educating myself on dvc

[ToddyLu]

Another good resource is the DVC Guide book from Passporter.com. It is about 10$ and you can download it and take your time reading it. I actually got most of my info here but I did read the guide and it was helpful.

Read the stickies and then just lurk around. There are no stupid questions and you should be proud that you are taking the initiative.

My DB and DSIL have five children and I tell him to stay on property a 2 bedroom would be the way to go--full kitchen, w/d, they would love it.

So I started here, then called the 1-800# and my guide called me back just a few minutes later. He was surprised I knew so much

[The V Gang]

Originally Posted by ToddyLu

Another good resource is the DVC Guide book from Passporter.com. It is about 10$ and you can download it and take your time reading it. I actually got most of my info here but I did read the guide and it was helpful.

Read the stickies and then just lurk around. There are no stupid questions and you should be proud that you are taking the initiative.

My DB and DSIL have five children and I tell him to stay on property a 2 bedroom would be the way to go--full kitchen, w/d, they would love it.

So I started here, then called the 1-800# and my guide called me back just a few minutes later. He was surprised I knew so much

Thanks everyone. Your advice is priceless. I know we can only fit in a two bedroom villa. Reserving two deluxe rooms is insane. I think ill try renting points for a two bedroom at akl. My family loves it there and we dont mind the extended ride.

Thanks again!

[JimMIA]

I would also encourage you to get your information from additional sources besides DVC.

If you rely exclusively on DVC, you are going to get the most wonderful rose colored-glasses picture you can imagine. The info you receive from DVC will be factual, but it is timeshare sales info designed to present the product and the uses of the product in the most favorable light.

You will find the vast majority of DVC sales people to be generally honest and professional. But keep in mind that, although they are friendly, they are NOT your friend.

They are timeshare salesmen and women. For the most part, they will not LIE to you (some will), but it is not their job to give you the full picture.

Their job is to sell you a timeshare, not to "guide" you objectively through the entire universe of vacation options for the good of your family. They sell for the good of their family!

[ToddyLu]

and please remember: DONT DRINK THE KOOL-AID!!!

However it is cherry flavored and quite delicious.

[ELMC]

Originally Posted by JimMIA

I would also encourage you to get your information from additional sources besides DVC.

If you rely exclusively on DVC, you are going to get the most wonderful rose colored-glasses picture you can imagine. The info you receive from DVC will be factual, but it is timeshare sales info designed to present the product and the uses of the product in the most favorable light.

You will find the vast majority of DVC sales people to be generally honest and professional. But keep in mind that, although they are friendly, they are NOT your friend.

They are timeshare salesmen and women. For the most part, they will not LIE to you (some will), but it is not their job to give you the full picture.

Their job is to sell you a timeshare, not to "guide" you objectively through the entire universe of vacation options for the good of your family. They sell for the good of their family!

A specific example of this has to deal with the "break even" point where your initial DVC purchase will in essence pay for itself. Most salespeople will tell you that DVC "pays for itself" in 7-8 years. However, this is compared to the alternative of paying full rack rate at Deluxe resorts. Have you seen those prices? Most people don't pay those rates, they use discounts or special offers or whatever may be. When I calculated the "break even" point vs. booking with a discount, PIN code or renting DVC points, I found it to occur somewhere around year 15. I couldn't justify losing money at something for 15 years only to come out ahead in year 16, so I passed. After much research on here I found a few great resale contracts that had a break even point somewhere between years 4-5. That made a lot more sense so I went resale.

[JimMIA]

Originally Posted by ELMC

A specific example of this has to deal with the "break even" point where your initial DVC purchase will in essence pay for itself. Most salespeople will tell you that DVC "pays for itself" in 7-8 years. However, this is compared to the alternative of paying full rack rate at Deluxe resorts. Have you seen those prices? Most people don't pay those rates, they use discounts or special offers or whatever may be. When I calculated the "break even" point vs. booking with a discount, PIN code or renting DVC points, I found it to occur somewhere around year 15. I couldn't justify losing money at something for 15 years only to come out ahead in year 16, so I passed. After much research on here I found a few great resale contracts that had a break even point somewhere between years 4-5. That made a lot more sense so I went resale.

I tend to get pretty amused by "break even" analysis anyway. I usually find those calculations rather twisted attempts to justify what the analyst is going to do anyway, no matter how the numbers look.

Those analyses also usually leave out the annual MF's, which actually are the largest component of your true cost of lodging.

I think a much more sensible financial analysis is to assume a ten-year useful life and no recovery at the end of ten years -- so divide your initial cost (including finance costs, if applicable) by 10 to get an annual cost. Then add the MF's for the year. Then divide that total by the number of points you receive each year -- that's your per point cost including all components of that cost.

To calculate the cost of a night's stay, multiple your per point cost X number of points needed.

Compare the per night cost to other options and see if it seems reasonable to you for the lodgings you will be receiving.

That said, I think most of us have legitimately justified our purchases using non-financial criteria...which usually are more rational than the financial gymnastics people typically use.

