The Price of Borrowing Money - DVC Direct Sales

[BruinEd03]

It definitely changes the math. But in general, Americans aren't all that interest rate sensitive for this kind of purchase. Monera has no trouble finding takers for their credit card level rates. My prediction is it would take more of a hike than we've seen to have much impact.

IMO once most people have made the choice to take the big hit of finance charges, the rate doesn't move the needle that much.

30k for 10 years would break down to these monthly payments:

5% - $318.20
10% - $396.45
15% - $484
20% - $579.77

Each 5% jump equates to close to $80 - $100 more per month. By itself that's a good chunk of money. But keep in mind, there will be grocery price increases, subscription service increases, gas increases, etc. I think that will begin to impact a family's decision.

If it doesn't impact a family's decision, then the fed will keep raising interest rates until it does to slow the purchase of goods.

Now on the flip side, the family could choose to cut back on subscription services, groceries, or other spending areas to compensate for the finance costs.

 

[Kumanate]

I had this conversation with a DVC guide at Disney. They were like “how can we convince you not to go resale.” I had a frank conversation saying that financing and doubling the cost over 10yr is just crazy to me and not everyone has that stack of cash laying around. I pitched they need to bring back the 50 point entry mark to get things into that good entry range.

Maybe that was just me , but as someone in my 30s with 4 kids and works as a teacher, that is a ton of money. I would much rather accept that I can only go every other or every three years and buy 50 points at OKW(E) or SSR for no more than 6k-7k cash. At least it won’t cost me 50k plus in purchase price over the next 10 years. It just moves any thought of savings so far down the road.

Now, if I had the cash in hand and wanted the points, I would probably buy direct just for the flexibility of it all….but it would be a close debate still..

 

[BeachClub2014]

I had this conversation with a DVC guide at Disney. They were like “how can we convince you not to go resale.” I had a frank conversation saying that financing and doubling the cost over 10yr is just crazy to me and not everyone has that stack of cash laying around. I pitched they need to bring back the 50 point entry mark to get things into that good entry range.

Maybe that was just me , but as someone in my 30s with 4 kids and works as a teacher, that is a ton of money. I would much rather accept that I can only go every other or every three years and buy 50 points at OKW(E) or SSR for no more than 6k-7k cash. At least it won’t cost me 50k plus in purchase price over the next 10 years. It just moves any thought of savings so far down the road.

Now, if I had the cash in hand and wanted the points, I would probably buy direct just for the flexibility of it all….but it would be a close debate still..

I think you make a good point here. Having to plunk down enough money (whether it's cash on hand or financed) to buy in at 150 points is a whole lot of dough.

 

[hglenn]

I think you make a good point here. Having to plunk down enough money (whether it's cash on hand or financed) to buy in at 150 points is a whole lot of dough.

I agree... I'd be all over the 50 point option! LOL. But not quite ready for 150... we plan to buy 50 point increments until we get to 150 (hoping that we get to 150 before it's raised to 200!)

 

[Matty B13]

DVC was riding the low interest band wagon, just like the housing market was, and jacked up their prices. Now people are really going to be looking at if they can afford the $30k+ of buying into DVC, especially if they have to finance it at these rates. I don't think we will see a price reduction, but they might have to rethink their price increases and incentives.

We are currently in ROFR on selling one of our contract that would have let us take 2 trips to WDW because spending $10k a trip at WDW just isn't worth it anymore to our family. Seems with the glut of resale contracts on the market right now, we aren't the only ones.

 

[BeachClub2014]

DVC was riding the low interest band wagon, just like the housing market was, and jacked up their prices. Now people are really going to be looking at if they can afford the $30k+ of buying into DVC, especially if they have to finance it at these rates. I don't think we will see a price reduction, but they might have to rethink their price increases and incentives.

We are currently in ROFR on selling one of our contract that would have let us take 2 trips to WDW because spending $10k a trip at WDW just isn't worth it anymore to our family. Seems with the glut of resale contracts on the market right now, we aren't the only ones.

There does seem to be a lot. I follow resale listings with one search engine and it shows about 2,250 listings across the various primary brokers. SSR has over 500 listings. Seems like a lot.

I also realize that these don't represent all contracts that might be for sale, but is a pretty good snapshot.

 

[Matty B13]

There does seem to be a lot. I follow resale listings with one search engine and it shows about 2,250 listings across the various primary brokers. SSR has over 500 listings. Seems like a lot.

I also realize that these don't represent all contracts that might be for sale, but is a pretty good snapshot.

Might also be a lot of foreign sellers trying to cash in on the high American dollar as well.

 

[heynowirv]

At some point, the cost of borrowing money today has to impact on some level, DVC's ability to sell direct points. With today's .75% increase, the cost of borrowing money has increased by just under 4% in the last 10 months. I don't know what Disney's lowest interest rate is on direct purchases today, but back in February I think it was "down" around 9%.

You have to figure Jerome Powell is off Bill Dierkson's Christmas card list.

