What makes DVC worth investing in?

[stewart715]

Why do these people need DVC though? DVC does not provide "ease of booking". DVC itself doesn't give you vacations to look forward to. You can still book these exact same vacations in the same hotel room without all of the stress of booking 11 months out, banking, borrowing, and renting out points and fighting for limited availability.

I get it. Theres that odd multi-millionaire who absolutely loves Disney and who's life won't be complete without the blue card. None of the cost savings matter to them. DVC is a status item for them. But in my opinion, that person is the exception, not the rule.

A lot of the 3 bedroom villa's aren't available for cash and the 1/2 bedrooms are only available 11 months from check out date for cash. So, your odds of getting the room you want at 11 months is pretty high. DVC does give you vacations to look forward to because they are implied vacations. "We paid for 24 vacations and now I just pay my dues" for example.

But you're right, it is a status thing for those people many times. But that being said, DVC is still way cheaper than rack rates for those 2/3 bedroom units. So it would just be stupid for those people to not join.

 

[Maistre Gracey]

I don’t see DVC as a status thing. It’s for the upper-middle class who believe they want to vaca in WDW for life.
We were those people, and for us it did not last.
There were a few reasons we left DVC (one being a job loss). But truly several others that I won’t go into here.
It’s not an investment. Period.

 

[CanadaDisney05]

A lot of the 3 bedroom villa's aren't available for cash and the 1/2 bedrooms are only available 11 months from check out date for cash. So, your odds of getting the room you want at 11 months is pretty high.

I iust checked and it looks like 1 to 2 months out I can have my pick of 1 and 2 BR units paid by cash. 3 BR are more limited, so for that rare person who is buying DVC to stay in a 3 BR villa every year 30 to 50 years and won't notice the dent in their wallet, I'll give that one to you. But again, thats the exception, not the rule.

DVC does give you vacations to look forward to because they are implied vacations. "We paid for 24 vacations and now I just pay my dues" for example.

So does paying nothing upfront and the full cash later.

But you're right, it is a status thing for those people many times. But that being said, DVC is still way cheaper than rack rates for those 2/3 bedroom units. So it would just be stupid for those people to not join.

How would you know this without a financial analysis? This is my whole point

 

[stewart715]

I iust checked and it looks like 1 to 2 months out I can have my pick of 1 and 2 BR units paid by cash. 3 BR are more limited, so for that rare person who is buying DVC to stay in a 3 BR villa every year 30 to 50 years and won't notice the dent in their wallet, I'll give that one to you. But again, thats the exception, not the rule.

You won't find any during F&W at BWV or BCV. A lot of DVC members buy DVC for hard to get times when rooms are hard to get and discounts are rare.

How would you know this without a financial analysis? This is my whole point

What? Simple napkin math will show you that DVC is way cheaper than cash rack rates. Especially for the larger rooms. For a 2 bedroom during F&W at BWV it is around $10,000 cash rack rate. 223 points @ $137pp + ($130 contract pp + $7 MF) comes out to around $2,800. MF will go up next year but so will the rack rate. It's really not close lol

Even if you bought direct at $190 per point at BWV...it's only $3,400 for that room vs the $10,000 rack rate. No financial analysis needed. DVC vs rack rates is ALWAYS a home run. It is comparisons to discounted moderates, discounted deluxe rooms and DVC rentals that require FA.

 

[Bing Showei]

I don’t see DVC as a status thing. It’s for the upper-middle class who believe they want to vaca in WDW for life.
We were those people, and for us it did not last.
There were a few reasons we left DVC (one being a job loss). But truly several others that I won’t go into here.
It’s not an investment. Period.

Agreed. Status thing? Please. A Disney timeshare is like a fat coupon book. They just hide it in a cute little wristband and blue card.

 

[mustinjourney]

Agreed. Status thing? Please. A Disney timeshare is like a fat coupon book. They just hide it in a cute little wristband and blue card.

