DVC show financing

Heather07438

WDW Apprentice
Joined
Oct 20, 2015
I get that people are passionate about their personal decision on whether to finance DVC or not, but I don't know why people insist that everyone else has to do it their way. If you want to save money for 7 years and then pay cash for DVC, then cool! If you want to finance it and you can afford the financing, great!

People do smart and stupid things with their money all the time. Who are the rest of us to judge?
FINALLY.....someone who I can 100% agree with!!!
 

DGsAtBLT

DIS Veteran
Joined
Jan 10, 2017
As a millennial, not childless so that may be the difference in my mindset, I found the episode as a whole to be particularly poor advice or guidance, whatever you want to call it.

I think it’s incredibly irresponsible to not get all your financial ducks in a row before a purchase like DVC, and having all your financial ducks in a row is not something very common amongst millennials especially younger ones. The comparisons to prior vacations were not accurate and glossed right over the additional expenses, and like someone mentioned they weren’t comparing apples to apples. A 75 point DVC contract does not come close to replacing multiple Disney trips a year.

Someone also (I forget who) mentioned DVC forces you to prioritize vacations and that’s something that comes with age for some people (paraphrasing) but it’s also because the means to prioritize vacations also tends to come with age!

The shows are entertaining but not the place to go for financial advice, IMO.
 
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  • quandrea

    DIS Veteran
    Joined
    Jun 24, 2010
    As a millennial, not childless so that may be the difference in my mindset, I found the episode as a whole to be particularly poor advice or guidance, whatever you want to call it.

    I think it’s incredibly irresponsible to not get all your financial ducks in a row before a purchase like DVC, and having all your financial ducks in a row is not something very common amongst millennials especially younger ones. The comparisons to prior vacations were not accurate and glossed right over the additional expenses, and like someone mentioned they weren’t comparing apples to apples. A 75 point DVC contract does not come close to replacing multiple Disney trips a year.

    Someone also (I forget who) mentioned DVC forces you to prioritize vacations and that’s something that comes with age for some people (paraphrasing) but it’s also because the means to prioritize vacations also tends to come with age!

    The shows are entertaining but not the place to go for financial advice, IMO.
    I agree the shows are entertaining. I have to say that I enjoyed them more when they were discussing the different resorts and the ins and outs of membership. These ones that deal with the financials are off putting in that they are so pro financing to the point of ludicrousness. I agree that people can do what they wish with their own money, but these shows actively promote irresponsible practices. It’s kind of gross.
     

    CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    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.
    There are two types of financial risk, and I think financial people tend to use the same term for both, so that creates confusion for non-financial people.

    1) Fluctuation Risk: The stock market goes up and down all the time. However, over a long period of time (10+ years), the "line of best fit" has historically always gone up. So as long as you don't withdraw in the short term, there is almost no risk of your investments being worth less when you sell vs when you bought.

    When investment advisors suggest you should be risky with your assets when you are young, this is what they are talking about. Since you are so far away from retirement, the day to day fluctuations of the market don't matter to you because you should not "theoretically" be withdrawing any of this money. By the time you are ready to retire and withdraw, the fluctuations have trended up so you will see a much larger gain than had you been in a safer asset class with less fluctuation.

    2) Default Risk: Leveraging yourself so much that you put yourself at the risk of having to sell all of your assets at a loss and file bankruptcy. There is no time in your life where you should really be doing that.

    Same example as I said earlier:

    If you bought a DVC contract and financed at 15%, and then in two years the economy crashes and you lose your job, your finances will fall apart.

    1) With the economy crashing, your DVC resale value has probably tanked
    2) Because of the 15% interest rate, you've probably barely paid down the loan at this point.
    3) You now don't have a job to be able to pay your monthly loan payments and your maintenance fees bills

    This means you are now forced to sell your DVC, however you will owe more on the loan than you will be able to recover because the resale price dropped. You will now have to sell any investments you may have at the low end of a fluctuation cycle (see Fluctuation Risk above), to pay the loan company for the difference between your loan and the cash received from selling your DVC. If you don't have the investments to sell, you could be forced to sell your house, car, or claim bankruptcy.

    So you have now lost by paying high interest expenses for two years, and then sold your retirement investments for much lower than the amount you invested. At the end of the day, you have nothing to show for it.
     

    disneyland_is_magic

    DIS Veteran
    Joined
    Aug 16, 2016
    I agree the shows are entertaining. I have to say that I enjoyed them more when they were discussing the different resorts and the ins and outs of membership. These ones that deal with the financials are off putting in that they are so pro financing to the point of ludicrousness. I agree that people can do what they wish with their own money, but these shows actively promote irresponsible practices. It’s kind of gross.
    I agree the resort coverage has been great, just the financing advice is poor. I just hope everyone looks at it carefully and does what’s right for them.
    Why does no one on the show think the economy will slow again? It seems like part of buying DVC has to be a plan for both how to pay for it but how to pay to USE it.