[bighoo93]

Originally Posted by JimMIA

I tend to get pretty amused by "break even" analysis anyway. I usually find those calculations rather twisted attempts to justify what the analyst is going to do anyway, no matter how the numbers look.

Those analyses also usually leave out the annual MF's, which actually are the largest component of your true cost of lodging.

Why on earth would such an analysis EVER leave out annual fees? I can't imagine anyone would actually do that, unless they were a true neophyte who didn't know about annual fees. A breakeven analysis is very useful if done properly. No analysis is useful if done stupidly, and there really is no excuse for ever leaving out such a significant component.

I think a much more sensible financial analysis is to assume a ten-year useful life and no recovery at the end of ten years

Why is this a sensible assumption? Do you think it is likely that Disney and/or DVC no longer exist in 10 years? This seems much too conservative to me.

That said, I think most of us have legitimately justified our purchases using non-financial criteria...which usually are more rational than the financial gymnastics people typically use.

I have no idea what most people have done, but I don't think non-financial criteria are more rational. They are obviously more susceptible to fudging because it is just all in your head, no math involved. If anyone wanted to twist an analysis to make it justify what you want, the non-financial is the easiest by far.

[Missyrose]

Originally Posted by bighoo93

Why on earth would such an analysis EVER leave out annual fees? I can't imagine anyone would actually do that, unless they were a true neophyte who didn't know about annual fees. A breakeven analysis is very useful if done properly. No analysis is useful if done stupidly, and there really is no excuse for ever leaving out such a significant component.

Because far more people than you may realize come on these boards and say "If DVC costs me $12,000 and my annual trips cost $3,000, then I will break even after four years." It's nonsensical but it gets said, a lot. People like to use entire trip costs in their break-even calculations, even though DVC is only about lodging. Like ELMC said, they'll sometimes calculate break-even using full rack rate even if they've never once paid rack rate for a deluxe resort in their lives.

That's the point, I believe, that Jim was trying to make: You rarely see break-even points accurately calculated in any of these threads.

Originally Posted by bighoo93

Why is this a sensible assumption? Do you think it is likely that Disney and/or DVC no longer exist in 10 years? This seems much too conservative to me.

It's less sensible to assume you'll keep the contract until it expires. Timeshare purchases simply aren't always like that. Lives changes, finances change; feelings change. There are a million different reasons why someone would sell/give back their DVC contract. 10 years is a nice, round number to project as more of an average than just a hard and fast rule.

Originally Posted by bighoo93

I have no idea what most people have done, but I don't think non-financial criteria are more rational. They are obviously more susceptible to fudging because it is just all in your head, no math involved. If anyone wanted to twist an analysis to make it justify what you want, the non-financial is the easiest by far.

Again, the argument isn't that using non-financial reasons are a good way to justify a DVC purchase, the argument is that more people tend to use them because they are easier to quantify to ourselves. Having the numbers work for DVC saving you money can be hard to calculate in favor of purchasing a contract. But buying a contract because it will allow you to take longer trips/stay in bigger villas/take friends and family brings a much-more immediate conclusion.

[chalee94]

Originally Posted by bighoo93

Why is this a sensible assumption? Do you think it is likely that Disney and/or DVC no longer exist in 10 years? This seems much too conservative to me.

also, for those experienced with timeshares "in general" and not just DVC, many timeshares currently sell for $1 or less on ebay. DVC has held its value pretty well so far. DVC has not added restrictions to resales that significantly damage their market value so far. that might change or it might not.

be as conservative or optimistic as you like...

[ELMC]

Originally Posted by JimMIA

I tend to get pretty amused by "break even" analysis anyway. I usually find those calculations rather twisted attempts to justify what the analyst is going to do anyway, no matter how the numbers look.

I agree with you to a point on this. I, too, have seen some very creative break even analyses posted here on the DIS (specifically the one illustrated by Missyrose a few posts up from here). However, if done honestly, I do feel like it can be a useful tool, specifically for those who currently rent DVC points for their stays and are wondering if making the switch from renting to ownership makes financial sense. I don't think you were suggesting it, but I would disagree with you if you suggested that my personal analysis was an exercise in "financial gymnastics". In fact, as I'll talk about below, my first analysis led me to the decision not to buy, even though I really wanted to. I remember looking at my wife when all was said and done and saying, "I really want to own this timeshare, but at these prices I just can't justify it."

Originally Posted by JimMIA

Those analyses also usually leave out the annual MF's, which actually are the largest component of your true cost of lodging.

I think a much more sensible financial analysis is to assume a ten-year useful life and no recovery at the end of ten years -- so divide your initial cost (including finance costs, if applicable) by 10 to get an annual cost. Then add the MF's for the year. Then divide that total by the number of points you receive each year -- that's your per point cost including all components of that cost.

To calculate the cost of a night's stay, multiple your per point cost X number of points needed.

Compare the per night cost to other options and see if it seems reasonable to you for the lodgings you will be receiving.

