SSR vs Art of Animation

[DVCcurious]

I need some help from the finance experts on here.

We currently have 200 points at Wilderness Lodge. We are only staying in 1 BRs (a separate bedroom for the parents from the kids is a must).

We would like to go twice per year: 1 week in late August and a 3-4 day weekend in Jan (MLK), Feb (Pres), or May (Memorial). Our kids are 1 and 3, so we're looking at a minimum of 12 years where we'll go, and that assumes our kids don't want to go anymore when the youngest is 13, but if the kids want to keep going we could use the points forever.

Now, 6 days in late August is 215 points at VWL. We have 200 so we could borrow 15 from the future year for 13 years before we run out of points. So we are basically covered for the week in August. The question comes in regarding the holiday weekend: is it better the buy DVC points for this weekend or stay at AoA?

AoA costs $399 per night for Memorial Day weekend on the disney website. I don't know about taxes or discounts. OKW is 91 points for Memorial Day weekend.


Here's where I need your help with the math.

Is it better to buy SSR or OKW assuming we are planning on staying at OKW (my wife likes it)? We'd only use these points for the holiday weekends and I'm assuming availability shouldn't be a problem. Is SSR or OKW a better deal: OKW has .60 per year higher dues but costs less per point on resale. I think that since our time horizon is 10+ years that the .60 difference in dues for SSR will be better than the lower buy in cost for OKW. SSR also expires later than OKW.

Assume we buy 100 SSR points at $77 per point and the dues are $500 per year. Compare that with $1200 for Memorial Day weekend at AoA. So we'd be paying $700 more per year for AoA. $7,700 up front is an 11 year break even point. So that would take us until our kids are 12 and 14 to break even.

What do you think? Buy DVC or stay at AoA (we'd prefer to stay at OKW than AoA)? Buy SSR or OKW?

 

[supersnoop]

Do you want to stay at a value resort or a deluxe resort? When comparing dvc to a value resort, it's hard to make the numbers work out.

 

[disBOBney]

You have forgotten that you still have points left at the end of your expected use that can be resold. I don't remember off hand if SSR expires in 57 or 54, I'm thinking 57 which means that you have 42 years left. and if you bought the points at $84 pp then that means you have a use year point cost of $2 pp or $182 per memorial day wkd plus your dues which you estimated at $500 meaning a cost of $682 for the trip as opposed to your $1200 to stay in a place you don't want to stay. Is there really a question here?

 

[DVCcurious]

We would prefer to stay at OKW over AoA 100 times out of 100.

The only "question here" is whether buying DVC is really as good a deal. That's what I was hoping to figure out. I don't really understand the 84/42 years left = $2 per point.

More info: the $8,000 cash up front is a non issue. We have plenty of cash and it won't create a burden on us to use the cash to buy the DVC.

 

[disBOBney]

We would prefer to stay at OKW over AoA 100 times out of 100.

The only "question here" is whether buying DVC is really as good a deal. That's what I was hoping to figure out. I don't really understand the 84/42 years left = $2 per point.

More info: the $8,000 cash up front is a non issue. We have plenty of cash and it won't create a burden on us to use the cash to buy the DVC.

Sorry for muddying the waters. I had raised your expected purchase price of $77 to $84 so I would have an evenly dividable number. Forget that and lets use your numbers. And I checked and SSR expires in 54.

So OKW expires in 2042 or 2057 which means that there are either 27 years or 42 years left to use. So if you take your pp of $77/27=$2.85 per point per year of use. $77/42=1.83 per point per year.

SSR expires in 2054 so there are 39 years left. $77/39=$1.97 ppy

Why look at it from this perspective? You are considering buying someone's unexpired points and likewise if you decide to stop going to DVC properties and sell your unexpired points you should not expect to get less per unused point than what you are paying today. So your realized cost are not what you paid up front but the difference of what you paid and what you sell for.

Therefore your worst case is OKW expiring 2042 at $2.85 ppt
you said OKW was 91 pts for your trip and estimating dues at $500 therefore your cost per trip is 91 * 2.85 = $259.35 + $500 = $759.35 per trip.

