What do your points cost?

[Orsino]

This is a very interesting way of looking at DVC costs. However, I think one has to factor in the present value of money to be accurate. (Most of what everyone is doing is looking at present value anyway, so the numbers work out quite well for 2011). For example, one dollar in 1996 is equivalent to $1.35 in 2009. So simply dividing the cost paid for points by the number of years is not exactly correct. By coughing up $1.95 now, for the opportunity to use points in 2035 or later means you are paying more than $1.95 for that right.

By my estimations I've paid (not counting dues):
1.71 per point for 2011 (in 2011 dollars).
6.22 per point for 2054 (in 2054 dollars assuming a 3% inflation rate).

Counting dues I have:
6.21 per point for 2011 (in 2011 dollars)
22.24 per point for 2054 (in 2054 dollars assuming a 3% inflation rate and 3% increase in dues per year)

It's a fun exercise, but I'm also tracking how much I've paid to DVC versus how much I would have paid to CRO (including discounts). When that breaks even, I'll be happy and content simply looking at annual dues as my "cost."

 

[JimMIA]

We are thinking about buying in...can someone check to be sure I am figuring this correctly? We would buy 110 points at AKV for $114 per point (according to dvcnews.com points are currently $120 with $6 discount) with maintenance of $5.01. Total cost (estimating closing costs) $13000. Total number of points over life of contract 5060. Gives me cost of $2.57 per point which added to MF is $7.58 per point. For example, if one week costs 102 points, we are spending $773.16 to stay for that one week which breaks out to just over $110 per night compared to at least $250 per night for regular AKL room...can that possibly be right or am I doing something wrong?

I think your calculations are right, provided you are paying cash. But if you are paying cash, AKV is one resort where I would really take a long look at resale

I see resales passing ROFR in the low to mid-70's. If you can buy an AKV resale for $74 per point (I think you can, maybe less), you will save $40 per point. On your 110 point purchase, that's $4,400. That's a huge difference.

 

[DVCGeek]

What about this:

Add up all the points you get on the contract and divide the purchase price by it?

So, if I buy a 50 point contract that expires in 2042 and I am getting 25 banked 2010 points and all my 2011 - 2041 points (no new ones in 2041 since it expires Jan. 31st and there isn't a Jan. UY) I would get 1,575 points to use.

If I buy at $69 per point and seller picks up closing, that would be a $3,450 purchase price.

Therefore each point cost me me about $2.19 per year. Add on my dues and voila- that is my cost... The 25 2010 points might be a deal w/ no dues paid on them in this example. Therefore any rooms booked on them will be WAY cheap.

 

[brrabit]

(Using a 100 pt contract for the example)

At $72 per pt the contract principal was $7200. Multiply 100 * 37 and you will be receiving 3,700 points over the life of your contract. Divide the total cost of $7,200 by total points 3,700 and you will see you paid $1.95 for every point you will receive for the entire contract.

Thus - if you receive 1 year of banked points you are receiving 3,800 points. Divide that into $7,200 and now you have a cost of $1.89 for every point that you will receive for the life of the contract.

I've always thought of points in this manner...it makes it SO much easier. I've bought a lump sum of points worth so much. So each point is worth the total cost/total # of points. If I "rent" any, I'm actually selling them. I will never see those particular points again! unless I buy them back which makes no sense. And when they're used, they're gone.

 

[Dumbo_Husband]

This is a great original post. I don't rent points, but it is nice to see what any given stay is actually costing you. I think Disney would be better off using this type of math to sell their timeshare direct.

By my calculations, I can stay in a 1-BR at Beach Club for about $1,500 or about $250/night. Not bad for pretty nice accomodations.

However, being in sales & marketing my entire career - DVC is not a financial but an emotional decision. It's the dream of having a magical experience from the first "Welcome Home". We own 200 at SSR and 200 at BCV. We are VERY new members and WE LOVE IT! It is a completely different Disney experience in my opinion.

If someone asks me about it I simply say...

1) If you like luxury acommodations DVC is for you.
2) If you go to Disney at least 1-2 X per year DVC is for you.
3) If you like to plan your trips way in advance DVS is for you.

