Help me with the math

So is buying a car, and now, since you have not bought DVC, that little upgrade to the leather interior (or whatever) is now something for which you may pay, since perhaps you do not have to tighten your belt up as much.

Now you got a 1000$ option that you would not have gotten had you bought DVC. Yet this does not get deducted in the analysis. People are still taking the purchase price of a DVC contract, and increasing it by some factor representing ROI. And thats fine. My point is, in many cases, SOME of that principal is likely to get spend in another way. No analysis seems to allow for that.

this is a solid point. We save/invest fairly heavily and did so before/during/after purchasing DVC. The cash used to buy our contract was considered expendable, did not lessen our saving/investment contributions, and we almost definitely would have spent it on something else if we hadn’t purchased DVC.

Even so, knowing how the numbers would play out helps as even if the cash is expendable, no one wants to light it on fire. For example, at least purchasing DVC is a more financially sane decision than purchasing a duct-taped banana.😆
 
So is buying a car, and now, since you have not bought DVC, that little upgrade to the leather interior (or whatever) is now something for which you may pay, since perhaps you do not have to tighten your belt up as much.

Now you got a 1000$ option that you would not have gotten had you bought DVC. Yet this does not get deducted in the analysis. People are still taking the purchase price of a DVC contract, and increasing it by some factor representing ROI. And thats fine. My point is, in many cases, SOME of that principal is likely to get spend in another way. No analysis seems to allow for that.
I guess that can be true. It really depends on personality. These analysis are not one size fits all. They are based on personal circumstance. You have to tailor it to your situation. If you think there is a reasonable chance of you withdrawing the money for a consumer purchase, then that should be factored in.

At the end of the day, all projections are based on a set of assumptions. Nobody will be 100% correct. The point is, people do them to the best of their ability to ensure that they feel comfortable with the purchase. You mentioned in the previous post about how most Americans are willy nilly with their personal finances. I'd much prefer people taking the time to understand the financial implications even if they only end up being 90% correct, rather than toss $40,000 out the window because some sales person, or a stranger on a message board told them it was a good idea.
 
Hi Friends, first post here, as we explore DVC. Family of five, all three kids elementary age. Historically have visited 1x/3yrs, could see us going as frequently as 1x/yr, but probably not more than that. The past couple times we've rented DVC points and stayed in a 1BR, and then 2BR, Deluxe. That's the level we would stay at going forward.

I can't get the math to work. I understand there are all sorts of non-financial benefits to DVC; for the purpose of this post, let's exclude those. I also understand that there are peripheral financial benefits (AP and dining discounts). For our family, we probably wouldn't go frequently enough to warrant the AP, so "best case" (?) assume a 10% discount on meals for 1 week/yr.
I've read other posts indicating that if you are staying at Value Resorts, DVC may not make sense. But we are the opposite end of that spectrum and I still can't figure it out. I also have read the comments that suggest DVC members spend more money because you go more often, etc. - not even worried about that right now. Just trying to understand if there's some financial benefit of this timeshare, from a lodging-only perspective, that I am missing.

We were in a similar position before we bought in around 3 years ago. For us, I was comfortable doing a very rough estimate and comparing that to either: 1) cost of discounted deluxe rooms (e..g 20-30% cash room at Contemporary or AKL), or 2) renting points. At that point we had 1 kid (trying for the 2nd), knew we wanted to be in deluxe or DVC accommodations, and had stayed in several deluxe resorts and had rented points as well. (AKL, Contemporary, GF, BWV, BCV). We had also stayed offsite a few times so we knew we didn't want the hassle. I also spent some time here polling members about renting points v. buying, and was fully ready to continue renting. Rental points were generally well under $15 pp at the time, and I never used the point brokers but rather used the rent/trade board here.

Another big point was that I was only considering resale (and this was before many of the restrictions).

It made sense, financially, to us, even without considering investment returns and/or time value of money, after about 5-7 stays, and without considering maintenance fees. We did not consider discounts etc. but did consider the value of discounted APs because we figured we'd do the 11/13 month plan for our "annual" visits.

I would add that buying direct just doesn't make sense unless you're buying a large enough contract at RIV (and split it into smaller contracts) to get a meaningful discount off the $188 pp, or you buy 100 points direct OKW or SSR to get access to new resorts if that means something to you. Otherwise, resale is really the best option for a good mix of resorts at a good price (check out the ROFR board).

