVC. Some people may look harder at cost to benefit ratio while others are less worried about coming out ahead and just want to have access to the DVC program.

 

[WeIcomeHome]

Thanks for doing this and sharing. I am back and forth on DVC and today is a day where I want to buy. For Column G [
Cash Price or Point Rental Price for Equivalent Room(s)] do you think it's safe to just use a rental price of $19 per point? I referenced the board sponsor and it is $19 booking seven months out, $21 eleven months out. With a 7% ROI opportunity cost, it seems it may never be worth it (i.e. For my calculations of a 130 point contract @ BW for $125 a point, I would have saved ~$19k while investing would have netted me $86k over that same timeframe). Am I looking at this wrong?
I appreciate your insight.

You are correct that the opportunity cost is high when assuming the ratio of MF to rental points to remain constant over time. Your savings will exceed the cost of your contract but your opportunity cost will exceed 7 figures by the end of the contract.

I considered using $20/point instead of a rack rate estimate but I imagine if room rates continue to rise with inflation that so to would rental costs. My guess is overtime rental costs will exceed the rise in MF.

 

[gisele2]

Thanks for sharing the chart. It is surprising . My BCV is a better purchase than my BLT. Was convince of the contrary.

 

[E2ME2]

That's not the comparison. The comparison is between two (hypothetical) people:

• Person A buys a contract, pays Dues, books some set of DVC stays, and holds until expiration.
• Person B invests an amount equal to Person A's purchase in an investment account. Each year, they add exactly the amount of Person A's Dues to the account. They rent (from other owners) exactly the same DVC stays that Person A books.

If Person B has money left over at the end, buying is a bad (financial) idea. If Person B has to throw in extra money at the end, then buying is a good (financial) idea.

Of course, there are other reasons to decide to buy or rent.

You could probably model a comparison, using historical data for dues/MFs/Rental$$, and see which comes out ahead over time, perhaps in 5 year increments ......??

 

[Brian Noble]

You could. Or you could decide “Dude, it's a TOY. You're buying a TOY. Treat it like a TOY."

 

[Alexander]

You could. Or you could decide “Dude, it's a TOY. You're buying a TOY. Treat it like a TOY."

Love this! Only twice in 20 years of ownership have I looked to see what the room would've cost in cash. Both were for stays at Aulani because I was curious. Otherwise, just use your points if you're already a member and enjoy your vacations. LOL

 

[E2ME2]

You could. Or you could decide “Dude, it's a TOY. You're buying a TOY. Treat it like a TOY."

OK - so I decided to play around with that toy
This is definitely a "quick & dirty" analysis.
I used the resale value I purchased SSR for in 2020, compared to Direct SSR in 2020, compared to $19/PP rentals, booking 200 points worth of SSR studios in February (my normal travel window) which is just about 14 Nights.
I assumed MFs would escalate at 3.5% per year, and that rental prices would also increase by 3.5% per year.
BIG Assumptions, IKR, but there will always be the unkown variable. Anyway, here's what I got:
Cumulative Rental exceeds Cumulative Resale in Year 7
Cumulative Rental exceeds Cumulative Direct in Year 12

Not Scientific, but something to think about

 

[WeIcomeHome]

DVC will almost always make sense from a cash savings viewpoint after 10 to 15 years of use. It's when you account for time value of money and the opportunity cost that it won't. But that is the main point people make when they say "DVC isn't an investment".

The main purpose of the spreadsheet was to be a cost tracker over time as requested and less about making assumptions for future costs. I just built future costs in as a starting point mostly to verify my equations were working properly but also to show users what the inputs should look like. I threw in the OC column after hearing that most people weren't taking the time to figure it out.

 

[Brian Noble]

It's when you account for time value of money and the opportunity cost that it won't.

It can, but it's not huge.

https://www.disboards.com/threads/where-is-bottom.3909674/post-64662073

 

[JPKanks]

F

So I plugged in somewhat close numbers and yes, for a 2042 contract, breaking even at $125 a point is very very tough as you only have 19 years to do it.

