We Blinked! (Long!)

[Grumpy37]

Our guide told us on Monday (Labor Day) that a significant number of points were going to be available for BCV, either Aug. or Sept. use year. I was psyched! We had wanted to buy enough points to go to BCV in a 1 BR over Easter week every year for us and the two little ones. We knew how much it was going to cost (350 pts) and we already know what week we wanted, the perfect candidates for DVC membership.

Unfortunately, by the time we decided to commit *and* had the 20% down payment in hand, the BCV had already sold out. The other resorts were nice enough, but we had already decided we were only going to buy in w/ guaranteed SAB access w/ the 11 month advance reservations. (DisneyWorld is BUSY over spring break!) So you can imagine how happy we were when someone else's ROFR pts came available to us.

But a funny thing happened on the way to DVC nirvana. My wife had me calculate the cost differences between DVC membership and the deluxe Disney resorts we currently stay at.

DVC for 350 pts was going to cost us $5,880 up front (20% down) and $423.36 per month ($307.57/month principal/interest for 10 years + $115.79/month taxes/maint for 38 years). That's $56,684 total over the next 10 years. And a whopping $10,960 within the first year. For one queen bed and one *foldout* bed. The calculations for a studio the same week is $29,314, significantly cheaper but still doesn't solve the foldout bed problem. Where is the breakdown on the 5-7 years breakeven point I keep hearing?

We could stay at a "standard" (non-villa) BC/YH hotel room for $2,758 that week in both 2003 and 2004. Figuring an annual inflation rate of 5% over the following 8 years, that comes to just $31,852 over 10 years and it solves our "foldout bed" problem. What am I missing?

We do make some assumptions. 10 years out is the max value the kids will get out of WDW. The kitchenettes are nice but cooking/cleaning is no more of a vacation for my wife than driving from hotel to theme park and back again every day is for me (we're staying on property and dining out, period). And (in this post-Enron, post 9/11 era) whether WDW will even be a going concern that far down the road. Does that make the difference?

Regardless, we blinked and called our guide and told him to let those points go to someone else. But I'd be interested in how the DVC members here all came to different conclusions and a different decision than we did.

PS: Don't flame me, tell my why I should change my mind!

 

[Maistre Gracey]

Hi, Grumpy37. There are many different ways to justify the cost of DVC, but your method forgets one HUGE thing. If you are only planning on using it for 10 years, you could sell it at the 10 year mark... possibly for more than you bought it for. You must subtract this from your cost of DVC.

Good luck!...

 

[Doctor P]

You have actually made your own case for buying DVC rather than vice versa! A hotel room is most comparable to a DVC studio, so let's make the comparison using your numbers. The cost of a week at Beach Club for next year's Easter (std. view) is $3075.24 for two adults staying in the room with two juniors (at no charge) (you only quoted the room rate, you needed to add the tax in). Over a 10 year period, that's almost $31,000. The studio is $29,314. Even using the ridiculous assumptions of a 10 year comparison, and ignoring the fact that room rates have typically gone up faster than dues, DVC comes out better by nearly $2,000 (or $200 per trip). If you carry this out for 40 years, the gap is even larger! If you travel with more than two adults in a villa, you avoid extra adult charges at DVC that you pay at the other WDW resorts. IMHO, you have just demonstrated why DVC is a good buy as a prepaid vacation plan. Hope to welcome you home soon!

 

[Dean]

350 points corresponds to a 2 BR most of the year or a 1 BR Premier Season (Xmas, Easter). A proper comparision of rooms to a non DVC WDW resort is a studio to a regular room to 150 points. If you want to compare a 2 BR to a suite, that's fair enough. Don't forget the 11-12% tax on cash reservations and the fact you own nothing at the end of 10 years without buying DVC.

While the realility may be that you'll do a 2 BR at DVC vs a regular room at the Poly (etc), it's not fair to compare directly just on dollars alone. Also, don't forget the savings in food costs.

 

[Happy Birthday Cat]

BC/YH hotel room for $2,758 that week in both 2003 and 2004. Figuring an annual inflation rate of 5% over the following 8 years, that comes to just $31,852 over 10 years

Your calculation is actually too low figuring a 5% increase for years 3 through 10. Wihout tax it would come to $33,169.26. With 11% tax added in it comes to $36,817.88.