Your best case is OKW expiring 2057. 91 * 1.83 = $166.53 + $500 = $666.53 per trip.

SSR expires in 2054: 91 * 1.97 = $179.27 + $500 = $679.27 per trip.

HOWEVER don't forget to add in your closing costs, which for a 100 pt contract is about $400 at the timeshare store. So your new pp is $77 + $4 = $81 so cost per trip becomes: $773, $675.63, & $689.28 respectively.

 

[DVCcurious]

OK, that makes sense.

Either way the numbers are way less than the $400 per night AoA will cost.

So it looks like buying a few more points is the cheapest way to go.

 

[zavandor]

So we'd be paying $700 more per year for AoA. $7,700 up front is an 11 year break even point. So that would take us until our kids are 12 and 14 to break even.

You should add the time value of money. If you invest 7700$ now, how much would you have after 11 years? Breakeven would go further along the road. And you would still have your capital if you don't buy. And you could find a better deal on the Disney Website between now and next May, making comparison even worst.

It's more difficult to come ahead comparing DVC to a Value Resort, even if AoA is more of a moderate (both for the resort and the pricing).

Would you be happy as well to stay at AoA or do you see more values in a DVC resort stay?
In the first case, not buying more DVC would be more prudential.

 

[CarolMN]

Another option is to rent a DVC reservation from another owner (or get a transfer of points into your own account. That way you make and control the reservation).

Assuming you can rent for $14/point, the cost for OKW is 91*$14 = $1274. (You could probably get a transfer for $11 or $12 a point, but may have to take more points than you want. Owners are only allowed to transfer in or out once per year, not both in the same year, so those who transfer tend to offer larger transactions only).

A 3 night stay at AoA at $399 per night is $1197, but there is a 12.5% tax for Orange Country, so the total would be $1347.

The advantage to renting is that you could try different resorts and there would be no long term commitment. There are some disadvantages to renting, so it's not a perfect solution. It might be a good solution for a few years until you see if your current plans are really what you want to do for the next few 10 years or so.

Good luck with your decision.

 

[disBOBney]

You should add the time value of money. If you invest 7700$ now, how much would you have after 11 years?

NOTHING. He wants to go on vacation today and for the next 12 years. When considering to start vacationing now the time-value-of-money becomes moot. (If you are thinking of vacationing 5 years from now it is applicable.)
During the next years that he will be using his points inflation will occur thus the price of a rental room such as AoA will increase thus negating the significance of any interest received from an investment. To be fair, I point out that dues will also continue to rise, however his price per available use year point will not change, it is locked when it is purchased until expired or sold. This then is your hedge against inflation and why every year you own DVC is better than the previous (small changes most likely, but positive changes none-the-less.)

 

[supergoofy]

I cannot answer the finance aspect of this.

I can semi answer the comfort level of this situation.


This last trip we did a week at Bonnet Creek in a 2 bed room(yes I know not a DVC). Like a DVC its a stand alone unit with 2 full bed rooms, baths, kitchen, dinning room and living room.

We had 6 people. Me and DW had the master bed room, DD, DD and DDBFF had the other bed room and DS took the couch.

In the morning we could get up and get ready as girls had an area, parents had an area and son had his. Even if boy was still in bed I could get into the kitchen and sit at the bar or dinning table.


Last day we were there we decided to do 100% Disney and stayed at AoA. We absolutely loved it. The place is over the top Disney from the lobby to buildings. The food court was exceptional. This place is everything Disney is.

The issue we had was the room. The table doubles as a bed as does the sofa. There is no kitchen just a mini fridge and microwave. Both not a huge deal as it would work to make food.

The issue for me was the space. There was no privacy for girls to change. There was no place to go when I got up as kids had the other half of the room.

Personally I would stay at AoA again as it is a wonderful place but it is a different sytle of resort from a DVC type unit.