If anything -- it's somewhat of an embarassment depending on whom you're talking with. I'm at a point where I don't really give a damn what other people think -- but 98% of the general population would think most of us on these boards are certifiable.

 

[Bing Showei]

Why do these people need DVC though? DVC does not provide "ease of booking". DVC itself doesn't give you vacations to look forward to. You can still book these exact same vacations in the same hotel room without all of the stress of booking 11 months out, banking, borrowing, and renting out points and fighting for limited availability.

I get it. Theres that odd multi-millionaire who absolutely loves Disney and who's life won't be complete without the blue card. None of the cost savings matter to them. DVC is a status item for them. But in my opinion, that person is the exception, not the rule.

Maybe we're not fully appreciating the gravity of your concern. Let's look at a concrete example of a potential owner.

A working couple with 2 kids is getting to feel like hotel rooms are a little too small. The kids love going to Disney and for the past two years they've squeezed in 3 trips. Combined, the couple makes $150K/year. They both max out their employer contribution to a 401K, additionally, they max out their ROTH contribution, put about $1,000/month for the two kids' 529 plans. Mortgage represents less than 15% of their income. They have a 4-month cash emergency fund. Car is paid off. They have no consumer debt. The initial cash outlay is something they have sitting in an index fund. The plan is to pay for a resale contract to stay annually at their favorite timeshare resort BLT. The ADs would be paid monthly and represent 33% of their annual travel budget. They've determined they can afford to commit to doing WDW at least once a year for the next 40 years.

Quick, back-of-the-envelope calculations suggests they would save over renting points as they have done for the past 2 trips, and should probably "break even" in about 8-10 years.

These are not the .1% you seem convinced are the only ones who prescribe to the idea that as long as they can afford it, the amount of savings is secondary to the fact that they are in a good place to buy in. I'm having trouble seeing what sort of in-depth analysis this family should be doing that would be change the fact that they have their financials in order, can afford to buy in, understand that they're committing to going to Disney for 40 years (which is probably more than they would do on cash alone).

What sort of savings would they need to see that would trump that this is a luxury they can afford to buy?

You seem really concerned that not doing the detailed breakdown of PV, ROI, Inflation vs. Disney inflation, etc., would be reckless on the part of any buyer.

As I see it, the potential buyers above are in great financial shape, have demonstrated an ability to live within their means, and have decided to splurge on their family travels and buy a Disney timeshare. They're making a luxury purchase they can afford.

What calculations am I missing that you seem so gravely concerned that these people are failing to fully appreciate? I'm honestly asking as it seems some of us really don't understand your fixation on the value of the detailed analyses you're talking about.

 

[CanadaDisney05]

You won't find any during F&W at BWV or BCV. A lot of DVC members buy DVC for hard to get times when rooms are hard to get and discounts are rare.

I'm not going to argue this. I'm not too familiar with the availability on the cash booking side. I do believe that inventory becomes more readily available around the 60 day mark for cash reservations. In general, rooms are hard to get during that period of time through DVC as well unless your booking at 11 months.

However. I have never heard anyone claim that they buy DVC for the flexibility of booking. But in the situation where someone has throw away money, and they need to book hard to get rooms for 20+ years well in advance, I'll give that one to you. They don't need to do a financial analysis. They need to do an availability analysis only.

What? Simple napkin math will show you that DVC is way cheaper than cash rack rates. Especially for the larger rooms. For a 2 bedroom during F&W at BWV it is around $10,000 cash rack rate. 223 points @ $137pp + ($130 contract pp + $7 MF) comes out to around $2,800. MF will go up next year but so will the rack rate. It's really not close lol

137 x 223 = $30,551
I'm not sure where you are getting $2,800 from.

But here is some quick math. I couldn't find availability yet for 2BR in October as were still 90+ days out. A 1 BR at BWV is $5,950 for a standard view after taxes.

