Value of DVC points - 2023 case example

[wrigleyville]

You’re missing your amortized cost basis adjusted for the time value of money… which is a pretty significant thing to be missing.

Same reply as to other poster:
The present value of the $29,700 spent (what the 294 points actually cost 12 year ago) is $55,000. Using that as the cost basis for the 294 points only increases the 2023 price per point by $1.72. So, you now get a cost with MF of $3,282.66 vs the $15,468.75, so 79% savings off booking today or, in my case, $2,009 in cash realized by renting at ($18/pt * 294 = $5,292) for a profit margin on my $3,282.66 cost of 61%.

 

[wrigleyville]

Have you adjusted based on what would have happened if you instead invested your dvc purchase money into an S&P 500 tracking index fund for 20 years? Don’t get me wrong, DVC is a savings and i think is worth it (at least resale is now, and direct was 20 years ago), but it’s not quite as much of a savings as these calculations are implying.

The present value of the $29,700 spent (what the 294 points actually cost 12 year ago) is $55,000. Using that as the cost basis for the 294 points only increases the 2023 price per point by $1.72. So, you now get a cost with MF of $3,282.66 vs the $15,468.75, so 79% savings off booking today or, in my case, $2,009 in cash realized by renting at ($18/pt * 294 = $5,292) for a profit margin on my $3,282.66 cost of 61%.

 

[wrigleyville]

It doesn't factor in the countless discounts that Disney has and will continue to offer. Knocks that percentage down significantly but it is still a good deal.

Not true. I attached the quote from Disney based on the exact dates and room booked for the DVC stay. It includes whatever incentives were available at the time of the booking, so it is an apple to apple comparison.

 

[wrigleyville]

Dis I miss something or are you leaving out annual maintenance costs that continue to increase?

You missed it. I included that in the cost per point (it is the majority of the annual cost per point actually.)

 

[Nabas]

Have you adjusted based on what would have happened if you instead invested your dvc purchase money into an S&P 500 tracking index fund for 20 years? Don’t get me wrong, DVC is a savings and i think is worth it (at least resale is now, and direct was 20 years ago), but it’s not quite as much of a savings as these calculations are implying.

Yes, I have calculated that and it's not much of a difference.

Long-term, Disney raises the prices of its Deluxe Resorts by a bit over 5% per year, while the average long-term S&P return is about 10.4%, for which you pay capital gains, assuming you withdraw the money to purchase a cash room.

By buying DVC now, you lock in much of the cost of a Deluxe Resort stay at today's prices while only paying the increase of the MF, which has averaged (long-term) about 3.8%.

 

[wnielsen1]

I've done numerous spreadsheets and they all lead me to the same conclusion: I need more points

 

[stwaldman]

I've done numerous spreadsheets and they all lead me to the same conclusion: I need more points

Somehow I got there without the excel work (ok fine I have a spreadsheet too)

 

[New Mouse]

Nothing like rack rates flying up in cost to make the calculations look much better again. Discounts are coming back but they were pretty non-existent for a couple of years. ie - they can't always be counted on.

Discounts are coming back because people are not filling these rooms at the overinflated rack rates.

People can compare DVC to rack rate all they want, but it's just buying into the Disney hype over DVC.

I mentioned earlier, the discounts certainly exist but they are nowhere near as lucrative as the OP is suggesting.

 

[New Mouse]

Not true. I attached the quote from Disney based on the exact dates and room booked for the DVC stay. It includes whatever incentives were available at the time of the booking, so it is an apple to apple comparison.

Over 1 year.

 

[DonMacGregor]

Yeah, the TVM thing is always a bit complex, because some people might be pulling funds for DVC from what they would have otherwise invested or was sitting under a mattress, and some are pulling it from other vacations or a kitchen renovation or something similar that has no ROI. I feel like these calcs and the comments always find a way to prove what the poster or replyer wants to prove, same goes for the resale site's cost of points calculator

I just spent the dough. I utilize the “value of my time in money” formula which dictates that you have at least some cash that’s just meant to be spent, and you don’t spend too much of your time running endless calculations.

Not a popular opinion, but…

 

[Sandisw]

I just spent the dough. I utilize the “value of my time in money” formula which dictates that you have at least some cash that’s just meant to be spent, and you don’t spend too much of your time running endless calculations.

Not a popular opinion, but…

Matches my opinion. Basic calculations was all I needed!

 

[808blessing]

don't forget the 10% off dues with discount cards

 

[miTnosnhoJ]

What's your definition of pretty good? I am cool with 79% off versus the 82% originally stated.

The present value of the $29,700 spent (what the 294 points actually cost 12 year ago) is $55,000. Using that as the cost basis for the 294 points only increases the 2023 price per point by $1.72. So, you now get a cost with MF of $3,282.66 vs the $15,468.75, so 79% savings off booking today or, in my case, $2,009 in cash realized by renting at ($18/pt * 294 = $5,292) for a profit margin on my $3,282.66 cost of 61%.