 

[zavandor]

NOTHING. He wants to go on vacation today and for the next 12 years. When considering to start vacationing now

He wants to vacation every year for the next 12 years. To do so, he could pay the cost now for 12 years of vacations with a discount, or he could pay now only 1 year of vacation and use the money for something else, paying each year the cost of the vacation for that year only.
What's more convenient?
Sure, you could say that investing money you could get only a return to cover for inflation, but in that case I would suggest to change financial advisor.
And having the capital is important if one sees any other expenses in his future. Buying a car without a lease, buying a home with less mortgage. Those and many others are all examples of things that could increase time value for money.

 

[Dean]

I need some help from the finance experts on here.

We currently have 200 points at Wilderness Lodge. We are only staying in 1 BRs (a separate bedroom for the parents from the kids is a must).

We would like to go twice per year: 1 week in late August and a 3-4 day weekend in Jan (MLK), Feb (Pres), or May (Memorial). Our kids are 1 and 3, so we're looking at a minimum of 12 years where we'll go, and that assumes our kids don't want to go anymore when the youngest is 13, but if the kids want to keep going we could use the points forever.

Now, 6 days in late August is 215 points at VWL. We have 200 so we could borrow 15 from the future year for 13 years before we run out of points. So we are basically covered for the week in August. The question comes in regarding the holiday weekend: is it better the buy DVC points for this weekend or stay at AoA?

AoA costs $399 per night for Memorial Day weekend on the disney website. I don't know about taxes or discounts. OKW is 91 points for Memorial Day weekend.


Here's where I need your help with the math.

Is it better to buy SSR or OKW assuming we are planning on staying at OKW (my wife likes it)? We'd only use these points for the holiday weekends and I'm assuming availability shouldn't be a problem. Is SSR or OKW a better deal: OKW has .60 per year higher dues but costs less per point on resale. I think that since our time horizon is 10+ years that the .60 difference in dues for SSR will be better than the lower buy in cost for OKW. SSR also expires later than OKW.

Assume we buy 100 SSR points at $77 per point and the dues are $500 per year. Compare that with $1200 for Memorial Day weekend at AoA. So we'd be paying $700 more per year for AoA. $7,700 up front is an 11 year break even point. So that would take us until our kids are 12 and 14 to break even.

What do you think? Buy DVC or stay at AoA (we'd prefer to stay at OKW than AoA)? Buy SSR or OKW?

Given your situation, stated preferences and the math involved, I'd buy another contract, likely as an add on. I'd likely look at something that either is the cheapest long term, for general use that's almost always SSR OR I'd look at something that gives you other options like BWV standard, BLT, AKV, etc. I'd then look at the break points on pricing. Normally you can save enough to justify the 150 pt contract over the 100 pt. The other suggestion would be to look at something non DVC to give you non DVC options instead, of course those are not exclusive of each other.

NOTHING. He wants to go on vacation today and for the next 12 years. When considering to start vacationing now the time-value-of-money becomes moot.

It's not moot but it is reduced for the short term costs over the first 3-4 yrs. You simply divide the pile up and look at part as short term (adjusted for usual discounts) and the rest as long term. I use 8% after taxes before inflation.

 

[disBOBney]

It's not moot but it is reduced for the short term costs over the first 3-4 yrs. You simply divide the pile up and look at part as short term (adjusted for usual discounts) and the rest as long term. I use 8% after taxes before inflation.

Even if we would presume a room rate inflation of only 1/2% and that he could receive a 30% RO disc (which AoA doesn't give) and room tax remains constant at 12.5% and I give him your 8% after tax and fees return (which seems rather generous on a $8000 investment with yearly withdraws of principle) he still does not have enough money for his room in year 9.

If we said he would make $500 additional yearly deposits (equivalent to annual dues) then he doesn't have enough money in year 16.

And if we adj for instead a rm inlation of 2% and a RO disc of 25% then he doesn't have enough money in year 12.

In any regard in answer to the OP's original question: "does it make financial sense to buy more points and stay were they want to than to pay for a room where they are willing to stay but prefer not to?" Yes, buy more points.

