DVC show financing

jarestel

DIS Veteran
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Oct 24, 2003
I know people who spend $200 per month on lattes with nothing to show in return. I do concede they are not financing their lattes though. But I guess the point is everyone has a pool of money earmarked for entertainment and whether one uses that cash for DVC or lattes, it's going to be spent anyway, one way or another. Even though I would never personally waste money on lattes, if someone else wants to do that, I'm not going to get wired up about it.
 

CanadaDisney05

DIS Veteran
Joined
Mar 20, 2017
I know people who spend $200 per month on lattes with nothing to show in return. I do concede they are not financing their lattes though. But I guess the point is everyone has a pool of money earmarked for entertainment and whether one uses that cash for DVC or lattes, it's going to be spent anyway, one way or another. Even though I would never personally waste money on lattes, if someone else wants to do that, I'm not going to get wired up about it.
The difference is that financing DVC adds a lot of risk to your budget. Lets say the economy tanks and you lose your job, its pretty easy to cut the $200 per month of lattes. Same scenario, but now you've financed DVC, you still have to pay the monthly loan payment + annual dues. The only way to get out is by selling, and if the economy is tanking, you will probably be forced to sell at a huge loss. However, because you are underwater on your loan, you still have to come up with the difference, otherwise the bank won't let you sell.
 

nkereina

Last chance to lose your keys.
Joined
Feb 11, 2009
It’s also possible you may have the cash, but elect not to tie it up.
Financial advisors usually advise this way. The sentiment is that if you have the cash, it should be in savings, an IRA, 401K, etc. making money for you. Finance whatever you can and if you end up in a bad way, then fall back on that cash to pay it off to dig yourself out of that hole. It may seem counterintuitive since you're typically paying interest on something you're financing, but the thought is that if you can afford the payment, only spend your cash as a last resort.

With this in mind, I think financing DVC can make sense, but only for those who have investments and/or cash on hand to afford the total cost. If you couldn't otherwise afford to pay for the contract in cash, then its hard to justify taking the value of that monthly payment and spending it on something like a timeshare as opposed to a retirement account or stocks that would be a more worthwhile investment. But investment accounts are intangible and you don't reap the value of them in the present, like you would a timeshare. So I understand the emotion behind financing a timeshare, but practically speaking, I can't think of a scenario where its a good financial decision.
 
  • Tom P.

    Mouseketeer
    Joined
    May 11, 2015
    Financial advisors usually advise this way. The sentiment is that if you have the cash, it should be in savings, an IRA, 401K, etc. making money for you. Finance whatever you can and if you end up in a bad way, then fall back on that cash to pay it off to dig yourself out of that hole. It may seem counterintuitive since you're typically paying interest on something you're financing, but the thought is that if you can afford the payment, only spend your cash as a last resort.

    With this in mind, I think financing DVC can make sense, but only for those who have investments and/or cash on hand to afford the total cost. If you couldn't otherwise afford to pay for the contract in cash, then its hard to justify taking the value of that monthly payment and spending it on something like a timeshare as opposed to a retirement account or stocks that would be a more worthwhile investment. But investment accounts are intangible and you don't reap the value of them in the present, like you would a timeshare. So I understand the emotion behind financing a timeshare, but practically speaking, I can't think of a scenario where its a good financial decision.
    Dave Ramsey would give you a failing grade. :)
     

    nkereina

    Last chance to lose your keys.
    Joined
    Feb 11, 2009
    Dave Ramsey would give you a failing grade. :)
    LOL he would. As someone who works at a bank, we like to keep your money making money so we make money ;) But seriously, having cash tied up in a high yield savings or 401K is going to give you a bigger return on it than a timeshare would.
     

    AaronB

    Earning My Ears
    Joined
    Jun 1, 2018
    Also, if your name is on the deed, you can make unilateral decisions re DVC. For example, your son decides to throw down 300 points on hotel room space--you can't stop the transaction nor with DVC give you advance notice. You'll only find out when you find out.
    Just to add some quick advice as well for children on the deed, consider speaking with a lawyer, and in particular, an estate lawyer. My parents have been doing a lot of work on their estate planning recently, and depending on the state, the laws can get pretty crazy. My sister and myself are on our parents DVC deed, and I believe something like DVC is fairly straightforward, but it is good to know the pros and cons of how that will work as inheritance.
     

    afan

    Honorary Bus Driver
    Joined
    Dec 30, 2014
    Just to add some quick advice as well for children on the deed, consider speaking with a lawyer, and in particular, an estate lawyer. My parents have been doing a lot of work on their estate planning recently, and depending on the state, the laws can get pretty crazy. My sister and myself are on our parents DVC deed, and I believe something like DVC is fairly straightforward, but it is good to know the pros and cons of how that will work as inheritance.
    Agree with this. I won't explain it well but basically in my state it's better for me to get the house via my mom's will than be on the deed. If she put me on the deed today the value of the house today would attach to me so when I sell anything over today's value affects the taxes owed. So if she hopefully lives another 20+ years that's a huge increase vs it not being attached until that time. In a high housing area it's better to wait.