    The millennial episode brought up something else though - when did staying at deluxes become almost a norm? Even for young people drowning in student loans? Sean advocating that seemed like a great disservice.

    The Dis has really become a luxury travel channel. Like for example, the Dis reviewed one of the all stars last year after a B&W, (partially in jest of sending Pete.) The other two AS ... a search on YouTube shows no content whatsoever since like 2013? They have traveled the world, but two WDW hotels with no footage in 6 years? Is that right?
     

    quandrea

    DIS Veteran
    Joined
    Jun 24, 2010
    The millennial episode though brought up something else though - when did staying at deluxes become almost a norm? Even for young people drowning in student loans? Sean advocating that seemed like a great disservice.
    Agreed. Deluxe became part of my reality in my late thirties. I traveled to WDW in my 20s but it was always the values. I didn’t have a lot of money and everything I did was on a budget and within my means. I still took vacations, but they looked very different from the ones I take today.
     
  • DGsAtBLT

    DIS Veteran
    Joined
    Jan 10, 2017
    The glossing over of the additional expenses bothers me, as well as the casually comparing total trip cost to DVC buy in which is obviously just lodging. To keep with the childless millennial thing, DH and I left the kids and took a trip to BWV in October. We rented points and paid I think about $1550 for 6 nights in a preferred studio. I would need approximately 100 points a year to do that annually (although yes as an owner there standard is a possibility). I grabbed the average resale price from a table I found online so someone please tell me if this is inaccurate, but that contract would be about $13000 on the resale market. And then there’s dues of course.

    Now I don’t argue with the finances behind DVC and that you do eventually come out ahead in many cases, but I think promoting the idea that it’s a no brainer and that huge chunk of money that is almost 10x the cost of your initial lodging is no big deal because financing is inaccurate.
     

    Nvrgrowup

    Mouseketeer
    Joined
    Jun 4, 2016
    Agree also. When Dh and I first started to visit WDW back in the early 90's we stayed at CBR or off site. As our finances evolved we went to deluxe then eventually to DVC, putting down a chunk of change and financing the rest.
    Never ever did we think of our purchase as an investment.It is not inexpensive. While you are paying off your loan you still have the expense of food airline and park tickets.
    Have we gotten a lot of joy and memories from the purchase? Sure. But we were able financially to do it. It has long been paid off. Eventually when our son is done with college he will be placed on the deed. People need to make their own decisions for purchasing and financing DVC including all the what ifs. As we all know there are plenty of what ifs in life.
    Some of the advice shared on the DVC show left me shaking my head.
     

    CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    The glossing over of the additional expenses bothers me, as well as the casually comparing total trip cost to DVC buy in which is obviously just lodging. To keep with the childless millennial thing, DH and I left the kids and took a trip to BWV in October. We rented points and paid I think about $1550 for 6 nights in a preferred studio. I would need approximately 100 points a year to do that annually (although yes as an owner there standard is a possibility). I grabbed the average resale price from a table I found online so someone please tell me if this is inaccurate, but that contract would be about $13000 on the resale market. And then there’s dues of course.

    Now I don’t argue with the finances behind DVC and that you do eventually come out ahead in many cases, but I think promoting the idea that it’s a no brainer and that huge chunk of money that is almost 10x the cost of your initial lodging is no big deal because financing is inaccurate.
    Very rough math here, not factoring in things like Time Value of Money, or increasing MF or rack rates.

    BWV Contract Length = 22 Years
    MF = 7.365 PP
    Contract Price = 13K

    13K + (100 x 7.365 x 22) = $29,203 = Total Cost
    6 x 22 = 132 nights
    29,203 / 132 = $221 per night

    So yes, it ends up being cheaper than paying rack rates over the long run, but its hardly the slam dunk they are talking about. And it is definitely not cheaper than the Allstars. There are only two ways I can see how they can conclude that it is cheaper than the values.

    1) Prices at Values continue to increase at an exponential rate
    2) They aren't factoring in maintenance fees.

    All of this to be said, BWV is one of the worst valued resorts out there. The numbers look better if you use SSR or BLT as an example.
     

    firefly_ris

    DIS Veteran
    Joined
    Nov 25, 2015
    I agree the shows are entertaining. I have to say that I enjoyed them more when they were discussing the different resorts and the ins and outs of membership. These ones that deal with the financials are off putting in that they are so pro financing to the point of ludicrousness. I agree that people can do what they wish with their own money, but these shows actively promote irresponsible practices. It’s kind of gross.
    Yeah I agree. Entertainment value only. I don't think anyone needs to be taking financial advice from a group of Disney podcasters.
     
