DVC show financing

[CanadaDisney05]

Yep, and with enough invested, you can use the returns to pay rack rates and not be locked into a contract with rising maintenance fees; I'm not a debt carrier fan.

Theoretically yes. But ive run the numbers (atleast on the cheaper resorts), and DVC still far outweighs that option. By locking in for the long run, DVC is actually a good deal when compared to rack rates of deluxes (even with 30% off deals factored in)

 

[YesterDark]

DVC only makes sense if staying at Deluxe resorts is important to you. If it's not, you'll never save.

 

[CanadaDisney05]

DVC only makes sense if staying at Deluxe resorts is important to you. If it's not, you'll never save.

I wouldn't say that neccesarily. If you buy resale at the cheaper resorts it can make sense a lot quicker.

Here is my example: bought 200 points at Saratoga (75 direct, 125 resale). This should be enough for about 10 nights per year in a studio for 35 years. We travel during summer only because my spouse is a teacher. This means that it requires more points per night than someone who can travel during the lower cost seasons.

Ive assumed maintenance fees will go up by 4% annually, and hotel prices will also go up by 4% per year. 2% annual US inflation.

In 35 years of ownership, it will cost me about $260 per night tax in. During the same week next year, its currently $167 + tax+ parking for the cheapest value, $241 + tax + parking for the cheapest moderate, and $402 + tax + parking for the cheapest deluxe.

So even on day 1, its already cheaper than the cheapest moderate, and only about $60 more than the cheapest value. Now if you start factoring in 4% "disney inflation", the break even is on a $161 tax and parking included hotel room. Thats cheaper than a value currently is.

 

[Linkura]

You're also "locking in" your vacations at WDW as opposed to anywhere else unless you go through the hassle of renting your points out. Not like WDW has gone down in quality and value for your vacation dollar, though, right....?

 

[CanadaDisney05]

You're also "locking in" your vacations at WDW as opposed to anywhere else unless you go through the hassle of renting your points out. Not like WDW has gone down in quality and value for your vacation dollar, though, right....?

This is why DVC is not for everyone

 

[TonyaG83]

You're also "locking in" your vacations at WDW as opposed to anywhere else unless you go through the hassle of renting your points out. Not like WDW has gone down in quality and value for your vacation dollar, though, right....?

I rent my parents’ house long term vs. living there. Posting my points for rent and making a reservation is nothing compared to being a landlord, but in both cases I do it because I can get a return.

Disney is a brand I don’t mind sinking money into, because regardless of quality decline, the demand is there. It’s been there since I was a child. Even if I don’t use my points, someone else will.

 

[hertamaniac]

You're also "locking in" your vacations at WDW as opposed to anywhere else unless you go through the hassle of renting your points out. Not like WDW has gone down in quality and value for your vacation dollar, though, right....?

Aren't you also pre-accepting any price increases that Disney throws at the theme parks/food/etc. (assuming guests go to the parks)? I'm not saying it's good/bad/indifferent, but that is what concerned us as a potential DVC owner; I didn't want to give Disney a free pass on making additional profit on DVC ancillary purchases for the length of the contract.

 

[CanadaDisney05]

[QUOTE="hertama-not saying it's good/bad/indifferent, but that is what concerned us as a potential DVC owner; I didn't want to give Disney a free pass on making additional profit on DVC ancillary purchases for the length of the contract.
[/QUOTE]
That is basically the trade off.

Loss:
- flexibility of where to travel
- flexibility of booking windows
- flexibility of how often to travel
- less liquidity
- Opportunity cost of not investing that money

Gain:
- Lower per night room cost for the duration of the contract

You have to weigh the different options. How much of a room discount am I really expecting? Are there ways to mitigate the "losses"?

My personal calculations:
Cost per night = $260 USD (tax included) per night in today's dollars. I assumed that hotel rates would continue to grow at a rate of 4% annually (double inflation). Therefore, paying a flat $260 USD was equivalent to how much I would pay for a hotel that is currently $161 USD per night but growing at 4% per year. This is a significant discount off of the rack rates of these hotel rooms (even when discounted at 20 or 30%).

Ways to mitigate the losses:
Renting points through a broker is a very simple process. The return on renting actually exceeds my cost (maintenance fees + purchase price). Unless demand for WDW falls off the face of the earth, I can expect to get back atleast most of my money through renting without much hassle.

Renting mitigates the flexibility of where to travel, as I can easily take the money from my rental and go use it for an alternate vacation.

I also have a healthy emergency fund and retirement savings, so the liquidity wasn't too big of an issue for me.

It would take a very significant rate of return on investments (one that I would not comfortable expect) for the opportunity cost to outweigh the savings.

So now the only real tradeoff for me personally is having to plan my vacations a year ahead. I personally don't find that to be too big of a deal. My SO is a teacher, so we are generally planning vacations for the summer as it is and will continue for most of the life of the contract.