    They should have put a disclaimer on the ep that they aren't lawyers or financial advisors.
     
  • disneyland_is_magic

    DIS Veteran
    Joined
    Aug 16, 2016
    I just thought of a flaw in Fiasco’s logic. He claimed he was coming to WDW every year for a week each. He was doing the math he was throwing around on the show and justifications on his $200 a month payments based on that vacation style of dropping $1500- 2000 or so in lodging for a week when he came.

    He has a 75 points contract. How far does 75 points go?! I looked up his valentine’s night theme park view Bay Lake reservation he bragged he grabbed on a whim for “free.” That’s 27 points! That’s more than a third of his allotment!
    He talked like his DVC replaced his WDW lodging budget and that’s not accurate, and especially not after picking up that night in Feb.

    The audience could have easily been misguided on this, he is not getting a week at his home resort and Valentine’s as a “free” bonus. He doesn’t even have enough points for a week to start with, a week in the most value season is 107 points.
     
    Last edited:

    CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    Financial advisors usually advise this way. The sentiment is that if you have the cash, it should be in savings, an IRA, 401K, etc. making money for you. Finance whatever you can and if you end up in a bad way, then fall back on that cash to pay it off to dig yourself out of that hole. It may seem counterintuitive since you're typically paying interest on something you're financing, but the thought is that if you can afford the payment, only spend your cash as a last resort.

    With this in mind, I think financing DVC can make sense, but only for those who have investments and/or cash on hand to afford the total cost. If you couldn't otherwise afford to pay for the contract in cash, then its hard to justify taking the value of that monthly payment and spending it on something like a timeshare as opposed to a retirement account or stocks that would be a more worthwhile investment. But investment accounts are intangible and you don't reap the value of them in the present, like you would a timeshare. So I understand the emotion behind financing a timeshare, but practically speaking, I can't think of a scenario where its a good financial decision.
    Exactly, but you have to factor in what the interest rate is vs the rate of return on your traditional investment (savings, IRA, 401K, etc....). A "financial advisor" at a bank may suggest to put your money into the 401K and pay cash for DVC because that's what earn's them a commission or bonus. A non-biased financial advisor would likely tell you the same thing only if the ROI in the investment is bigger than the interest rate on the investment by a substantial margin. The problem with DVC, is most people are financing through Disney or these other timeshare loan companies and are charging crazy high interest rates that won't be beat by a traditional investment.
     

    Tom P.

    Mouseketeer
    Joined
    May 11, 2015
    LOL he would. As someone who works at a bank, we like to keep your money making money so we make money ;) But seriously, having cash tied up in a high yield savings or 401K is going to give you a bigger return on it than a timeshare would.
    Well, to be fair, Dave Ramsey would never suggest buying a timeshare of any kind, even a DVC one, under any circumstances. And he opposes financing anything except your primary residence under any circumstances also. So this entire discussion would be moot to someone who followed Ramsey's plan and philosophy, as neither debt nor timeshares would be on the menu.
     

    nkereina

    Last chance to lose your keys.
    Joined
    Feb 11, 2009
    Exactly, but you have to factor in what the interest rate is vs the rate of return on your traditional investment (savings, IRA, 401K, etc....). A "financial advisor" at a bank may suggest to put your money into the 401K and pay cash for DVC because that's what earn's them a commission or bonus. A non-biased financial advisor would likely tell you the same thing only if the ROI in the investment is bigger than the interest rate on the investment by a substantial margin. The problem with DVC, is most people are financing through Disney or these other timeshare loan companies and are charging crazy high interest rates that won't be beat by a traditional investment.
    Of course. But considering the long-term ROI on a properly invested 401K/IRA, etc., I would still say it always makes more sense to take a large chunk of cash ($20K-$100K, whatever your contract costs) and invest that than it would to take that and purchase a timeshare. With that much money, your earnings over 50 years will outweigh any interest paid on timeshare financing.
     
  • CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    Of course. But considering the long-term ROI on a properly invested 401K/IRA, etc., I would still say it always makes more sense to take a large chunk of cash ($20K-$100K, whatever your contract costs) and invest that than it would to take that and purchase a timeshare. With that much money, your earnings over 50 years will outweigh any interest paid on timeshare financing.
    I'd agree if most people were financing DVC at 2 - 4% interest rates. However, the sad thing is that most people are financing in the 10 -15 % range.
     

    Rich M

    DIS Veteran
    Joined
    Apr 18, 2016
    The difference is that financing DVC adds a lot of risk to your budget. Lets say the economy tanks and you lose your job, its pretty easy to cut the $200 per month of lattes. Same scenario, but now you've financed DVC, you still have to pay the monthly loan payment + annual dues. The only way to get out is by selling, and if the economy is tanking, you will probably be forced to sell at a huge loss. However, because you are underwater on your loan, you still have to come up with the difference, otherwise the bank won't let you sell.
    Knowing this first hand after having a huge loss in the family I was in this exact situation with my DVC and didn't know what to do. I called DVC after contacting to sell and found that I was still going to owe a lot even if I sold and was told that I could just walk away from my contract and not owe anything. I hate that I lost it and regret it all the time but it was a choice between my car and my DVC. Sucks that I would have been paid off by now but I had no choice.
     

    Tom P.

    Mouseketeer
    Joined
    May 11, 2015
    Of course. But considering the long-term ROI on a properly invested 401K/IRA, etc., I would still say it always makes more sense to take a large chunk of cash ($20K-$100K, whatever your contract costs) and invest that than it would to take that and purchase a timeshare. With that much money, your earnings over 50 years will outweigh any interest paid on timeshare financing.
    First, I do not think that holds true at some of the ridiculously high interest rates people are getting to finance DVC. It is not uncommon to see interest rates on DVC loans approaching those on credit cards. There is no way you are making that spread work, even in a quality 401(k) or IRA, at those interest rates.

    Second, you are not factoring risk into your equation, which is a common problem when people start talking about paying off debt vs. investing money. As has been pointed out, suppose someone loses their job or has an unexpected major health event or whatnot. Those things happen all the time. They are still on the hook for that monthly DVC payment and they are in the worst possible market to sell their DVC contract should they want to. And, yes, the money is still sitting there in their 401(k) or IRA, but assuming they are not of retirement age, they are going to get hit with a 10% penalty, plus all the taxes, to withdraw that money.

    I am not 100% on board with Dave Ramsey's ideas regarding money and debt. My wife and I took out loans to buy our cars, for example. But I firmly believe that one should not be financing luxury or recreational purchases like DVC. You are adding a substantial amount of risk to your financial life that people often do not account for. I know that many here will vehemently disagree with me, probably largely because that means many people would not be able to be DVC owners, but IMHO if you want to buy a timeshare you either pay cash or you cannot afford it.
     

    Starport Seven-Five

    Mouseketeer
    Joined
    Aug 16, 2019
    I made it about 5 minutes. When Sean started talking about how you should finance through this place because they don't have credit checks and millennials have a lot of debt I wanted to punch things. If you have so much debt that a traditional bank won't approve you that should be a big flashing sign that maybe it's not a good idea.

    Also, if you're barely scraping into a value resort DVC is NOT a way to stay deluxe for the same money. I've run the numbers about 100 different ways because I would love for it to be true and even buying resale contracts with cash, you're above value prices. I can't imagine what would happen if you threw 10% financing on a direct contract into that equation but I can guarantee it's not cheaper.

    If I work up some more patience I may give the rest a hate listen. Not in the mood right now as I can't stand people giving garbage financial advice as this country is full of people that are already in too much debt. Funny part is I should be in the target market for this episode as I'm a millennial.
    LOL he would. As someone who works at a bank, we like to keep your money making money so we make money ;) But seriously, having cash tied up in a high yield savings or 401K is going to give you a bigger return on it than a timeshare would.
    High yield savings returns are lower than inflation at this point. It's a fairly good place to park your rainy day money but I would refrain from bragging about your "money making money" in that type of account.
    Well, to be fair, Dave Ramsey would never suggest buying a timeshare of any kind, even a DVC one, under any circumstances. And he opposes financing anything except your primary residence under any circumstances also. So this entire discussion would be moot to someone who followed Ramsey's plan and philosophy, as neither debt nor timeshares would be on the menu.
    He would be fine with buying a timeshare if he could co-brand it somehow I'm sure. He promoted a ridiculously overpriced cruise earlier this year.
     

    TonyaG83

    Mouseketeer
    Joined
    Jan 28, 2017
    The millennial show spoke to me in a lot ways, and I must be the only one not flabbergasted at the other entertainment expenses Fiasco and Sean were listing (dine in movies and music festivals).

