What Does a Disney Point Cost?

[akk]

I've seen many analysis on what it costs for a Disney Point and I think that the calculations have been too low. The cost of a point depends on three things.
1. Depreciation 2. Time Cost of Money 3. Yearly dues.
If you buy points at $200 per point and they are for 50 years, the depreciation is $4 per year. If the annual dues are $9 per point, that is an additional cost per point per year. Then add the time cost of money. If it is 5% then the time cost of $200 per point is 5% of $200 or $10 per point per year. That comes out to $23 per point per year. You'll be able to see that some of the DVC vacations at Disney Resorts are costing you more than you think, and using them for Disney Cruises is a very bad deal, however, some are a very good deal. For example if you can get a studio for 10 points, it is costing you $230 per night when Disney may be charging $400 for the same room. Also in the calculation is that the annual dues will increase yearly slower than the hotel room price will. So over time, the savings between the cost with points and Disney price will improve

Now I bought my points at $50 per point, paid $2 per point in dues when I first joined so my costs are significantly less. But new purchases cost significantly more. For you to determine what a Disney point costs you need to know of few numbers. 1. What did you pay per point? 2. What do you consider your time cost of money (If you were able to borrow the money then it is the interest rate. If you put your money in a savings account it is your interest rate. If you invest, it is your investment return rate) 3. How many years on your contract 4. What are your yearly dues per point. So to calculate your cost you would

Cost per point divided by number of years on your contract, plus cost per point times time cost of money plus yearly dues.

There are two variables that this calculation does not include 1. This formula holds true if you hold on to your Disney points till they expire. DVC is the only time share that I have ever seen that has actually increased in value. This is strange because the number of years left on the contract decline each year. So if you sell you DVC membership before it expires, you subtract the sale price per point from the cost of your Disney point. So if your $200 per point payment now is still worth $200 per point 20 years from now and then you sell, you can subtract the depreciation cost from the cost per point. 2. No one can predict what the yearly increase in dues are. So the cost per point will go up every year But this will certainly be less than the increase in prices that Disney charges for the rooms. The biggest variable in the equation is what you consider your time cost of money is. But nevertheless, if you rent your points for $12 per point, you are giving them away.

 

[Chuck S]

A timeshare, any timeshare, is one of those purchases that you really can't put a hard value on. I mean, the last 5 cars I've purchased have been Cadillacs, when I'm sure a KIA would have been just fine for basic transportation...but I like my bells and whistles. By the same token, I like my DVC one bedrooms, even for solo trips, when I'm sure a Holiday Inn standard room would have provided adequate sleeping space. I like going to Disney, when I'm sure a day at a local attraction would have been entertaining. Some women spend hundreds of dollars on a handbag, I'm sure a WalMart purse would carry just as much stuff. So it boils down to the fact that human beings have different tastes, and when something strikes their fancy, they will put out the money for it.

 

[Nabas]

A timeshare, any timeshare, is one of those purchases that you really can't put a hard value on. I mean, the last 5 cars I've purchased have been Cadillacs, when I'm sure a KIA would have been just fine for basic transportation...but I like my bells and whistles. By the same token, I like my DVC one bedrooms, even for solo trips, when I'm sure a Holiday Inn standard room would have provided adequate sleeping space. I like going to Disney, when I'm sure a day at a local attraction would have been entertaining. Some women spend hundreds of dollars on a handbag, I'm sure a WalMart purse would carry just as much stuff. So it boils down to the fact that human beings have different tastes, and when something strikes their fancy, they will put out the money for it.

Well, you kinda can put a value on a DVC timeshare.

You can compare the cost of a DVC purchase with the cost of renting points, or the cash cost of a room at that same resort.

So rather than comparing a Cadillac to a KIA, it's perhaps more like buying a Cadillac vs leasing a Cadillac.

Some buy and some lease. I know several who always lease, even though they have more than enough to pay cash. DVC is a bit the same. Two people might reach different conclusions of how to pay for the same product.

 

[Chuck S]

Well, you kinda can put a value on a DVC timeshare.

You can compare the cost of a DVC purchase with the cost of renting points, or the cash cost of a room at that same resort.

So rather than comparing a Cadillac to a KIA, it's perhaps more like buying a Cadillac vs leasing a Cadillac.

Some buy and some lease. I know several who always lease, even though they have more than enough to pay cash. DVC is a bit the same. Two people might reach different conclusions of how to pay for the same product.

True, but the point is the same. If you want something, and can afford it, most people aren't going to analyze the purchase price too much if it is something they want.

 

[Maistre Gracey]

Not a fan of figuring time cost of money. If you figure that, you are assuming you’ll never take a vacation. If you want to compare it to a hotel stay, the math gets more complicated.

 

[anomamatt]

But nevertheless, if you rent your points for $12 per point, you are giving them away.

I'd agree even if you changed $12 to the market rate for renting. Before I bought my first DVC contracts, I went into it thinking (a) that me just renting DVC points would likely save money over purchasing DVC (at the current market rental rates) and (b) I was never going to rent my points for the current market rates. DVC works for my family because we want bigger rooms (1-2 BRs). And I decided to buy (instead of renting DVC) for the flexibility and the ability to control our destiny.