But again, there is something to be said for not having your $ tied up in DVC and committed to MFs if you are pretty ok with renting points and having less control over your reservation. We rented 400+ points for a 2br stay with extended family at BLT and it got me thinking about DVC - even at the MUCH lower cost to rent back then, we paid over $5000 for that rental.

Since you've already rented and had a good experience, there is absolutely nothing wrong with continuing to do it that way, especially if you are happy with any DVC resort or moving your stay to lower-demand times. I agree with you that it's hard to make the financial aspect make sense unless/until you are looking at a larger unit, a hard-to-get resort, or a hard-to-book time. If you're generally flexible as to resorts and dates, then it makes lots of sense to keep renting.

Nothing about DVC or visiting WDW makes financial sense. I understand the need to try to justify it to yourself, but really, none of this makes any sense at all. If you want to buy into DVC and have the means, then go ahead. You don't need a spreadsheet to tell you it's OK to spend your own money on something you want.

If you're only visiting every 3 years though, I wouldn't buy into it. I'd just rent. Odds are you'll visit 3 times or less before you sell the contract.

Yes, this all the way. Only consider buying DVC if you think you'd visit at least every other year, and again, only consider direct if you can get a per point cost that brings it in line with resale AND you love the home resort.

tl; dr: I think you are right, the math doesn't make sense compared to renting, if you are thinking about a direct purchase. Use reasonable resale numbers, however, and it can - but again, only if you are likely to go at least every other year, or would go at high-demand times like Fall Frenzy, Christmas, and (maybe) Easter. Otherwise, you will find that renting gives you enough flexibility and keeps you more liquid.
 


Wow, this all sounds too complicated. Either you want DVC or you don't. It will most likely save you money in the long run but maybe not. You will spend time vacationing with loved ones so try to put a price on that.

My experience on getting rich. You save everything, you get rich, you die. What fun is thay😂
 
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We wished we had purchased sooner (bought two 200 point BLT contracts in 2014).

Sure, we visit WDW more than if we did not have DVC, but we have enjoyed each visit. We have been able to stay in grand villas with family, 2BR units with the kids bringing friends, and 1 and 2BR units for just the 4 of us. We've gotten used to having a washer/dryer, so we only pack carry ons for trips. We eat breakfast in the room (bagels, yogurt, cereal, etc.) and bring our own snacks to the pool (cheese & crakers, hummus & chips, etc.). Traveling DVC is not like staying in a hotel (as you know).

I'd recommend buying resale and thinking about how you will travel years from now. As your kids get older, you will want more room - most likely a 1BR at minimum; a 2BR is perfect for us for a week trip.

As you travel to WDW more, you might spend more time relaxing at the resort. Be sure to buy where you want to stay. We bought BLT for the second full bathroom in the 1BR unit (three full baths in the 2BR!) and the proximity to MK. There's nothing like walking back to the room after the fireworks at night when most other guests are waiting for the buses, monorail and ferry.

It's a big decision, but if you decide later that it was a mistake, you can always sell your contract(s). Best of luck with your decision!
 
Your calculations should include the lost investment income during the period while you were paying yourself back.

Here is a very rough quick calculation of how I would do it with some made up numbers. There are other more correct ways of doing this using NPV formulas, but for this purpose I figured this way illustrates it better.

Year 0Year 1Year 2Year 3Year 4Year 5
Purchase Price-25,000
Maintenance Fees-1,000-1,040-1,081.60-1,124.86-1,169.86
Hotel Costs3,5003,6403,785.603,937.024,094.51
Savings-2,500-2,600-2,704-2,812.16-2,924.65
Lost Investment Income-1,125-1,181.25-1,110.31-1,030.63-941.55
Net Cash Flow-1,125-1,181.25-1,110.31-1,030.63-941.55

YearAnnual SavingsLost Investment Income (5%)Balance
000-25,000
12,500-1,250 (25,000 * 0.05)-23,750 (-25,000+2,500-1,250)
22,600-1,187.50-22,337.50
32,704-1,116.88-20,750.38
42,812.16-1,037.52-18,975.73
52,924.65-948.79-16,999.87