125 @ 166 = $20,750 (Purchase Price)
7.17 @ 166 = $1,190 (1st Year Maintenance Fees)
20,750 + 1,190 = 21,940 (Total Upfront Cost)

21,940 @ 8%= 1,755 (Lost investment income at 8% by investing your cash into DVC instead of an income producing asset.)
21,940+ 1,755 = 23,695 (Balance you could have in your account without DVC before finalizing hotel stay in year 1)
23,695 - 5,950 = 17,745 (Balance you could have in your account without DVC after year 1)

21,940 – 17,745= 4,195 (Cost of DVC in first year)
5,950 (Cost of rack rate)

DVC provided savings of ~30% off of rack rates. While not insignificant, these rates (or close to) can usually be found through promotions. Same booking can be done by renting points for $2,822 which proves to actually be cheaper than purchasing DVC in that first year.

I'm not trying to argue that DVC is a bad deal. In most cases, it actually tends to be a really good deal depending on the situation. What I am suggesting is that without a financial analysis, you have no idea if DVC is saving you 5% or 80%. Unless your in the small percentile described above, how do you make a major financial commitment like this without understanding what you are purchasing.

NOTE: Before anyone goes crazy, I am not suggesting that you can earn 8% guaranteed year over year. It was simply to illustrate why you need to do your own analysis. DVC's marketing uses the most extremely favorable variables to over value their product. Use variables that make sense to you, and your situation. DVC can provide great discounts on future stays, but before you purchase something like this, you should make sure you understand what you are buying.

Even if you bought direct at $190 per point at BWV...it's only $3,400 for that room vs the $10,000 rack rate. No financial analysis needed. DVC vs rack rates is ALWAYS a home run. It is comparisons to discounted moderates, discounted deluxe rooms and DVC rentals that require FA.

 

[CanadaDisney05]

Quick, back-of-the-envelope calculations suggests they would save over renting points as they have done for the past 2 trips, and should probably "break even" in about 8-10 years.

What calculations am I missing that you seem so gravely concerned that these people are failing to fully appreciate? I'm honestly asking as it seems some of us really don't understand your fixation on the value of the detailed analyses you're talking about.

1) I appreciate the thorough analysis you did above. That is a lot more of an analysis than I imagine 90% of DVC owners did before purchasing.

2) I'll just use a random week as an example. Oct 1 - 8 for a 1 BR at BWV standard view. Points required = 166. 166 @ 17 = $2,822 which is the cost to rent points. Lets assume you took the money you would have put into DVC (purchase price + maintenance fees) and instead put it into an index fund (or any other liquid investment of your choice), earned 5%, and then withdrew enough cash every year to rent the points. If you purchased for around $125 per point, your break even would be closer to 22-23 years. Which is not ideal considering BWV only has about that amount of time left on the contract.

 

[mustinjourney]

1) I appreciate the thorough analysis you did above. That is a lot more of an analysis than I imagine 90% of DVC owners did before purchasing.

2) I'll just use a random week as an example. Oct 1 - 8 for a 1 BR at BWV standard view. Points required = 166. 166 @ 17 = $2,822 which is the cost to rent points. Lets assume you took the money you would have put into DVC (purchase price + maintenance fees) and instead put it into an index fund (or any other liquid investment of your choice), earned 5%, and then withdrew enough cash every year to rent the points. If you purchased for around $125 per point, your break even would be closer to 22-23 years. Which is not ideal considering BWV only has about that amount of time left on the contract.

Your calculation does not work b/c someone would need about $60,000 to invest in order to pay $2822 per year using just the interest -- whereas the DVC owner is paying around $21000 up front. That's a big difference in initial investment.

If someone takes the same initial investment and does what you suggest -- then they'd be out of money after year 10 -- and that's assuming rental rates never go up.

ETA -- I see you are including the MFs as part of the up front buy-in. I can understand that logic -- but I'm not so sure it works. I'll have to give it some more thought.

 

[crvetter]

1) I appreciate the thorough analysis you did above. That is a lot more of an analysis than I imagine 90% of DVC owners did before purchasing.