Why stop at 10 years? If you just go out a couple of more years it goes way past the breakeven point. At that point you are going on just your maintenance fee. Then the numbers look really good for DVC.

By the way, part of what you pay for DVC (property tax and interest) can be deducable. Paying for a room isn't. So you may have to look at your tax bracket and how much you could deduct each of those first ten years to make a fair comparison.

HBC

 

[mikesmom]

... and don't assume your kids won't want to go in 10 years, either. My DS is pretty close to 21. We've been going since he was 7 (DVC owners for the last 3 years). He has never wanted to skip the annual trip. We've even given him choices "if you want to go on that road trip to San Francisco instead of on vacation with us, we'll give you the portion of the vacation money that we would have spent on you.." and "are you sure you don't want to go to Padre Island with your other friends?"

Not once has he skipped the trip. It's not that he's wierd, either. Since he's the only, we always let him bring a friend. His friends are in line to go with him every time. The Magic Kingdom vacation that a small child loves becomes a resort pool, Epcot, MGM and AK vacation as they get older. There is something there for all ages. It's almost like a different vacation each time.

 

[jbthi]

If your kids are like mine, you'll be needing to add more points as they get older. We are in our 60's and just added another 100 points. Our daughter is 40, has gone to DW just about every year since it opened. Now she, her husband and 3 children go with us. That studio has expanded to a 2 BR.

June

 

[dianeschlicht]

Just echoing what everyone else has said. Our adult "kids" (34 and 28) plus their SOs are always happy to do WDW any time they want with our points! When we get too old to use it, I know they will still enjoy it.

 

[timC]

Hi, Grumpy37. There are many different ways to justify the cost of DVC, but your method forgets one HUGE thing. If you are only planning on using it for 10 years, you could sell it at the 10 year mark... possibly for more than you bought it for. You must subtract this from your cost of DVC.

I saw that one too. Using your approach, if you're only going to account for 10 years, there will still be an asset. If you sell, I'm sure this will put over the top.

I think the numbers look good! You're in!!!!

 

[Loubon]

Regarding the 5-7 times breakeven:

In my situation a week in a studio would have been approx $2,600 in August. (not renting points, just out right cash) Take that times 5 = $13K. My points cost a few hundred $ less than that. So if you add on maintenance for those years you break even about 6 trips or so.

BUT....you still have another 30+ years, you still have appreciable resale value, you can bank and borrow to different scenarios and you can still go after 10 years without the kids if they don't want to go! Don't laugh, but even though it is Disney it is still a vacation and you may look for a few trips alone without the kids as a refreshing change (once they are older).

And then as mentioned when they are older with their own kids......make the grandkids happy.

Regarding the post 9/11 world we live in remember.....you can also walk out of the door and get hit by a car. Don't live your life that way or else the terrorists have won.

Now call back so we can all say Welcome Home!

 

[DisneyKidds]

I think everyone has the answers covered, but I'll throw in my $.02.

When I did our breakeven analysis for our total purchase of 325 points via resale I figured a mix of moderate and deluxe resorts (plus tax and inflation) to compare to DVC. I came out with a 6-7 year breakeven. We paid cash so financing charges weren't a factor. If you only went deluxe and you factor in those financing charges it would take longer so 10+ years would be right for a breakeven in your case. Of course once you buy DVC you find yourself making more frequent trips so the "breakeven" might come down while you actually spend more money.............loving every minute of it .

Where you go from the 10 year point is key in your analysis. If you keep making WDW trips (or use the points to trade out for other accomodations should your family outgrow WDW) then DVC quickly eliminates any gap in your calculation and becomes the better long term value. Take your $2,758 cost (which I assume includes tax) and run it out at 5% inflation for 39 years and you get a whopping $315,000. With maintenance (inflated at 3% for arguments sake) for another 29 years added to your analysis your total DVC ownership costs would top out at $160,000. As you see, over the life of the contract DVC is a much more cost effective option.

Let's say that after 10 years DVC hold no attraction for you. You may likely be able to sell it for upwards of $20,000 at that point. With that your DVC cost comes down to the mid $30,000's and is on par with the cost of those hotel rooms.............and you have enjoyed a 1 br suite vs a standard hotel room for those 10 years.