Forget the math and have a great time! I also like not getting a bill at check out (other than the grand I drop in the parks and on meals).

Now if DVC only had discounts on airfare!

Dumbo_Husband

 

[taaren]

I did this math when I was sitting in the DVC sales center contemplating whether this really would be a good buy for us. We had the cash (had been saving up for a fancy wedding, which we then skipped), so interest was not a consideration. And that also meant we would have spent the money on something else so neither would the 'lost opportunity' costs have componded for us. And really, how many DVC owners would have taken the money we spent on DVC and invested rather than spending it on vacations or another unnecessary expense?

At the time at which we bought they were selling VGC for $96/pt, and it wasn't built yet so we got the full 50 years. Therefore each year my points cost me $1.92, plus that year's maintenance fees were $3.70 I think. So it was $5.62/per point and to stay in a 1 bedroom for 5 nights that first year, at 34 pts/night during 'Choice', or shoulder season = $191.08/night. However, we had previously been getting two rooms for 5 people at the Best Westerns on Harbor, usually for $120/night + tax, so I felt like we were getting a bargain.

I previously budgeted about $1000/trip for hotel for 1 week close to Disneyland (but not on property), and it now is costing me about $1100/year for accommodations that are larger and ridiculously more luxurious. Didn't do the nightly breakdown at the time, which doesn't feel as much of a bargain, but the weekly one sure is.

Regardless, the value has been found in the intangibles as well: more relaxed vacations knowing we'll be back next year, my four year old saying "This is our house, right Mama?".

Not sure why we would ever want to sell, but I'd hope for $80/pt in 2019, or $60/pt in 2029, $40/pt in 2039, or $20/pt in 2049. If I didn't get that I'd rent them out.

 

[Cajun28]

We are thinking about buying in...can someone check to be sure I am figuring this correctly? We would buy 110 points at AKV for $114 per point (according to dvcnews.com points are currently $120 with $6 discount) with maintenance of $5.01. Total cost (estimating closing costs) $13000. Total number of points over life of contract 5060. Gives me cost of $2.57 per point which added to MF is $7.58 per point. For example, if one week costs 102 points, we are spending $773.16 to stay for that one week which breaks out to just over $110 per night compared to at least $250 per night for regular AKL room...can that possibly be right or am I doing something wrong?

Your calculations seem right to me but, as JimMIA said in a previous post, be careful when you compare your cost to rack rates, unless you pay rack rates currently. You should compare your cost to what you normally pay. If you currently stay offsite for $100/night then you're actually paying more for DVC, assuming the $110/night you would be paying for an AKL room. Now, you're getting a better room in a better location with DVC, but strictly speaking money, you would be paying more in my scenario. Then you would have to decide if the extra cost of DVC would be worth buying. In my case it was well worth it, but don't make your decision based on saving $140/night. (Again, unless you're paying rack rates now)

Good luck with your decision and hopefully soon we'll be welcoming you home!

 

[sweetdana]

Also assuming most people write off there taxes paid on their real estate purchase you would mostly subtract that out, as well, if you buy AP passes anyway.. that is another 300 - 500$ off depending on your family size.


Before purchase I did the cost per point/per night at SSR, and BC, the resorts I was considering. (Aug 2010)
I did the average night out and SSR with the years left came in less than (44 years and 62$ a point.) 1.50$ per point for the life (and dues at the time just under 5$) and BC came in nearly 2.70$ (it was 85$ per point and 32 yrs left, and dues were almost under 6.50$ a point). Assuming I was fine staying at any of these. A room at SSR was at 18 points a night 6.5*18 = 120$ a night, but a night at BC was 20 points = 8.70*20 =175$ per night. Assuming I used my SSR points at BC then it brought the room price to 130$. A 1 bedroom was even more of a difference.. To me I couldn't justify the extra 40 - 50$ extra a night and went with SSR. I could pay 120$a night for SSR, even 130$ a night for BC, but I could not every year for 32 years pay 175$ a night for BC.
I think 50$ * 13 nights a year is a lot, (even more because for us 4 of those are a 1 bedroom). IT SURE HELPS WE LOVVVVVVE SSR too.

