What am I missing? Cost of ownership

[Andasibe]

We are seriously considering purchasing through DVC for 150 points now that we are starting to get little people in our family. Our plan was to purchase 150 points at Polynesian. The rep quoted us $168 a point, which is standard I see, and that the current fees are $6.09 per point, and an average increase on the point fees between 3-4%.


So this morning I started looking at numbers. Some things that I have assumed, the DVC rep stated that they are getting finance rates between 10-14.5% for a 5 year term, my calculations did assume the 4% increase in dues per year….


If I go based on those assumptions here is what the amortized costs would be:


$25,200- Today’s Cost of Points

$2,520- Cash Down Payment

$32,017.20- Total of financed payments ($22,680 financed, 14.5% interest rate for 5 years= $533.62 monthly payment)

$34,537.20- TOTAL COST OF POINTS


$574.61- TOTAL CLOSING FEES


$139,461.40- TOTAL ANNUAL FEES (Current rate of $6.09 per point x 150 points X 4% growth rate for 50 years)


So that means that for 50 years of ownership at Polynesian the cash out of pocket:

$174,573.20, or $5,819.11 per year


Taking out the personal, “I own a piece of Disney” from it is that really worth it long term?!?!? With the usage of travel points from credit cards, etc. I average $1,500 cash in hotels for 3 weeks of vacation a year. Even with an inflation rate of 3% over 50 years I would just spend $169,195.30 on places to stay (all that DVC is offering me). We typically do not go to Disney but every 5 years so using my points would also mean paying the RCI fees annually as well, so that is another fee above and beyond ownership.


Is there something I am missing? What makes DVC a good value for you and your family long term?

 

[crisi]

That we bought resale 15 years ago at $63 a point.

 

[msjprincess]

For me it was a good value because I bought resales at OKW and SSR and paid cash. We're able to travel when it's not very busy and there are other resorts available at the 7 month mark.

Buying direct at PVB and financing would not be a good value for me.

 

[_auroraborealis_]

Well, a lot of people bought in before Disney started pricing points at $168pp, and didn't finance.

Unless you are well and truly in love with the Poly, resale is a much better value and lets you pay less per point, with lower maintenance fees. Initial Poly fees are higher than many resorts, because Poly is already 40 years old as a resort, and the longhouses converted to DVC are 30 year old buildings.

 

[disneynutz]

Disney wants you to use their numbers or better yet not use any numbers, just buy.

They paint a picture of the benefits of ownership and buying direct but in reality, those benefits are minimal and the perks come and go. DVC comes up with some DVC only "perks" that look good on paper or maybe when bragged about during a sales meeting but have limited benefit. How many "members" want to pay to go DVC bowling or fishing? How many are at WDW during the Christmas Party dates, of the beach dates, or how many will use the new DVC only lounge inside Epcot?

Bill

 

[KAT4DISNEY]

Financing adds to the cost for certain and isn't something I'd ever recommend. And you also can't take your numbers for ever increasing annual fees and just divide to give you the yearly cost- - that's weighting too much up front. I also don't know what the percentage will be that holds the product until it's life end and on the plus side it so far has held it's value well on the purchase/sales side.

But, the simplest fact for you is you only go every 5 years. DVC is best financially for those that go every year or two years and it won't be a product for everyone.

 

[LisaS]

I agree with KAT. The best candidates for DVC are those who go to WDW every year or at least every other year and who would typically stay in a deluxe resort or at least a moderate. I would not purchase directly from Disney and would definitely not finance because that makes an overpriced deal even worse. Prices on the resale market have gone up considerably in the past year but they are still significantly cheaper than Disney's prices unless you are set on purchasing at the Poly. It is so new, there aren't many resale contracts available and they sell for a premium.

You are smart to consider the annual dues over the lifetime of the contract because over time the dues will cost you much more than your initial buy-in. However as KAT said, I would not divide that huge number by the years left in the contract and add that to the annual cost. Many people sell after 10-15 years so it's likely you would never pay those rates anyway. For those who do hang on until the end, prices of everything else in life will have increased significantly as well and the dues will likely still be less than the cost of booking a stay in a WDW hotel at that time.