2) I'll just use a random week as an example. Oct 1 - 8 for a 1 BR at BWV standard view. Points required = 166. 166 @ 17 = $2,822 which is the cost to rent points. Lets assume you took the money you would have put into DVC (purchase price + maintenance fees) and instead put it into an index fund (or any other liquid investment of your choice), earned 5%, and then withdrew enough cash every year to rent the points. If you purchased for around $125 per point, your break even would be closer to 22-23 years. Which is not ideal considering BWV only has about that amount of time left on the contract.

Are you financing the difference between the DVC Cashout Outlays each year vs those of renting? Doing this the breakeven for me moved up to be about 15 years (but BCV and BWV are the worst to buy at for economics). Each side (renting and owning) should have similar cash outlays, else you punish the DVC side because it needs to come up with less cash yearly. Of course if the person can't invest that savings each year between cash and DVC then they couldn't truly afford the cash rooms and are treating DVC as a way to upgrade accommodations, which means the comparison has a bias. Also I would suggest doing Garden/Pool as consistently renting standard view is difficult.

 

[CanadaDisney05]

Your calculation does not work b/c someone would need about $60,000 to invest in order to pay $2822 per year using just the interest -- whereas the DVC owner is paying around $21000 up front. That's a big difference in initial investment.

Your not taking into consideration that you can use interest + capital to rent the points. At the end of your DVC contract, your left with zero. To make it a fair comparison, at the end of the break even point, you should be left with zero as well.

If someone takes the same initial investment and does what you suggest -- then they'd be out of money after year 10 -- and that's assuming rental rates never go up.

ETA -- I see you are including the MFs as part of the up front buy-in. I can understand that logic -- but I'm not so sure it works. I'll have to give it some more thought.

In order to make it a fair comparison, you would have to "pay" MF into your investment every year as well, just as you would into DVC.

 

[CanadaDisney05]

Are you financing the difference between the DVC Cashout Outlays each year vs those of renting? Doing this the breakeven for me moved up to be about 15 years (but BCV and BWV are the worst to buy at for economics). Each side (renting and owning) should have similar cash outlays, else you punish the DVC side because it needs to come up with less cash yearly. Of course if the person can't invest that savings each year between cash and DVC then they couldn't truly afford the cash rooms and are treating DVC as a way to upgrade accommodations, which means the comparison has a bias. Also I would suggest doing Garden/Pool as consistently renting standard view is difficult.

Year	Maintenance Fees	Interest (5%)	Rental Cost	Balance
0				20,750 (166 * 125)
1	1,190 (7.17 * 166)	1097 (20,750 + 1,190) * 0.05,	-2,822	20,215.23 (20,750 + 1,190 + 1,097 -2,822)
2	1,190	1,070	-2,822	19,653

And so on....

I know I didn't factor in any kind of MF and Rental inflation. The point was merely to illustrate that it's not back of the napkin math.

 

[crvetter]

Year	Maintenance Fees	Interest (5%)	Rental Cost	Balance
0				20,750 (166 * 125)
1	1,190 (7.17 * 166)	1097 (20,750 + 1,190) * 0.05,	-2,822	20,215.23 (20,750 + 1,190 + 1,097 -2,822)
2	1,190	1,070	-2,822	19,653

And so on....

I know I didn't factor in any kind of MF and Rental inflation. The point was merely to illustrate that it's not back of the napkin math.

We just differed the side we did the analysis on, but I agree on the above. Our difference was the Inflation costs of MF and Rentals.

 

[mustinjourney]

Year	Maintenance Fees	Interest (5%)	Rental Cost	Balance
0				20,750 (166 * 125)
1	1,190 (7.17 * 166)	1097 (20,750 + 1,190) * 0.05,	-2,822	20,215.23 (20,750 + 1,190 + 1,097 -2,822)
2	1,190	1,070	-2,822	19,653

And so on....