 

[Brian Noble]

Aw, c'mon, Brian! That's a HUGE overvaluation! I assume you're just joking, because that sounds like a timeshare salesman talking!

Why? To get extra points (in a transfer) it would cost you $10/per. To give up points, you would (probably) earn $10/per. This is a simple way to value extra/missing points...in the first year of the contract only.

The others are the ones you get "at cost" (the cost you pay).

But, hey---you can use any valuation you like.

 

[pilferk]

I'll yield to the CPA's among us, but I'd be inclined to consider those two separate transactions -- one for 50 years and one for 15. If you do it that way, your initial acquisition cost was $.96 per point, and the extension was $1.00 per point.

So for this year -- part of your original 50 years -- your total per-point cost is $4.97 dues + $.96 = $5.93.

I'm sure we all envy that price!

In this case, it doesn't really matter which way you do the math....

If you take "total price paid for 65 years", which would be:
48+15= 63 per point

and then divide that by number of years:

63/65 = .97 per point

.97 + 4.97 = 5.94 for this year.

About a penny difference.

I agree with your opinion that the two would be looked at as separate transactions.....but in this persons case, the difference in the two scenarios is about a penny.

 

[pilferk]

Great discussion Jim. Does anyone know if the historical rate of maintenance fee increases matches WDW's rack rate increases? In other words, if the cost of a cash room increases at an faster pace than the annual maintenance increases, then the DVC comparison becomes better over time. If the opposite occurs, then DVC looks worse.

Mousesavers.com had an analysis of this up awhile ago. Not sure if it's still there, but I seem to remember they were either roughly equivalent or rack rates increase just SLIGHTLY more than DVC dues did.

 

[pilferk]

I'm not sure how you would value banked points.

For your overall acquisition cost, they wouldn't count at all since they are one-time points, not every-year points.

A reasonable approach might be that they would decrease your average cost for that one year. For example, if you had 200 points with 50 banked, and your total cost was $7 per point for 2011, I guess you could multiply 200 X $7 = $1400 and then divide by 250 to get a lowered cost for that one year of $5.60.

CPA's -- a little help here! Does that make sense?

Not a CPA, but...

The other issue with opportunity costs is, to really get an apt comparison, you have to reduce the principal each year equating to what you project you would spend on lodging costs. You also have to have a steady rate of return you have to assume...and that tends to cause a lot of debate.

There probably is some inherent opportunity costs in this for most folks, but how much they are is tough to actually determine. You can "guestimate", but it may prove to be wildly inaccurate. For us, using the projections we had (and the 10 year previous interest rates we had on the instrument the money we used to purchase our membership was in), it was minimal over the course of the 50 years we'd have had the money invested. It was there, but it wasn't considerable enough to be a big factor in the decision.

But again, you're right....this type of discussion typically loses most of the "audience" and makes people's eyes glaze over.

 

[rillsung]

We had 240 points banked 2009 points when we bought. Our contract closed and we got our points last week. I am really tempted to call them freebe points since our plan is to stay at the VGC and also give a room to my BIL's family. Since we likely wouldn't make the trip, and definately would not stay at the VGC using cash we will lose money on our calculation LOL. Also since we always stayed at the value WDW resorts we don't gain a whole lot. I figure we save $600 over value this year which would be 32.5 years to break even. Too bad BW is done in 31! But I also have almost 100 more points than necessary for our trip so it will work out better hehehe. I'll just have to keep track of everything to see when we actually break even. If I figure rack rates for BW then it's more like 2 trips!

Also assuming most people write off there taxes paid on their real estate purchase you would mostly subtract that out, as well, if you buy AP passes anyway.. that is another 300 - 500$ off depending on your family size..

Oh yeah APs thanks! After I add in AP discount, we will break even in 21 years

Mousesavers.com had an analysis of this up awhile ago. Not sure if it's still there, but I seem to remember they were either roughly equivalent or rack rates increase just SLIGHTLY more than DVC dues did.

It's still there. Search for DVC on mousesavers site.