But everyone's situation is different. DVC doesn't make sense for everyone. In fact, I would suggest that it doesn't make sense for most.

 

[hertamaniac]

Loss:
- flexibility of where to travel
- flexibility of booking windows
- flexibility of how often to travel
- less liquidity
- Opportunity cost of not investing that money

I would add this as a loss risk:

- Full exposure to Disney price increases, not room related, for the length of the contract.

 

[Starport Seven-Five]

Cost per night = $260 USD (tax included) per night in today's dollars. I assumed that hotel rates would continue to grow at a rate of 4% annually (double inflation). Therefore, paying a flat $260 USD was equivalent to how much I would pay for a hotel that is currently $161 USD per night but growing at 4% per year. This is a significant discount off of the rack rates of these hotel rooms (even when discounted at 20 or 30%).

Are you including the annual increases in member dues in those calculations? It's 0-7% of a smaller number, but those also add up and they're not optional.

 

[DGsAtBLT]

We’ve crunched the numbers for DVC many times over the years, and no question if we had bought when we had started looking (2008ish) it would have been great, but we were gun shy. At this point the buy in is so high, our happy medium is renting.

As Canadians it’s scary locking ourselves into frequent WDW vacations with the fluctuating dollar, especially having to add near 30% to the per point cost if we bought in today. When we were considering DVC our dollar was near par, now it’s terrible. Another reason to kick our 2008/2009 selves lol.

 

[CanadaDisney05]

Are you including the annual increases in member dues in those calculations? It's 0-7% of a smaller number, but those also add up and they're not optional.

I included 4% annual increases to maintenance fees

 

[CanadaDisney05]

We’ve crunched the numbers for DVC many times over the years, and no question if we had bought when we had started looking (2008ish) it would have been great, but we were gun shy. At this point the buy in is so high, our happy medium is renting.

As Canadians it’s scary locking ourselves into frequent WDW vacations with the fluctuating dollar, especially having to add near 30% to the per point cost if we bought in today. When we were considering DVC our dollar was near par, now it’s terrible. Another reason to kick our 2008/2009 selves lol.

I'm Canadian too. The FX does add a level of risk. Keep in mind, that your vacation dollars will always continue to be paid out in USD. If the exchange rate stays static (or atleast averages the current rate), then there is really no effect. The only way DVC investing poses a risk (atleast at its core) is if the FX rate goes down. It also poses a secondary risk if the FX rate goes up and now the cost of food, tickets, etc costs more.

 

[DGsAtBLT]

I'm Canadian too. The FX does add a level of risk. Keep in mind, that your vacation dollars will always continue to be paid out in USD. If the exchange rate stays static (or atleast averages the current rate), then there is really no effect. The only way DVC investing poses a risk (atleast at its core) is if the FX rate goes down. It also poses a secondary risk if the FX rate goes up and now the cost of food, tickets, etc costs more.

This is why we kick ourselves for not using our crystal ball and buying in 10 years ago. “Locking ourselves” into the exchange rate back then for the bulk of our hotel costs would have been great. In 2019, it’s a hard one to justify, especially with the high cost to get to Orlando in the first place for us.

 

[Jax1023]

Oh man... finally got around to watching this. And, as a CPA with a pretty good knowledge of personal finance, yikes. Y'all weren't exaggerating. I'm not even sure where to start, so I'll just point out a few things that were particularly egregious:

-Pete asking the audience if we pay for our WDW vacations via credit card. Uh... yes? But I pay off my card in full every month so it is basically like paying in cash. Pete condescendingly asking the audience if they pay in cash for a vacation is ridiculous. It's a LUXURY, just like he says, and so are timeshares! Don't buy them if you can't afford them! I can understand maybe taking a few months to pay off your vacation that you put on a credit card, but you're also not taking out a new line of credit for it, and it's easy to find credit card offers with 0% or low interest so you don't need to get bilked on interest as long as you pay it off within the intro period.

-Talking up loans that START at 9.9% and go up to the 2x% range is completely irresponsible. The HELOC idea isn't too terrible of an idea as long as you KNOW you can afford the payments and you get a decent rate like Other Pete did at 4%. With 4%, you can dump your excess money you have from not paying cash into an index fund and make back your interest in the long term. But 9.9%+ is a joke rate and you're blowing a massive amount of money on interest. Sean got hosed.

-It's obvious none of these people have a background in finance or personal finance and the hardball way Pete approaches it ("If you don't like financing, I don't want to hear it!") is completely irresponsible. And don't get me started on the fact that this show is sponsored by a timeshare resale company and they're in on making the recommendations.

