sandersiii said:
How does the initial purchase work into these dollars? I know we must factor inflation in with it somehow? How would those dollars factor in between the two? It makes sense that the dues have smaller increases; I'm just curious how to factor the big initial dollars in order to properly compare with the hotel prices?
There have been a number of people who have performed full fledged financial analysis of this very issue. The final answer depends on a plethera of issues which vary all over the place, but generally it's been shown that at around 6-7 years is the break even point. That is if you buy DVC today, and your friend doesn't, and each year the two of you go to WDW with you staying in a DVC unit, and your friend staying in regular WDW hotels, then in about 6-7 years the two of you will have spent the same amount of money for the same number of days at WDW. (This is including your initial purchase and all dues paid during those years, and for your friend, his regular hotel bills along with room taxes).
After this break even period, the DVC owner saves considerably on each and every stay since the only cost is annual dues. The annual dues for the points for a room are then probably only a fraction of the cost of getting a room at a WDW hotel. Today, in 2005, you can get a Studio at Hilton Head during Adventure season for 6 points/night. For dues only that's less than $24. You can get OKW for 8 points or less than $32. Now go see what it costs to get a room at the Poly, or other WDW resort.
Obviously this is the most extreme case, and point requirements change between weekday/weekend and by season. But you can do similar comparisons for the other combinations.
A member gets the absolute best value using their points for weekdays during Adventure season, and the worst value if using points during weekends during Holiday seasons. (Of course hotel rates are higher during holiday seasons also, so keep that in mind)
This 6 to 7 year break even point also assumes there is no residual value left over on the original purchase. In other words it is totally used up. At some point during DVC's contract period this will become true, but currently value is holding quite strong. In fact, for those of us who purchased early, we could sell today for more than we paid, thus making an actual gain. So in these cases the break-even point might have been as little as 3 or 4 years.
Example, we made our initial purchase in 1993. in this case my true costs are only what I paid in dues, plus whatever difference there was in gain on my DVC purchase if I sold it today, minus what true gain I would have made on that same money had I left it in the marketplace.
Just crunching numbers, today I could get about 48% more for my DVC points than I paid for them, or about 3.4% compounded annually. Say I had left that money in CD's or stocks that paid 8.4% instead. Then my true cost would have been the cost of all dues paid plus the 5% difference in gain between the DVC current value, and the projected equivalent value if the money had been invested elsewhere. I'm leaving out for now the other savings received such as the deduction in income taxes paid because the portion of dues that cover real estate taxes is deductible. Also other intangibles include discounts received on WDW meals, tours, etc. that have been perks that came along with membership. And a big one for ourselves, when we purchased we got free passes into the parks up to 1/1/2000. So if I throw into the equation the money I would have spent on park tickets during those years, the break even point is reduced even further. We even used points to stay at
Disneyland Paris once, and it included park tickets which saved us quite a bit of money. For new members today, the current discounts on Annual Passes is considerable. Let's just do a what-if. Say you purchase DVC today and buy annual passes for the next seven years for a family of 4. That's a savings of about $2500 right there over buying AP's at the regular rate.
If someone finances instead of using current funds, then it would be a similar calculation. Take initial purchase price, add all interest paid, add all dues paid, subtract what you could sell the membership for today, subtract all income tax deductions realized on annual dues (real estate tax portion), subtract income tax deductions realized on interest paid (assuming the loan is tax deductible which in most cases it would be), and you get the true cost of ownership. This assumes you bought, used it, then sold it, thus closing all the books.
If you keep your membership for more years, then the resale value will decrease, eventually to nothing, but the annual savings of using points to stay in DVC units.
Crunching the numbers for everyone will be a little bit different in each and every case. In many cases DVC actually costs more than a WDW hotel. But that's by choice. If I elect to stay in a 2-B/R villa at SSR I might spend 31 points/night, or the equivalent in dues of $118/night. Now I'm sure I could get a room at All-Stars or Pop Century for less than that (Correct me if I'm wrong), so in this case DVC is more expensive. Of course going to the other extreme, compare an OKW Studio to a Concierge room at the Grand Floridian, and my DVC stay is a fraction of the hotel stay.
In my other post I hope I didn't come down hard on Mary's site. Like many others, I enjoy it and realize how much work it took. What I disagree completely with is the apparent emphasis she put on compounded annual price increases. If she would point out that the cost in dues for an OKW studio went up less than $11 over the past 14 years, and that during that same time the price of a room at the Poly went up over $200 (or whatever the amount is), then I think she would be fair. But stating that DVC dues went up a compounded 3.14% while Yacht Club rooms went up only a compounded 2.6% is a total misrepresentation of the actual monetary increases.
Face it, if your local government said they're going to increase taxes, and you had the choice of paying 3.14% of the value of your car, or paying 2.6% of the value of your house, which would you choose? Just stating percentages does not tell the whole story.
. I think it's definitely a good INTRO to DVC. Perhaps the criticism here is that Mary's site is very highly regarded (for good reason! 