I know I didn't factor in any kind of MF and Rental inflation. The point was merely to illustrate that it's not back of the napkin math.

One thing that will blow up your assumptions is that if you only hold the contract 10 years, you come out WAAAAAAAY ahead with DVC assuming you buy resale and the contract doesn't get devalued somehow. 2042 resorts might not fit this assumption -- but VGF should maintain a strong resale value.

Even in your BWV example, your annuity would essentially be worth about $15,000 after 10 years. Question is whether or not BWV will be worth more or less than $92 per point when it still has 13 years left.

Lastly -- you also need to factor in income taxes. If you were to invest, that 5% earned (almost $1100), is really only about $700-$900 depending on your marginal tax bracket. Taking income tax into account -- you'll run out of money in about 18-20 years depending on your tax bracket.

 

[CanadaDisney05]

One thing that will blow up your assumptions is that if you only hold the contract 10 years, you come out WAAAAAAAY ahead with DVC assuming you buy resale and the contract doesn't get devalued somehow. 2042 resorts might not fit this assumption -- but VGF should maintain a strong resale value.
Even in your BWV example, your annuity would essentially be worth about $15,000 after 10 years. Question is whether or not BWV will be worth more or less than $92 per point when it still has 13 years left.

The same could be said if your investment goes up by 25% year over year, over 10 years (which is entirely possible).

Lastly -- you also need to factor in income taxes. If you were to invest, that 5% earned (almost $1100), is really only about $700-$900 depending on your marginal tax bracket. Taking income tax into account -- you'll run out of money in about 18-20 years depending on your tax bracket.

That is a fair point. The numbers I was using above were by no means meant to be a detailed financial analysis. It was just an illustration of the real world complexities of the situation. Once you factor in things like US inflation, Disney rack rate inflation, MF inflation, taxes, etc.... back of the napkin math is just not sufficient.

The point I am trying to make is that the financial analysis is important to understand what you are really buying. DVC doesn't offer you any kind of experience that you cannot get by paying upfront. It's basically like the Disney Dining Plan (Although in my opinion, the math is much more favorable with DVC). It's a prepaid option for something that can be paid for in cash. In some specific circumstances, it works out cheaper. But you have to understand what those circumstances are. The real world complexities of this purchase goes over 99% of people's heads, and this is exactly what Disney is hoping for.

 

[stewart715]

137 x 223 = $30,551
I'm not sure where you are getting $2,800 from.

Wait...what??

$130pp for 223 points = $28,990 OR $1,260 for each of the 23 remaining years
Dues are currently around $7 OR $1,561 for 223 points.

= $2,820 for the 223 point booking

Rack rate for that room is $9,500 after taxes/fees.
This is back of the envelope math.

Your 8% "missed" opportunity is EXTREMELY generous. My goodness, please show me these guaranteed 8% returns. This is where income disparity comes in and I have trouble with these conversations. For many people, missed investment income on $30k is not a big deal. Also - if you're going to give the non-DVC scenario the benefit of the doubt, you have to give the benefit of the doubt to the contract (which holds value well so far). Like, your 'balance' column is entirely wrong. Saw a guy purchase a VGF week 52 grand villa contract, stayed that week, then sold it for more money. He made money on his vacation.

I argue again, it is my opinion that if DVC is as you say a "huge financial commitment" it is not for you. Your DVC contract should not be costing you your life savings or even close to most of your life savings. It's a luxury purchase at the end of the day because let's face it, you can go to WDW every year for MUCH cheaper than DVC costs, you just won't be at the Grand Floridian.

Bottom line is, you shouldn't lose sleep over the amount of money you spent on DVC. If you are, it's a stupid decision.

 

[CanadaDisney05]

Your 8% "missed" opportunity is EXTREMELY generous. My goodness, please show me these guaranteed 8% returns.

NOTE: Before anyone goes crazy, I am not suggesting that you can earn 8% guaranteed year over year. It was simply to illustrate why you need to do your own analysis.