I'm not a DVC member and never will be, but I still liked watching some of the episodes in this series to learn about the DVC resorts and how it all works (again, CPA/personal finance background so I kind of like this stuff in a nerdy way). But not anymore; I'm done with this series if they're going to aggressively promote high-interest loans to buy timeshares on a show that is sponsored by a timeshare resale company and has co-hosts from that company.

Yeah the sarcastic do you pay for your vacation is cash really got me too. No obviously don’t hand over a literal wad of cash to pay, I use a credit card which is paid in full. With cash that was already in my bank account. And I’ve paid cash for cars and financed cars at low interest rates like 1.9%.

I don’t care what choices other people make with their money. But talking about interest rates of 9-15% boggles my mind. At least in this current century.

The idea that someone would finance a 30 point contract at 15% over 5 years is crazy. That’s basically paying 4200 for an 3000 purchase

DVC isn’t for me- mainly because I don’t think I want a yearly Disney vacation for the next 50 years. But I think there’s a lot of fancy math used to justify these things.

 

[eMoneyBug]

MY PERSONAL Financial thinking/strategy is that Cash is King. Keep as much of it as possible at any point in time. So in 2012 when I made my first DVC Purchase, I got financing to help pay for my SSR at the eye popping mind boggling interest rate! It was worth it to me: a) if it didn't turn out to what I think I was buying into or I suffered a financial emergency, I'm always willing to walk at the cost of my credit score. b) my young children would get to vacation in DVC style and create those memories even if it meant higher total cost of ownership for myself. c) After a few years, I did refinance the interest rate down as more offers came into my inbox. win/win lower interest expenses/faster payoff.

Fast forward 7 years later and just paid off that SSR! No regrets at all. Yes I've considered selling before to make money but I remembered I bought DVC for the guaranteed vacation not to try to make $$$ so we decided to buy another contract which this time around are financing 2/3rds of it over 3 years at 6%. I couldn't be happier with that decision. Everyone is different, there is no right way or wrong way, so don't take it to heart. The show gets us to watch and discuss and contrast and like/agree, etc. They did a pretty good job of that!

 

[manicstreet]

We’ve crunched the numbers for DVC many times over the years, and no question if we had bought when we had started looking (2008ish) it would have been great, but we were gun shy. At this point the buy in is so high, our happy medium is renting.

As Canadians it’s scary locking ourselves into frequent WDW vacations with the fluctuating dollar, especially having to add near 30% to the per point cost if we bought in today. When we were considering DVC our dollar was near par, now it’s terrible. Another reason to kick our 2008/2009 selves lol.

same. Its too late now. we still kick our selves every now and then.

 

[MarkE83]

Does DVC / financing make sense in the super long term long term?


Two weeks in a savannah view studio in August at AKL costs 259 points. To purchase that many points at resale (roughly 120 per point looking at today’s prices on dvcresale)... $31,080.

Let’s say you finance it over 5 years at 10% and you end up paying back another 8.5k,
10 grand in interest. $41,080 for your points.

Dues: $6.58 in 2017, 6.75 in 2018, 7.44 in 2019. Lets even it out and say they’ll go up 7% every year (some may be worse, like this year, some may be lower). Your dues would be $1926 in 2019, $2061 in 2020...

By the year 2050: $41,080 on your points and $212,385 in dues. Grand total of $253,465.

Quarter of a million dollars. Sounds a lot. But...

Let’s look at staying in a savannah view room and just booking the same room year on year (i chose a studio as it’s closest to what you’d get in a regular room):

Rack rate for that period in 2018: $569 a night. $7966 for a 14 night stay in 2018. Let’s go easier on this and say it increases in cost 5% year on year.

By 2050: you’d have spent $637,788 if you paid rack rate. $384k more than doing the same thing via DVC.

But nobody pays rack rate, right!? Let’s assume you can get a 40% discount EVERY YEAR. you’d pay... $382,672 between now and 2050. That’s STILL $129,206 more than the DVC route

 

[CanadaDisney05]

Dues: $6.58 in 2017, 6.75 in 2018, 7.44 in 2019. Lets even it out and say they’ll go up 7% every year (some may be worse, like this year, some may be lower). Your dues would be $1926 in 2019, $2061 in 2020...

7% is really high. Long term averages have generally been between 3 to 4%

But nobody pays rack rate, right!? Let’s assume you can get a 40% discount EVERY YEAR. you’d pay... $382,672 between now and 2050. That’s STILL $129,206 more than the DVC route

Your mixing up "today's dollars" with "future dollars". It's going to make your numbers all wonky. Remember, a dollar today will buy you more than a dollar tomorrow. General inflation is about 2% on average. You have to discount your future calculations into today's dollars to get a realistic number.

 

[MarkE83]

7% is really high. Long term averages have generally been between 3 to 4%

I was trying to make DVC as expensive as possible to show how it’s still a boatload cheaper...