Using the numbers above, if you extend it out, after about 11 years you would have paid yourself back for the purchase price. If you continued to put the difference between hotel cost and cash flow into savings, you would now have positive investment income. After about 20 years, your positive investment income would outweigh your negative income. Again, these are completely fabricated numbers I made up off the top of my head.
This is a great starting point! This is exactly the approach I used. I know you just threw this together for sake of the discussion, but here are some notes;
  1. You have the same interest rate on MF's and Hotel Costs. I think that's unrealistic. We are talking Disney inflation on the hotel, not regular inflation. Last year may have been an anomaly, but rack rates increased closer to 10% at AoA (That's the one I was tracking - YMMV, and that will likely not be the case every year, but who knows?)
  2. I like that you reduced "Lost Investment Income" in year 2 on by assuming you are investing the "Savings"
OK, so now let's say you buy in, own for 5 years in and changed your mind. If you buy resale, it's a pretty safe bet you'll get the purchase price back, minus closing costs. Assuming closing costs are 10% and using the 4% interest rate on the rack rate, I have you ahead about $5500 buying DVC.

Of course if you REALLY want to save money, you don't go to WDW every year, but where's the fun in that?
 


Lumpy1106 makes a great point that "Of course if you REALLY want to save money, you don't go to WDW every year, but where's the fun in that?" If you don't have the money you stay home and if you do have the money you go somewhere - if you love Disney you go there...

A simplified version using 25K for cost and 2K for MF's based on a $95 point/250 OKW resale boils down to about $600 per month over 60 months or $7200/year. This purchase comes with an annual three week stay in a studio at 80 points per week (just an example) which would cost at minimum about $300/night or $6300/year not factoring in DVC inflation. Over five years your cost is about $4500 plus the loss of use of the cash for investment which honestly, I really don't think about when I'm at the pool as this is our "fun" money. I certainly believe a 250 point OKW contract would sell for a lot more $4500 in five years and it comes with 15 weeks of fun!

Disclosure: I'm obviously not a professional money manager - I just manage from my dining room table so I apologize if I offended anyone with my simplicity!
 
This is a great starting point! This is exactly the approach I used. I know you just threw this together for sake of the discussion, but here are some notes;
  1. You have the same interest rate on MF's and Hotel Costs. I think that's unrealistic. We are talking Disney inflation on the hotel, not regular inflation. Last year may have been an anomaly, but rack rates increased closer to 10% at AoA (That's the one I was tracking - YMMV, and that will likely not be the case every year, but who knows?)
  2. I like that you reduced "Lost Investment Income" in year 2 on by assuming you are investing the "Savings"
OK, so now let's say you buy in, own for 5 years in and changed your mind. If you buy resale, it's a pretty safe bet you'll get the purchase price back, minus closing costs. Assuming closing costs are 10% and using the 4% interest rate on the rack rate, I have you ahead about $5500 buying DVC.

Of course if you REALLY want to save money, you don't go to WDW every year, but where's the fun in that?
Yea, I just made up numbers for the sake of illustration. I don't have the historical data handy to really make a fair assumption on hotel inflation. I cannot imagine it would average long term anywhere near 10% though. Especially not from here on out.

The one thing I would caution is the assumption that its a "pretty safe bet" that you will get your purchase price back minus closing costs in 5 years. While certainly possible, it's really just a guess. Almost no different than betting on any large company's stock price to rise over the next 5 years (see #1 below for the major caveat). There are a few factors working against it.

1) All things being equal, by definition, DVC contracts lose value every year.
2) Even if you get your gross dollars back in 5 years, you have to factor in the inflation lost. Paying $10K today and then getting a refund of 10K in 5 years from now is not equal. The 10K today is worth more.
3) Yes, DVC prices have continued to rise historically, but it's been a pretty small sample size in the grand scheme of things. It won't take a 2008 financial crisis to reduce DVC appreciation into proper straight line depreciation.

TLDR: If your going in with the assumption that you can use DVC for 5 years and then cash out and get your money back, make sure you really understand the risks. It's not as simple as that.
 
Since I don't have unlimited
TLDR: If your going in with the assumption that you can use DVC for 5 years and then cash out and get your money back, make sure you really understand the risks. It's not as simple as that.

Exactly, just ask people from 2010-2012 how they did having to sell in that market. I bet there were a lot of people underwater on their contracts and sold at a lose.
 

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