Nobody was suggesting that you can get an 8% guaranteed rate of return.....But it is far from unreasonable to expect close to an 8% average rate of return on an investment over 20-30 years.....

Rack rate for that room is $9,500 after taxes/fees.
This is back of the envelope math.

My first search for a week in October was $5900 after taxes/fees at BWV which was the resort and time-frame your post mentioned. Not to mention, you can snag the same week by renting DVC points for $2,822.

For many people, missed investment income on $30k is not a big deal. Also - if you're going to give the non-DVC scenario the benefit of the doubt, you have to give the benefit of the doubt to the contract (which holds value well so far). Like, your 'balance' column is entirely wrong. Saw a guy purchase a VGF week 52 grand villa contract, stayed that week, then sold it for more money. He made money on his vacation.

Sure, the contract could hold it's value, or even appreciate by the time you sell. However, DVC is hardly a diversified portfolio of assets that you can realistically predict with any sort of confidence what it's value will be in 5, 10, or 20 years from now. The one thing we do know for sure is that at the end of the contract it will have a value of zero.

But again, my argument is NOT that DVC is a bad decision. It's that there are so many individual variables involved that you need to do your own personal analysis to see where the outcome gets you. You can do back of the napkin math to make yourself feel better, but its not grounded in reality.

I argue again, it is my opinion that if DVC is as you say a "huge financial commitment" it is not for you. Your DVC contract should not be costing you your life savings or even close to most of your life savings. It's a luxury purchase at the end of the day because let's face it, you can go to WDW every year for MUCH cheaper than DVC costs, you just won't be at the Grand Floridian.

There's a large gap between being a "huge financial commitment" and "costing you your life savings".

I think where the big disagreement here is the term "luxury purchase". DVC is a luxury purpose in the same sense that any vacation is technically a luxury purchase. However, DVC is more of an economic investment than a true luxury purchase. Hear me out.

Lets just assume a car is a necessity based on where you live/work. You can buy a Toyota or a Ferrari. Both cars get you from point A to point B. The Ferrari however, is much more fun to drive. How much value that provides is personal, not economical. The next decision is how do you want to pay for the Ferrari. You can lease or purchase. This decision is economical. Buying the vehicle vs leasing doesn't provide any non-measurable value to you. In both cases, you have the same car to drive.

Bringing that back to Disney, you don't need to stay in the deluxe accommodations. You can can travel to WDW and stay in a wide variety of hotels including Disney's Value Resorts. The "luxury purchase" is staying in deluxe resorts vs value resorts. Once you make the decision that you want the luxury of a deluxe resort, the question comes down to how to pay for it. This is the DVC vs Non DVC decision. It has now become a pure economic decision. Which option will cost less based on your assumptions of future travel habits, inflation, etc.... The decision to pay for your deluxe resorts by buying DVC does not provide any sort of non-measurable value to you. In both cases you get to stay at deluxe resorts at WDW.

 

[stewart715]

My first search for a week in October was $5900 after taxes/fees at BWV which was the resort and time-frame your post mentioned. Not to mention, you can snag the same week by renting DVC points for $2,822.

For a 2 bedroom? No chance. My example was for a 2 bedroom.

And yes, renting is an entirely different story. I was specifically talking about rack rates.

Re: Your Ferrari example, if you're buying a Ferrari I highly doubt you are getting out a spreadsheet to determine how you are paying for it.

The main problem with all of this though, is none of this is necessity. No one needs to go to WDW ever. If your DVC purchase is forcing you to go every year, then it's costing you more money. But the main point is if you have for many years over and over been going to WDW website, purchasing rack rate a cash room, DVC would save you money in that scenario every single time vs. holding onto the cash. But again, at end of day, no one needs any of this.

 

[tguz]

If you are a vacationer that like or is ok with the All Stars or even Pop Century, then I think DVC is not a good investment as the maint fees could cost as much as a value room for a week.

We don't stay at the deluxe level so somebody else would be better to give their opinion on that.