 

[Dean]

Even if we would presume a room rate inflation of only 1/2% and that he could receive a 30% RO disc (which AoA doesn't give) and room tax remains constant at 12.5% and I give him your 8% after tax and fees return (which seems rather generous on a $8000 investment with yearly withdraws of principle) he still does not have enough money for his room in year 9.

If we said he would make $500 additional yearly deposits (equivalent to annual dues) then he doesn't have enough money in year 16.

And if we adj for instead a rm inlation of 2% and a RO disc of 25% then he doesn't have enough money in year 12.

In any regard in answer to the OP's original question: "does it make financial sense to buy more points and stay were they want to than to pay for a room where they are willing to stay but prefer not to?" Yes, buy more points.

I'd recommend buying as well as I did above. However, to ignore the TMV and/or opportunity costs in this situation (or any DVC purchase) would be foolish. You consider it along with other factors and make an informed decision. However, IMO, one needs to look at what you would have spent assuming reasonable discounts (20% is probably best in this situation) then show a clear savings AND/OR increased value of around 20% to justify the cost $$$ wise. So the math is simply cost of DVC (I always use a ROP of 10 yrs, I think 20 is the longest reasonable) and dues adjusted for inflation. Then on the cash side I'd use the current rack rate of what I was looking to use discounted by 20% plus tax and also adjusted at the same inflationary rate. That'll give you costs, then you consider the cash position which to me is 1/2 in a money market or series of CD's and half invested day 1 at 8% after taxes and see where the lines cross with that info. Then I'd look at the time to crossover of cost and the point where DVC shows me a 20% savings. If the crossover date is more than about 10-12 yrs including the TMV using this method, I likely wouldn't buy. Too many risks and variables long term to a timeshare that you don't have with cash.

 

[DVCcurious]

Thank you very much for all the replies.

We decided to go and buy an add-on. While AoA may be cool a couple of times now that our kids are young, I don't think we'd like it very much in a few years when the kids are older. Plus, OKW is like 900 sq feet and AoA is like 550 sq feet. There's really no comparison in terms of comfort. Our boy is pale as can be so our strategy is always to hang out around the hotel during the heat of the day and hit the park for evening to late night so he won't get sunburned. It works well for us. Since we'll be using the resort almost every day we figured the extra room would really pay off.

So we went ahead and got a 200 pt OKW with all 2013, 2014, and 2015 points. $69 per point. Not as good a deal as back in 2012 when we got our loaded VWL for $55, but I figure the break even on this one will probably be like 10 years considering the 200 banked points. When you're figuring your opportunity cost you should know that if I didn't use the 15k on this I would've used it to pay down a 3.625% deductible HELOC, so my rate of return had I "invested" the money instead of buying would only be like 2.5% after taxes. I wouldn't have invested it in the stock market or anything. So that really shortens the break even.

anyway, thanks for your help!

 

[Dean]

Thank you very much for all the replies.

We decided to go and buy an add-on. While AoA may be cool a couple of times now that our kids are young, I don't think we'd like it very much in a few years when the kids are older. Plus, OKW is like 900 sq feet and AoA is like 550 sq feet. There's really no comparison in terms of comfort. Our boy is pale as can be so our strategy is always to hang out around the hotel during the heat of the day and hit the park for evening to late night so he won't get sunburned. It works well for us. Since we'll be using the resort almost every day we figured the extra room would really pay off.

So we went ahead and got a 200 pt OKW with all 2013, 2014, and 2015 points. $69 per point. Not as good a deal as back in 2012 when we got our loaded VWL for $55, but I figure the break even on this one will probably be like 10 years considering the 200 banked points. When you're figuring your opportunity cost you should know that if I didn't use the 15k on this I would've used it to pay down a 3.625% deductible HELOC, so my rate of return had I "invested" the money instead of buying would only be like 2.5% after taxes. I wouldn't have invested it in the stock market or anything. So that really shortens the break even.

anyway, thanks for your help!

Congratulations and enjoy.