 

[Brian Noble]

I average $1,500 cash in hotels for 3 weeks of vacation a year. ... We typically do not go to Disney but every 5 years

DVC tends to work best for people who visit WDW at least once every two years, never stay offsite, and stay only in Moderate or better resorts. If you typically stay in Moderate resorts, you can upgrade your lodging for about the same cost. If you typically stay in Deluxe resorts, you can save money on your lodging. You are not visiting WDW often enough for DVC to make sense. If you are averaging $500/week for your vacation lodging, you are well under what it would cost to own DVC, probably even if purchased resale.

DVC is not a great financial move for almost anyone who buys direct and finances.

That said, you are also ignoring the time value of money. Yes, dues grow at about 3-4% per year, but inflation is probably going to be in the 2-3% range, so the "real" growth is probably closer to 1-1.5%. Even so, your answer probably does not change.

 

[icc2515]

Well, one of the things you are missing for sure is the tremendous cost benefit of buying resale. Here is a simplified analysis:

Saratoga Springs expires 2054

150 points at $85 per point=$12,750. Hint: Always buy a fully loaded resale contract so you have 150 points right away and 150 more when your use year hits.

Loan from Monera Option B 11.9% for 5 years interest cost is $3382

at 38 years left you are at about $424.50 per year for the cost for the points plus you annual dues

$2550 down with a monthly payment of about $226 per month plus your closing costs and annual dues.


Annual dues per year 150 @ $5.44pp =$816/yr

so for $1240.50 per year I can stay for 7 nights at a deluxe resort for a fractions of what I would pay Disney. Below are some rack rate examples of what a room costs July 10-16 2016. If you go off season it costs less points and of course less for the rack rate room.

Animal Kingdom Savana View $3102.78 or 139 points

Contemporary/BLT Lake View $3673 or 153 points (you would have to buy 3 one time use points @$15 per point)

Now imagine if you got in on the ground floor at OKW in 1991 those points were $51 each. Those same points are on resale now for about $82pp. Those people if they sold now would have had 25 worth of vacations for only their annual dues and would walk away with money from the sale (I am not counting the cost of the dues as those were the cost of the vacations).

Plus is you don't go on vacation you can rent your points for I think about $11.30pp for ssr so you would pocket $879 after dues to go towards your initial investment. Who knows, if you sell in 10-15 years you might still get pp what you paid. The higher Disney raises it's prices the higher the stronger the resale market remains. I read a few times that Disney rarely lowers it's prices on anything. Take a look at what BWV are going for after all these years.

Hope this helps a little. Have fun and good luck with what ever you decide to do.

 

[_auroraborealis_]

The every 5 years thing is huge. You can only realistically access 3 years of points at any given time via bank/borrow. So if you only go every 5 years, you have two years of points that you would be looking to rent out.

Now, only you can decide if that is financially "worth it," but as such your financial consideration needs to take into account renting 2/5 of your points out, either via a broker at ~$11/point, or direct you might be able to command higher, but have more overhead in terms of your time to manage renting the points.

 

[CarolynFH]

DVC has been a good value for us because we've gone every year (sometimes more often) since we bought in 1997. For the first few years we gleefully compared the cash resort room rate for our stay to what our DVC cost us that year but gave that up long ago, so I can't tell you how much we may have saved on WDW accommodations over our 18+ years of ownership, but at $62.50/point it's been a lot. I agree with KAT and Lisa, if you go to WDW only every five years it doesn't make sense for you to buy into DVC. If you decide that having little people in your family will mean you'll visit at least every two years, and you want to buy DVC, then look seriously at resale.

 

[Lynne M]

You're on to something, OP. Buying from Disney definitely increases the cost, and financing sucks a lot of value out of the purchase.

The picture looks very different if you buy resale and don't finance.

 

[Minniesgal]

What makes DVC of value for me is being able to use 2 bedrooms for my family of 5 and have room to spread out and chill so for me the Poly falls at the first hurdle with just studios.