But there is no way I would rent any points at current market rates -- unless I couldn't bank them and I was going to lose them otherwise, of course (because at that point, it's the only option). The current rate for point rentals is way too low, IMO (owners getting $20 a point would be closer to their true value, IMO).

 

[Sandisw]

I'd agree even if you changed $12 to the market rate for renting. Before I bought my first DVC contracts, I went into it thinking (a) that me just renting DVC points would likely save money over purchasing DVC (at the current market rental rates) and (b) I was never going to rent my points for the current market rates. DVC works for my family because we want bigger rooms (1-2 BRs). And I decided to buy (instead of renting DVC) for the flexibility and the ability to control our destiny.

But there is no way I would rent any points at current market rates -- unless I couldn't bank them and I was going to lose them otherwise, of course (because at that point, it's the only option). The current rate for point rentals is way too low, IMO (owners getting $20 a point would be closer to their true value, IMO).

Except market is what dictates the rental price. Right now, WDW has been giving some decent discounts and with the closure last year and many renters losing money, the savings has to be much great right now over cash stays, IMO, for them to take the risk. In a few years, you may see it rise back up.

 

[CraigInPA]

Your straight line assessment of the time value of money is incorrect. The straight line assessment you did assumes that you're taking out the $10 in interest each year, That is incorrect, as the exercise is to determine the actual value of a point per year over the whole course of the investment, not the cost of the points in the first year.

If you invested the $200 per point for the full 50 years, at a 5% return each year, it would gain $10 per point the first year, $10.50 the second year, $11.02 the third year, and so forth. By the time you reach the end, you'd have accrued $2093.48 per point in interest on the $200 initial purchase price. Adding in the original $200 it cost to purchase the point, and dividing by 50 years ($2293.48/50) yields a time value of money of $45.87 per point. These calculations, like yours, assume that the purchaser holds the points for the full 50 years. If the points are held for less time, you'd have to calculate over the shorter term, and subtract the selling price from the calculations before dividing by the number of years actually held.

 

[Nabas]

Your straight line assessment of the time value of money is incorrect. The straight line assessment you did assumes that you're taking out the $10 in interest each year, That is incorrect, as the exercise is to determine the actual value of a point per year over the whole course of the investment, not the cost of the points in the first year.

If you invested the $200 per point for the full 50 years, at a 5% return each year, it would gain $10 per point the first year, $10.50 the second year, $11.02 the third year, and so forth. By the time you reach the end, you'd have accrued $2093.48 per point in interest on the $200 initial purchase price. Adding in the original $200 it cost to purchase the point, and dividing by 50 years ($2293.48/50) yields a time value of money of $45.87 per point. These calculations, like yours, assume that the purchaser holds the points for the full 50 years. If the points are held for less time, you'd have to calculate over the shorter term, and subtract the selling price from the calculations before dividing by the number of years actually held.

Thanks for the post. I have created a rather sophisticated Excel spreadsheet to take all of the factors you mention into account.

What I have found is that I can plug in all sorts of "reasonable assumptions" and, depending on the combination, justify almost any decision.

I did reach a few conclusions:

• If you don't care where you stay, a Value Resort is always going to cost less. (Moderates generally as well, especially at today's resale prices.)
• You don't need to treat a DVC purchase as a long-term investment. Even when prices plummeted during the Great Recession, resale prices remained relatively strong. This means that you can think of DVC as a 5 or 10-year vacation plan. For example, buy DVC now while your children are of a certain age, and then sell it when they outgrow Disney.
• If you are a life-long WDW lover who plans to go for decades, then DVC makes sense at almost any price.

 

[CraigInPA]

• You don't need to treat a DVC purchase as a long-term investment. Even when prices plummeted during the Great Recession, resale prices remained relatively strong. This means that you can think of DVC as a 5 or 10-year vacation plan. For example, buy DVC now while your children are of a certain age, and then sell it when they outgrow Disney.
• If you are a life-long WDW lover who plans to go for decades, then DVC makes sense at almost any price.

I think the way most DVC owners treat their DVC "investment" is a pre-paid discount on annual vacations to Disney.

In my case, my DVC resort will expire when I'm 99 years old. I'm unlikely to be going there when I'm in my 80's, so my wife and I amortized the cost over a 25 year life span, assumed that the price we paid will be fully recouped when we sell due to the ever-increasing prices on DVC points, and decided that DVC was a good financial option for us when we purchased.

 

[crisi]

Thanks for the post. I have created a rather sophisticated Excel spreadsheet to take all of the factors you mention into account.

What I have found is that I can plug in all sorts of "reasonable assumptions" and, depending on the combination, justify almost any decision.

I did reach a few conclusions:

• If you don't care where you stay, a Value Resort is always going to cost less. (Moderates generally as well, especially at today's resale prices.)
• You don't need to treat a DVC purchase as a long-term investment. Even when prices plummeted during the Great Recession, resale prices remained relatively strong. This means that you can think of DVC as a 5 or 10-year vacation plan. For example, buy DVC now while your children are of a certain age, and then sell it when they outgrow Disney.
• If you are a life-long WDW lover who plans to go for decades, then DVC makes sense at almost any price.