  • disneyland_is_magic

    DIS Veteran
    Joined
    Aug 16, 2016
    For as cautious as they are when talking about travel insurance and what it covers (something far closer to their expertise), I completely don’t understand why they are being so reckless with financial advice.
     

    DGsAtBLT

    DIS Veteran
    Joined
    Jan 10, 2017
    Very rough math here, not factoring in things like Time Value of Money, or increasing MF or rack rates.

    BWV Contract Length = 22 Years
    MF = 7.365 PP
    Contract Price = 13K

    13K + (100 x 7.365 x 22) = $29,203 = Total Cost
    6 x 22 = 132 nights
    29,203 / 132 = $221 per night

    So yes, it ends up being cheaper than paying rack rates over the long run, but its hardly the slam dunk they are talking about. And it is definitely not cheaper than the Allstars. There are only two ways I can see how they can conclude that it is cheaper than the values.

    1) Prices at Values continue to increase at an exponential rate
    2) They aren't factoring in maintenance fees.

    All of this to be said, BWV is one of the worst valued resorts out there. The numbers look better if you use SSR or BLT as an example.
    Thanks for doing the math! :) I agree that it definitely works out better at resorts with longer contracts, but I just knew what BWV cost us.

    I will say, with the IMO crazy high cost of values and moderates I can absolutely see why they compare them to DVC and putting them in the same ballpark. Looking at rack rates, the same time of year would be $153-219 at an All Star depending on the day of the week and standard or preferred. POR is about $300 for a standard room. I don’t necessarily disagree with that part of the argument, I just find the idea that thousands and thousands of dollars is no big deal because you can finance it and just you know not go out a few times a month really poor advice.
     

    CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    Thanks for doing the math! :) I agree that it definitely works out better at resorts with longer contracts, but I just knew what BWV cost us.

    I will say, with the IMO crazy high cost of values and moderates I can absolutely see why they compare them to DVC and putting them in the same ballpark. Looking at rack rates, the same time of year would be $153-219 at an All Star depending on the day of the week and standard or preferred. POR is about $300 for a standard room. I don’t necessarily disagree with that part of the argument, I just find the idea that thousands and thousands of dollars is no big deal because you can finance it and just you know not go out a few times a month really poor advice.
    BWV Contract Length = 22 Years
    MF = 7.365 PP
    Contract Price = 13K

    13K + (100 x 7.365 x 22) = $29,203 = Total Cost
    6 x 22 = 132 nights
    29,203 / 132 = $221 per night
    Same scenario, but lets add in 10 year financing at 12%, paid monthly.

    Financing Cost = $9,382 (72% of the original contract amount!!!)
    29,203 + 9382 = 38,585 Total Cost
    38,585 / 132 = $292 per night
     

    Tom P.

    Mouseketeer
    Joined
    May 11, 2015
    For as cautious as they are when talking about travel insurance and what it covers (something far closer to their expertise), I completely don’t understand why they are being so reckless with financial advice.
    Because -- let's just be honest here -- the DVC show is nothing more than an infomercial for The DVC Store and they are doing everything they can to push everyone possible to go buy from them. It really is quite a dramatic change from the team's normal approach to podcasts and is rather disappointing.
     

    Wakey

    DIS Veteran
    Joined
    Dec 22, 2015
    It’s opinions, everyone is entitled to one.

    One finances direct, one never says finance.

    I am personally a never finance guy- not for a luxury timeshare. Then again, if you are spending thousands anyway on WDW vacations, I can certainly see that is ‘dead money’ so to speak.

    So I suppose it’s not that clear cut. What I think everyone would agree with is never get into financial trouble over DVC.
     

    disneyland_is_magic

    DIS Veteran
    Joined
    Aug 16, 2016
    Because -- let's just be honest here -- the DVC show is nothing more than an infomercial for The DVC Store and they are doing everything they can to push everyone possible to go buy from them. It really is quite a dramatic change from the team's normal approach to podcasts and is rather disappointing.
    The agreement with DVC store must be pretty lucrative. I am really disappointed too. Young people with credit cards and/or student loans who can’t qualify and need a no credit check loan so they can stay deluxe? Really?
    Sorry, to keep coming back but I am really appalled.
     
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    CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    The agreement with DVC store must be pretty lucrative. I am really disappointed too. Young people with credit cards and/or student loans who can’t qualify and need a no credit check loan so they can stay deluxe? Really?
    Sorry, to keep coming back but I am really appalled.
    Let's also be fair to the DIS podcasters. Most people out there are pretty oblivious to their personal finances. DIS podcasters are not in the business of being financial advisors, and the expectation shouldn't be to receive sound financial advise from them. I personally think their financial "advise" is pretty atrocious, but that doesn't mean it comes from a place where they are trying to take advantage of people to line their own pockets. They may simply be unknowledgeable in this area as many others are.
     

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