And at $168 a point Disney eliminates any potential savings i could make so for me the Poly is over priced.

Thirdly we paid cash for our points. 14.5% interest in this market seriously? Who pays that? To me if you have to finance something this nice to have you really can't afford it.

If I were to buy again i'd buy AKV resale and maybe have a few resale points at VGF but I wouldn't even consider paying $168 for the Poly.

 

[Deb & Bill]

Plus buying at the Polynesian doesn't give you any one or two bedroom villas. You won't get a night with 150 points in a bungalow. The best part of DVC is having a villa with a living room, a full kitchen and a washer and dryer in your villa. And a king sized bed for mom and dad.

 

[drusba]

As noted, you can get DVC a lot cheaper in resale, and financing adds substantial cost to the purchase.

Also, I am also not sure what your figures are comparing You come up with $174,573 over 50 years for $5,819 per year but it seems you are taking into account a 4% inflation rate (in annual dues increases) over those 50 years and are getting total dollars, not current dollar value. And then you apparently compare it to a total cost for something for $169,195 but I cannot tell what that something is, but based on the $1500 for a week (or is it three weeks) figure you give I can guess it is not a room at the Poly or at any Disney monorail or Epcot resort (and if that $1500 figure is three weeks, it is not possibly even a room at a value WDW resort). Those that buy DVC generally buy it to stay annually at a DVC resort, most often the one they own. The financial comparison to make is between the cost of your DVC purchase and the cost of doing like rental annual stays through Disney in the same or a similar resort (e.g., the monorail resorts if purchasing Poly). If you are fine doing vacations other than staying at Disney most of the time (your apparent comparison), then you are correct that you can likely pay less elsewhere for hotel rooms over the 50 year period, but then you should not even be considering DVC if you are fine not doing Disney.

 

[freediverdude]

Well $174,573.20 divided by 50 years is $3,497.46, so I'm not sure where the op is getting the almost $6k per year number. Also mixing costs at the end of the contract into the pricing for the first years isn't the correct way to figure to me, but I guess everybody can figure the way they want to. In 50 years the hotel costs are likely to be double or triple what they are now or more, so it would still be a deal at that time. Plus you're likely to still be able to sell the contract in 20 or 30 years for similar to what you paid, and if you did you wouldn't be paying the later year member fees.

What I like to do is figure a per point cost based on what we are paying now, and see how that compares to paying for a similar hotel room at Disney. It comes out a lot less, even if financing a direct purchase.

 

[McCrae]

Buying Direct from Disney is not always a bad idea. When a resort is new their can be very little if any difference between resale prices and direct.

As a resort matures and the direct prices increase resale prices look more attractive.

Unless you want to guarantee booking at the 11 month window the Poly is poor value compared to other resorts.

Amongst the Mono Rail resorts BLT is much better value.

 

[zavandor]

One can get the most out of a DVC purchase if he/she:
- can pay cash
- wants to stay at least every other year
- buy resale
Any point you remove, the more difficult is to make DVC work.

 

[ktmo]

This is why I stopped trying to "run the numbers". Everyone who posts their rationalization based on numbers has done something different. They all come up with something else. Some break it down by how much each point will cost of the years. Sometimes it comes out as the best deal ever, some times it comes out as the worst.

I bought resale because I can afford it and it is at a place I want to stay with the room types I want to stay in. We don't do studios, so Poly wouldn't work for us.

The other question I have is how can you vacation 3 weeks a year and only spend $1500 on hotels? You can't compare staying off-site to Deluxe. You will never make the numbers work that way.

 

[SleighBelle]

This is why I stopped trying to "run the numbers". Everyone who posts their rationalization based on numbers has done something different. They all come up with something else. Some break it down by how much each point will cost of the years. Sometimes it comes out as the best deal ever, some times it comes out as the worst.

I think it comes down to what you're trying convince yourself of . . . Are you trying convince yourself that it's the best deal ever? Or the worst?

Me? I wanted to purchase and found numbers to support the purchase price.

If you really don't want to do it, you'll always find a reason *not* to do it.