    Millennials are blamed for killing so many “luxury” industries, and most are industries with tangible items attached (like fabric softener and diamonds). This is because millennials value experiences over things. Having a larger entertainment and travel budget and forgoing traditional expenditures (like owning large suburban homes vs. renting smaller urban spaces with less maintenance costs) isn’t irresponsible in the millennial mindset. Very few actual travel and leisure experiences come with ownership, so DVC can be seen as extra appealing.

    Also, it’s interesting to see all the debates about risk in terms of personal investments. It seems that most people here are risk averse. I was always told by my FA to take financial risks while I was young and able and to be aggressive with my funds. You have to be willing to be a bit of a maverick if you want to see bigger returns and not just be satisfied with being able to retire before you die.
     

    quandrea

    DIS Veteran
    Joined
    Jun 24, 2010
    The millennial show spoke to me in a lot ways, and I must be the only one not flabbergasted at the other entertainment expenses Fiasco and Sean were listing (dine in movies and music festivals).

    Millennials are blamed for killing so many “luxury” industries, and most are industries with tangible items attached (like fabric softener and diamonds). This is because millennials value experiences over things. Having a larger entertainment and travel budget and forgoing traditional expenditures (like owning large suburban homes vs. renting smaller urban spaces with less maintenance costs) isn’t irresponsible in the millennial mindset. Very few actual travel and leisure experiences come with ownership, so DVC can be seen as extra appealing.

    Also, it’s interesting to see all the debates about risk in terms of personal investments. It seems that most people here are risk averse. I was always told by my FA to take financial risks while I was young and able and to be aggressive with my funds. You have to be willing to be a bit of a maverick if you want to see bigger returns and not just be satisfied with being able to retire before you die.
    Not risk adverse at all. I’m still young enough that my investments are moderate risk. However, I’d never call my dvc an investment. Dvc is solidly in the splurge category and thus is cash only. There is no way I’d justify that purchase by saying it makes financial sense. I own dvc because I like Disney. I also spend lots of my discretionary income on Disney. I don’t fool myself into thinking any of that makes financial sense. It’s just my way of having fun.
     
    Last edited:

    Jax1023

    DIS Veteran
    Joined
    Nov 30, 2008
    The millennial show spoke to me in a lot ways, and I must be the only one not flabbergasted at the other entertainment expenses Fiasco and Sean were listing (dine in movies and music festivals).

    Millennials are blamed for killing so many “luxury” industries, and most are industries with tangible items attached (like fabric softener and diamonds). This is because millennials value experiences over things. Having a larger entertainment and travel budget and forgoing traditional expenditures (like owning large suburban homes vs. renting smaller urban spaces with less maintenance costs) isn’t irresponsible in the millennial mindset. Very few actual travel and leisure experiences come with ownership, so DVC can be seen as extra appealing.

    Also, it’s interesting to see all the debates about risk in terms of personal investments. It seems that most people here are risk averse. I was always told by my FA to take financial risks while I was young and able and to be aggressive with my funds. You have to be willing to be a bit of a maverick if you want to see bigger returns and not just be satisfied with being able to retire before you die.
    Here’s the thing- dvc is not an investment. In 50 years your points are worth 0. Not even good for a prepaid vacation anymore.

    If I invested 15k to buy dvc right now I’d have a ton more money in 50 years. Even if I stuck it under a mattress it would still be 15k in 50 years.
     

    TonyaG83

    Mouseketeer
    Joined
    Jan 28, 2017
    Here’s the thing- dvc is not an investment. In 50 years your points are worth 0. Not even good for a prepaid vacation anymore.

    If I invested 15k to buy dvc right now I’d have a ton more money in 50 years. Even if I stuck it under a mattress it would still be 15k in 50 years.
    I never said it was, I was talking about the general investment discussion here which mention safer options with 3% returns.

    Dvc falls into the experience category for me 100%, but I do have something to show for it (my deed) vs. the money I spend on the other experiences talked about by Sean and Cory.
     

    Heather07438

    WDW Apprentice
    Joined
    Oct 20, 2015
    I'm going thru this right now. We have the cash to comfortably buy a smaller contract, DH would like to double the points by financing the other half. I'm just not comfortable financing more than 1/4 of it. Part of buying DVC is receiving some cost savings in return for committing (alongside the rainbows where your life is happier and more content doing what you enjoy).

    15% loan on half, I'm cringing. At least when paying those kind of rates for a car, maybe that gets you into a newer more reliable car that will end up saving you an equal amount in repairs/maintenance.
     

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