 

[Plutofan]

Even though I did not finance I figure in what I could have made with the $ I paid if it was in medium term treasuries (3%) and run a standard morgage amoritization. At $45/pt plus $2.30 closing cost it works out to $2.25 plus 4.99 amount is $7.24/pt leveled over the life fo the contract.

Without the lost income it is $1.43 Plus 4.99 or $6.42/pt

bookwormde

I figure our true cost a similiar way factoring in my mortgage or my lost investment income on the buy in if I do not have a mortgage. People need to really analyze the costs of DVC to make sure it is worth it if they have to finnace it since the costs are usually a lot higher than people realize.

 

[JimC]

I do similar to JimMIA with two exceptions. In order to compare different contracts with different current, banked and borrowed point status, I calculate the total number of points acquired to the end of the contract. That is converted back to a price per point. When I have done this looking at specific resorts and contracts of similar size, the actual prices of the various contracts begin to converge significantly.

The other exception is that when converting to a room rate equivalent I factor in the room tax. Thus the number of points times my cost per point is equivalent to a room rate with tax. To convert to a pure room rate divide by 1 plus the tax rate.

 

[Mousewerks]

An interesting exercise. We are in the process of purchasing 150 SSR points (it's currently in ROFR). There are 42 years remaining on the contract, 5 points banked into 2011, and we purchased at $63/point. We financed, so adding all the closing costs, interest, etc.. into the calculation, I come up with $1.8487/point. Maintenance Fees for this year are 676.85 or 4.5123/point for a sum total of $6.3616 per point for this year.

I'm going to estimate that MFs go up by 3% to 4.6477 next year so next year's points are 6.4964.

We are hoping to get a BCV 2BD for this September (we'll see if I can get it at the 6 month mark) for which we'd need 271 points. That's 155 2011 points and 116 2012 points. So the cost per night averages (155*6.3616 + 116*6.4964)/7 = $215.38 per night. Not bad at all for a 2 bedroom suite, especially considering that CRO wants $670 per night with Friday night being $870! $1507.63 vs. $2728. Very nearly half the cost.

 

[JimMIA]

An interesting exercise. We are in the process of purchasing 150 SSR points (it's currently in ROFR). There are 42 years remaining on the contract, 5 points banked into 2011, and we purchased at $63/point. We financed, so adding all the closing costs, interest, etc.. into the calculation, I come up with $1.8487/point. Maintenance Fees for this year are 676.85 or 4.5123/point for a sum total of $6.3616 per point for this year.

I'm going to estimate that MFs go up by 3% to 4.6477 next year so next year's points are 6.4964.

We are hoping to get a BCV 2BD for this September (we'll see if I can get it at the 6 month mark) for which we'd need 271 points. That's 155 2011 points and 116 2012 points. So the cost per night averages (155*6.3616 + 116*6.4964)/7 = $215.38 per night. Not bad at all for a 2 bedroom suite, especially considering that CRO wants $670 per night with Friday night being $870! $1507.63 vs. $2728. Very nearly half the cost.

Again...I think this exercise is primarily useful for comparisons between DVC options and other uses of points (Cruises, RCI, comparisons with other timeshare systems for comparable accommodations).

If you are properly doing the math (and including total financing costs for the life of the loan), you should get a useful figure for apple-to-apple analyses.

But if you compare it to Disney's rack rates, I'd be absolutely astounded if that comparison didn't show a big savings. OF COURSE it's gonna look good!

Such a comparison would only be accurate if you are actually willing to PAY rack rates, and I suspect that's a small minority of the DVC owners. And if a comparison with rack rates doesn't show a DVC cost of half or less, you probably made a math mistake unless you financed.

 

[DVCconvert]

.....Such a comparison would only be accurate if you are actually willing to PAY rack rates, and I suspect that's a small minority of the DVC owners.....

I don't know how small that minority really is. Personally, I was paying those rates, and that comparison was a primarly motovator for my becoming a dvc member.
YMMV

 

[friends with mickey]

Don't the people that do the "free" dining plan pay the rack rate plus have to purchase tickets? There seem to be a lot oh them. It would seem that DVC would work for any of those folks that come every year.