I assure you that Disney is not a philanthropic organization that aims to transfer wealth from their shareholder to us DVC members. If you consider the time value of money, the analysis comes close to breaking even. That said, I really like DVC.

To understand what I am talking about, the present value for one year of a 2BR villa is what you would pay to use it today. Now, consider what you would pay today for a 2BR villa a year from now. It has to be less, because if you are going to tie up your money for a year, you need a discount to make it worth your while. Now consider what you would be willing to pay today for the same 2BR villa in 50 years. Probably not much. That is so far out that the value of this hotel room in 50 years is almost zero. The total value of your DVC timeshare is the sum of all these values Over the 50 year life of the property. (Shorter period for resales). So my theory is that the bulk of the value of a DVC contract (say 80% to 90%) is contained within the first 10 years of use. And virtually all the value is contained in the first 20 years of use. So if you amortize your acquisition cost over the first 10 years, you get close to a break even amount. The Disney finance people are looking at it this way. Most consumers don’t, leading to the saying that “Timeshares are real estate for people who can’t do math!”

So enjoy your accomodations and the time with your family. But don’t think that Disney is giving you free money.

 

[wrigleyville]

Okay, haters win. I try about every 12-18 months to actually engage in fact-based discussion with fellow owners and am always surprised at the propensity for negative / contrarian responses. Even when I lead off by saying it is one example, which came to me completely by chance, but is REAL in that it is a booking I was paid to make by a renter who would rather pay the rental store than Disney given the REAL cost shown for the same reservation on Disney.com on the same day, the instinct is to attack and question rather than just say “yeah, that makes me feel better about being part of this group.”

I’ll go back in the groundhog hole and hopefully remember that this is a hopeless cause. Unfortunately, I’m a hopeless optimist, so I’ll likely fall for it again next year.
TTFN

 

[Maistre Gracey]

1) Are you using published rack rates? Most bookings would get some sort of deal.
2) There is value in the Disney cancellation policy.

 

[bakerworld]

Time Value is such an economics/financial advisor response. Time Value is why my retirement account says I'll be worth 20 million in 20 years when, being 66, I have a better chance at being dead. Time Value doesn't seem to account for market fluctuation, like the 20% drop in investment capital experienced in 2022 that our investment portfolio lists as 7.9% (= joke). Time Value is just an economic guys justification for a down market or a purchase that will take funds out of their hands. I worked 5 years for an economics person and a less well off person with a decent brain I have never met. JMO

 

[Shelly F - Ohio]

Yep that is why they (DVC reps) say you hit ROI in about 5-7 yrs of ownership. For us we did hit ROI in 5 years. After keeping track of what it would have cost us had we paid cash for each of our stays verses the cost of a contract. And being members for 19 yrs. is a lot of saved money on vacations. Spending a weeks vacation for the just the cost of the dues for the past 14 yrs has been great.

 

[RoseGold]

BLT went on sale at $112 in 2008. But sure, let's say you paid $101, or $30,300 for 300 points in 2008 with zero closing costs.

In late 2008, the SP500 was about 900, or about 33.6 "shares." SP500 is 4038 right now. So, that money in the SP500 would be worth $135,946 today. It would be almost 4.5x the investment.

 

[Anthony1971]

The only way I think a person could take into account time value of money is using the Annuity formula adding your dues minus rental income (if you have any) each year after one has owned and used DVC for its entire life but you would need to keep track of what the same resort and room would have cost with discounts as well to know the final outcome. Biggest problem with time value of money with DVC is taking 20K (we paid less for our 200 points 19 years ago) investing it day one of purchase and to be fair you would need to withdraw from that account the cost you would have paid for the room as time value of money would need to apply here as well. The best estimate I can say is time value of money will only last 5-7 years before you are plus side and DVC is paying you. A lot of assumptions here but as a strict comparison you just can't invest X dollars and pay for your yearly vacation with other money. Using the stock market in any form is just a bad idea as again you need to withdraw to pay each year and if the market is down.... One could also subtract and discounts on food, tickets and more along with the hotel cost to make it look even better
But lets face it the vast majority of DVC owners would have not stayed in the same cat. of room if they did not own DVC.
If you go to Disney every year for at least 10 years sell it at a loss which should be expected but not true for people who bought a long time ago (this will likely change as well in the near future as the RE market turns) you will have value with DVC and have "free" cash vacations after as well when get the cash from the sale.

 

[ehh]

BLT went on sale at $112 in 2008. But sure, let's say you paid $101, or $30,300 for 300 points in 2008 with zero closing costs.

In late 2008, the SP500 was about 900, or about 33.6 "shares." SP500 is 4038 right now. So, that money in the SP500 would be worth $135,946 today. It would be almost 4.5x the investment.

BLT could be bought for ~$101 (or even lower) in April through August 2009 and November 2010. Doesn't change the S&P growth too much, but no need to cast doubt on their BLT purchase.