Which is why any sort of analysis is dangerous in the hands of someone who doesn't understand it and has to be able to justify their decision financially. Because in the end your last bullet point is only true if DVC does not create a financial hardship. If you are a life long WDW who plans to go for decades, but doesn't have the means to go every other year (at least) for decades, you are far better paying cash when you can afford to go.

 

[DVCanadian]

The cost of something is what you paid for it.
The OP is describing “accounting” and forms of economic analysis.

Per point is a easy way to compare things but you should take the full dollar amount you paid including all charges and divide that by the points you purchased. You didn’t buy a single year of points you bought between 20-50 years of points.
35 years of 200 points as an example is 7,000 points. Divide that by what you paid.
Most math on the boards is “justification” math.

You sure can calculate a theoretical opportunity cost but guess what you didn’t do the other thing with your money, nor is there a guarantee you would have.That is a pretend situation, with a pretend calculation.

I thought a straight line depreciation would make sense but my DVC has appreciated (now worth double!) since I bought it 10 years ago. Does that mean it cost more or less?

Trick question, depreciation is for accounting and taxes, not vacations.

 

[CarolMN]

Most math on the boards is “justification” math.

So true! In fact, I would say it's all "justification math"! DVC is a "want", not a need.

IMO, DVC is, at its heart, an emotional purchase. For those who have the disposable income, it can be a very satisfying purchase.

 

[Gobbles!]

This was a fun discussion. Right after we bought in we set up a spreadsheet to keep track of all of our vacations to figure out when we’d break even. Half the fun for me is pricing out how much the room we are staying in would have cost if we were paying cash (factoring in any discounts that might be happening at the time). Our magical cost per point is relatively straight forward. Our initial purchase price spread over the amount of points we bought for the amount of years on the contract. Then an additional ‘fees’ per point that takes the annual dues into account each year to come up with the total $ point cost for each trip we take. We subtract that from the going rate for the room to figure out our total savings each trip. We further break it down to savings per point just to compare trip to trip. We also track the annual dues to see what percent they change each year.

Super fun, I know. I was once an accountant a long time ago and loved spreadsheets. But it was fun watching the break even point getting closer. We are now well beyond breaking even, so it’s just fun to see how much we’ve saved. (As opposed to thinking about how much we’ve probably spent on the other parts of the trip.)

 

[CSLucas]

This was a fun discussion. Right after we bought in we set up a spreadsheet to keep track of all of our vacations to figure out when we’d break even. Half the fun for me is pricing out how much the room we are staying in would have cost if we were paying cash (factoring in any discounts that might be happening at the time). Our magical cost per point is relatively straight forward. Our initial purchase price spread over the amount of points we bought for the amount of years on the contract. Then an additional ‘fees’ per point that takes the annual dues into account each year to come up with the total $ point cost for each trip we take. We subtract that from the going rate for the room to figure out our total savings each trip. We further break it down to savings per point just to compare trip to trip. We also track the annual dues to see what percent they change each year.

Super fun, I know. I was once an accountant a long time ago and loved spreadsheets. But it was fun watching the break even point getting closer. We are now well beyond breaking even, so it’s just fun to see how much we’ve saved. (As opposed to thinking about how much we’ve probably spent on the other parts of the trip.)

Sounds like we have the same spreadsheet . I also think it's fun, although we are just getting started (just getting started as an accountant too!)

 

[Heather07438]

I think what DVC charges for One time use points is an accurate gauge.
https://disneyvacationclub.disney.go.com/faq/add-on-one-time-use-points/how-to/“Rates are subject to change, but currently Members enjoy a rate of $19 per one-time-use Vacation Point including taxes. That's $16.89 per one-time-use Vacation Point plus $1.89 tax (6.5%) plus $1.01 resort tax (6%).”

We often rent points and not all points are of equal value to us. I don’t mind paying an owner a bit higher than going rate if they are helping us get into a high demand room, resort &/or season. Also the flexibility and potential life of the points makes a difference too.

 

[The Jackal]

A DVC point over the life of the contract costs an arm and a leg, somehow I have 350?

 

[Grumpy by Birth]

A DVC point over the life of the contract costs an arm and a leg, somehow I have 350?

350 arms and legs?

 

[Evita_W]

It really depends on how you choose to look at it. For our GCV points, we calculated that including project cost of dues over the course of our contract, the cost we bought in at, etc. would be made up for in about 6 trips. Granted, we take longer trips (14+ days) than most, but we have hit far more than that, so now we essentially consider those points paid for. Of course there are still dues, but as I said, we factored the project cost (which may vary slightly) into that calculation. Our Riviera points will be on a different scale of course.

 

[Sandisw]

Personally, I don’t look at anything other than what I am paying in MFs and how many trips and nights I get each year. I applied the upfront cost in years 1 to 3. Now RIV I have one more year to go.

For just under $5k, we get a lot of trips so worth every penny to us regardless of what it might cost over ownership.

But we do this with all big personal purchases we decide on. We look at here and now compared to other options.

Once decided, we are cool with no longer analyzing.