I will also argue that 7% ROI is assuming you were never going to spend that money otherwise. I think what convinced us that it made financial sense was that I was taking these trips anyway and just paying each year. At that point, I'd rather just have the control. If you are truly taking that 16k and investing it and never touching it, it will never look like a good decision.

For sure. I would probably be more conservative and use 5% ROI opportunity cost which would make DVC a little more appealing. If I did take the DVC leap, I would not be financing. I do have the money in a savings account getting 4% right now.

The spreadsheet is useful for crafting my target so I will play around for each resort to see what my 'target' cost is. I don't mind 'losing' or (forfeiting?) some money because of the peace of mind and fun of DVC will be worth it. Thanks!

 

[JPKanks]

OK - so I decided to play around with that toy
This is definitely a "quick & dirty" analysis.
I used the resale value I purchased SSR for in 2020, compared to Direct SSR in 2020, compared to $19/PP rentals, booking 200 points worth of SSR studios in February (my normal travel window) which is just about 14 Nights.
I assumed MFs would escalate at 3.5% per year, and that rental prices would also increase by 3.5% per year.
BIG Assumptions, IKR, but there will always be the unkown variable. Anyway, here's what I got:
Cumulative Rental exceeds Cumulative Resale in Year 7
Cumulative Rental exceeds Cumulative Direct in Year 12
View attachment 748827
Not Scientific, but something to think about

Thank you for this. I think at this point, I need wine and PowerPoint to convince the spouse lol

 

[gisele2]

You could. Or you could decide “Dude, it's a TOY. You're buying a TOY. Treat it like a TOY."

Yes , and I love my toy. I did not save anything because I was going to Disney once every 2 years and now it is 2 times a year. But I am happy with my decision.

 

[Chili327]

Yes , and I love my toy. I did not save anything because I was going to Disney once every 2 years and now it is 2 times a year. But I am happy with my decision.

Would that mean that banking and borrowing for a trip every 3 years makes it no savings?

 

[Brian Noble]

It might, but it's harder that way. More importantly, if you only travel once every three years it is easy to strand points, because every point is valid for at most three years. That means every point can only be used for one potential trip. If it's not used for that trip, it's not used.

I think DVC works much better for someone planning to go at least once every other year. If I were going less frequently, I would just rent from an owner as I went.

 

[gisele2]

Would that mean that banking and borrowing for a trip every 3 years makes it no savings?

NO I mean that going more often is more expensive.

 

[Chili327]

It might, but it's harder that way. More importantly, if you only travel once every three years it is easy to strand points, because every point is valid for at most three years. That means every point can only be used for one potential trip. If it's not used for that trip, it's not used.

I think DVC works much better for someone planning to go at least once every other year. If I were going less frequently, I would just rent from an owner as I went.

Technically I'm thinking any leftover points from the 3rd year that don't need to be borrowed get rented or something, or you'd have to go back in 2 years every other trip.?

I just bought in with 50pts, so we'll see how it works out. lol

 

[Brian Noble]

Well, it's worth a shot! If it doesn't work out you can always buy more. ;-)

 

[DVCRookie2023]

DVC will almost always make sense from a cash savings viewpoint after 10 to 15 years of use. It's when you account for time value of money and the opportunity cost that it won't. But that is the main point people make when they say "DVC isn't an investment".

The main purpose of the spreadsheet was to be a cost tracker over time as requested and less about making assumptions for future costs. I just built future costs in as a starting point mostly to verify my equations were working properly but also to show users what the inputs should look like. I threw in the OC column after hearing that most people weren't taking the time to figure it out.

Thanks for putting this together. I am assuming this just figures using all points. In other words, do the calculations change whether or not I stay each year and use 200 pts per year vs. if I stay every two years and use 400 pts every two years (on a 'nicer' stay)?