In the end these numbers may not mean a whole lot. Who knows what happens with inflation, hotels, DVC, vacation habits, etc., etc. On paper, in the long term, DVC is clearly the most cost effective option for vacationing at WDW. However, paper don't pay the bills and if your realistic costs over the next 10 years make DVC uncomfortable for you then you may have made the right choice for your family.

Give it some more thought............and good luck in your decision.

 

[Lisa P.]

If you are going to add 5% per year inflation for the hotel room rate, then also add 2-3% per year inflation for the maint fees.

 

[floridafam]

I had a 2 bedroom suite booked at the AKL last year and it was $1,250 per night. I could directly compare this with a 2br villa at DVC. With tax, it was about $1,400 per night. That was almost $10,000 for 7 nights. We cancelled that reservation and added on at VWL instead. It was a no brainer for us.

Only join DVC if you feel it is right for you. DH and I ran the numbers over and over again but it just came down to how much we were going to use our DVC membership and the fact that we would have years and years to use it.

Let's say you buy in and never use your membership. You can still rent your points and have a good chance of at least making back your initial outlay later on down the road if you sell.

 

[Lisa F]

Your comparison is like saying "it costs xx to stay at the motel 6 and yy to stay at the grand floridian. What am I missing here?" What you are missing is that for the amount of points you are looking at buying, you are getting the equivalent of THREE rooms (except during easter time) in a 2 bedroom for a week. The master suite, the second bedroom and the living/dining/kitchen. To be fair, you need to look at what you would pay for the EQUIVALENT room when you run your numbers. Also, I think it just plain costs more to go during the busiest weeks of the year. DVC is definately the biggest bargain when you compare weekdays in the off season.

A standard view studio at BWV is 9 points per night for the weekdays, the AP rate is $199+ tax. The weekly rate including the higher weekends is 85 points. If you take a point to be valued at $10/point, thats $850 for the week vs. over $1500 for the AP rate for the same week.

Again, comparing apples to apples, a 2 bedroom easter week is $890/night. For a week, with tax, that is $6915. IF the travel industry continues to be slow that might be discounted but I woudln't count on it for the next 10 years. Let's even look at a preferred view, 462 points for the same week. At $10/point, that's $4620, or the equivalent of a 35% discount, guaranteed. And that's pretty much the worst that you do with DVC.

Lisa

 

[Maistre Gracey]

Just to add to my earlier post in this thread... When I first purchased DVC, I did not think it was a money saver. (I have since seen the light.)
Anyway, our initial purchase of DVC was based on a lifestyle decision, not economic.

I ain't given up my DVC fer nutin'...

 

[Grumpy37]

Wow, great comments from all you Mickeys and Minnies! Wonderful input!

The one, most significant component that I really didn't factor in was the points having value at the end of 10 years.

Some silly questions:

1. The maint/taxes have an annual cap, right?
2. Why don't they extend the monorail to other resorts (DVC or not)?
3. DH = ??? (Dear hubby? Dumb hubby? Disney hubby?)

 

[crisi]

1. Yes, 15% a year. But they haven't ever gone up that much

2. Monorail expansions are EXTREMELY expensive.

3. All the above. Darn hubby, too.

 

[RobDoc]

As crisi stated, the maximum cap (without needing approval of the membership) is 15%.

Since inception, annual fees have averaged 3-4% per year- with some years even having a decrease. DVC has done a good job of predicting expenses and planning for increases when indicated. In addition, a capital reserve is included to cover future major expenses (Exterior repair-roof, siding-, appliance replacement, carpeting, furniture replacement, etc.)

We purchased just over 10 years ago and paid between $50 and $56 for our contracts. Any could easily be sold today at a profit ranging from $10- $20 per point- unheard of in the timeshare world until DVC. At some point that potential "profit" will disappear and the value will approach zero, but for the near future, it appears to be a very real asset in the "portfolio".

You've posed a great question.

Enjoy!

 

[Dean]

The maximum increase does not apply to the taxes. If it went up 15% even one year, can you imagine the discussions we'd have on this board and the number of contracts that would go up for sale.

 

[ncligs]

Originally posted by Dean
If it went up 15% even one year, can you imagine the discussions we'd have on this board.........