When we first visited a DVC guide in 2006 and we spoke direct contracts she mentioned loans were 9.9%. So if it was 9% it looks like the line was lowered.FWIW. Needless to say we didn't buy until we could afford to buy a contract outright.

 

[heynowirv]

There does seem to be a lot. I follow resale listings with one search engine and it shows about 2,250 listings across the various primary brokers. SSR has over 500 listings. Seems like a lot.

I also realize that these don't represent all contracts that might be for sale, but is a pretty good snapshot.

It's also Nov.and many people sell before they get their bills for next years MF's. So that might also be a factor.

 

[RoseGold]

Meh. DVC financing was already disgracefully high IMO. Small changes on other interest rates don't really matter.

If someone was already willing to take on a loan like that, instead of waiting a few years, they weren't looking at math anyway.

If anything, I guess it makes DVC loans kind of look more reasonable?

 

[MinnieSueB]

I do believe DVC will have a harder time selling with the average American family spending approximately $8,000/yr more than they did on basic items from a year ago along with the higher interest rates. DVC is definitely a luxury item and we still believe that it loses its value if you can't pay for the contract with cash upfront. That being said - resale may be the way for many to go buying lower point contracts.

 

[BeachClub2014]

Might also be a lot of foreign sellers trying to cash in on the high American dollar as well.

Could be. I was just commenting on this point that you made, and not really speculating as to the "why". Bet there are lots of different reasons.

Seems with the glut of resale contracts on the market right now, we aren't the only ones.

 

[BeachClub2014]

It's also Nov.and many people sell before they get their bills for next years MF's. So that might also be a factor.

Could very well be. I'm sure that there are many reasons.

 

[RoseGold]

APs are the giant white Dumbo in this discussion. Plenty of DVC members or potential DVC members need APs to make what they want to do work. I know I do.

 

[Minniesgal]

I dunno if people were happy to pay them 12% why wouldn’t they pay 16% Disneys interest rates have always been crazy

 

[pianomanzano]

As we speak there's a thread on FB about a member happy to finally pay off their DVC loan after 8 years and many commenters on the post congratulating them or expressing hope that they'll be paid off soon. I know that folks here on these board aren't the average DVC member and are less likely to finance, but I think there's a lot of DVC members out there who are generally financially illiterate (or just don't care) and happy to take the financing DVC offers at those crazy rates.

 

[BeachClub2014]

As we speak there's a thread on FB about a member happy to finally pay off their DVC loan after 8 years and many commenters on the post congratulating them or expressing hope that they'll be paid off soon. I know that folks here on these board aren't the average DVC member and are less likely to finance, but I think there's a lot of DVC members out there who are generally financially illiterate (or just don't care) and happy to take the financing DVC offers at those crazy rates.

I'm willing to bet that are many folks here on the DIS that actually do finance, but are afraid to say so because of the crowd shaming that can occur.

We financed our very first contract through DVC way back in the day, paid it off after a few years, and have been in a position to not have to do so since. I'd bet a 3-night stay in a studio of choice if our experience is all that unusual.

 

[DonMacGregor]

When we first visited a DVC guide in 2006 and we spoke direct contracts she mentioned loans were 9.9%. So if it was 9% it looks like the line was lowered.FWIW. Needless to say we didn't buy until we could afford to buy a contract outright.

True, but let's not kid ourselves. If interest rates have gone up a full 4% over the last 10 months, and Disney was charging somewhere around 9.9% (your number is correct, mine was from memory) back in January, how long do we think they will be leaving money on the table? 9.9% was where they were comfortable when the cost of money was basically free, now it's at 4%.

 

[BeachClub2014]

True, but let's not kid ourselves. If interest rates have gone up a full 4% over the last 10 months, and Disney was charging somewhere around 9.9% (your number is correct, mine was from memory) back in January, how long todo we think they will be leaving money on the table? 9.9% was where they were comfortable when the cost of money was basically free, now it's at 4%.

This will be very interesting to watch, right? DVC may decide to leave it at 9.9% as an "incentive" to buy direct and finance through them. With mortgages at 7% and climbing, 9.9% doesn't look too bad, in comparison.

 

[Brian Noble]

I will be very (very) surprised if DVC reduces the initial buy-in to 50 points. Demand is already woefully imbalanced towards studios, and selling a contract this small only makes that worse. 50 points will not get you more than a single night in a Standard 1BR at either Riviera or the Grand (the two resorts in sales) in any season. It won't get you more than two nights in a Studio in those two during anything but the very lowest season in Standard view, excluding the Tower studios, of which there are 24, total.

A recession will slow DVC sales, for a host of reasons. Inflation might be slightly less impactful, because the average buyer who is in the target market (someone interested in returning to WDW at least semi-annually, staying onsite in Moderate or higher) is probably not on the margins of their budget for non-discretionary spending. In other words...

the family could choose to cut back on subscription services, groceries, or other spending areas

...the family probably has a lot of discretionary spending they can easily do without before getting anywhere near the food budget. They may not have the cash on hand to buy outright, but an extra $800/year or so in interest costs isn't going to materially impact most of them if they were willing to finance in the first place.