This is a good point. When illustrating the break even analysis, DVC salespeople will calculate all of the points you will receive over the life of the contract and then divide that by total purchase price to get an actual cost per point. By narrowing the scope to 10 years you are making things more realistic.

To clarify my methodology (and reasoning behind it), I was originally an offsite Disney vacationer. We own at Marriott Grande Vista which very easily traded into more time at Marriott Harbour Lake (which was perfect for us because we have little kids). It wasn't until we got a little tired of spending so much time in the car that we looked at onsite options. Clearly we couldn't go back to standard hotel rooms, so we looked at DVC. I knew about renting at the time, and when I broke down the financials provided by my salesperson, I simply couldn't justify the expense when I could simply rent points for $11 each quite easily. Then I came here to the DIS and learned more about resale. When performing the same analysis (buy vs. rent) I found that the crossover point was right around the 5 year mark. And I actually feel like my method is more conservative because it does not amortize the purchase price over ten years but instead includes it up front.

In my method I had one column that included initial buy in plus maintenance fees added each year (assuming a 3% increase). In a second column I had the cost of renting an equal number of points at $11 per point. When the numbers in the second column were higher, that was the point where renting was actually a more expensive proposition. In the case of my BWV contracts, that point came right around year 5. (The key was finding contracts with three years points. That greatly accelerated the break even point as those points did not carry any maintenance fees and were most likely not valued properly in the price of the contract).

My BLT resale contract, however, was motivated more by non financials. I simply knew that I wanted to stay at BLT at times and in rooms that would most likely require booking at the 11 month window. Sure I could've bought SSR for $30 less per point, but I decided it was worth more for the peace of mind that comes from owning BLT and being guaranteed the 11 month window. That being said, I still bought a fully loaded contract resale, because I can't afford peace of mind at direct prices.

Originally Posted by JimMIA

That said, I think most of us have legitimately justified our purchases using non-financial criteria...which usually are more rational than the financial gymnastics people typically use.

I think this is a point that often goes overlooked. There are many, many ways to visit Disney for less money than staying at DVC. There are offsite timeshares, weekly specials, vacation home rentals, etc. etc. But one thing that we often forget to put a price tag on is the benefit we get from owning DVC and being able to book and manage our own reservations for onsite accommodations. That has value, even if we forget to quantify it.

[JimMIA]

Originally Posted by Missyrose

Having the numbers work for DVC saving you money can be hard to calculate in favor of purchasing a contract.

Exactly. Based on my 6-7 years of actual costs of DVC ownership, I honestly don't think DVC saved us a penny. In fact, I think we spent more than we would without DVC.

However, the qualitative value we received was worth it. I can't put a dollars and cents number on it, but that's where we found the value for our family.

Other families may well have very different opinions - every family is different.

[ELMC]

Originally Posted by JimMIA

Exactly. Based on my 6-7 years of actual costs of DVC ownership, I honestly don't think DVC saved us a penny. In fact, I think we spent more than we would without DVC.

However, the qualitative value we received was worth it. I can't put a dollars and cents number on it, but that's where we found the value for our family.

Other families may well have very different opinions - every family is different.

I completely agree. While DVC projects to save me money on lodging over the next 8-10 years, my overall Disney expenditures will go up during that time. Case in point...a second trip to F&W this year instead of my normal one. One night I logged onto DVCmember.com, saw that there was availability and the next day we were on a plane. I can almost guarantee that trip wouldn't have happened if we didn't own DVC.

That being said, it was an awesome trip and I'm glad we had the ability to go. And dollars and cents aside, that is the real value of ownership for us.

[Dean]

Originally Posted by bighoo93

Why on earth would such an analysis EVER leave out annual fees? I can't imagine anyone would actually do that, unless they were a true neophyte who didn't know about annual fees. A breakeven analysis is very useful if done properly. No analysis is useful if done stupidly, and there really is no excuse for ever leaving out such a significant component.

We've seen a lot of attempted justification. IMO using the rack rates as the benchmark is one such example.

Why is this a sensible assumption? Do you think it is likely that Disney and/or DVC no longer exist in 10 years? This seems much too conservative to me.

10 years is my timeframe too. Too many variables after that and who's to say it won't be simply a liability long term, odds are it will be at some point.

I have no idea what most people have done, but I don't think non-financial criteria are more rational. They are obviously more susceptible to fudging because it is just all in your head, no math involved. If anyone wanted to twist an analysis to make it justify what you want, the non-financial is the easiest by far.

There is no way to justify DVC without using non financial criteria even if you assume you're going to visit WDW routinely. Staying on property is a significant cost above many off property options that are as nice or nicer in many ways. Thus my assumptions include the caveat's that one will routinely visit WDW or at least DVC resorts and that they put value in on property options such that they're willing to pay more to that end. The simplest way to look at it is for WDW vs staying off property in Orlando vs other Disney hotels. My view is that while there are other potential benefits for DVC, it has to at least make sense financially. It doesn't for many that we see post here and end up buying. A glaring example would be the idea of buying retail to use DVC points for cruises routinely.

[JimMIA]

Originally Posted by bighoo93

Why is this a sensible assumption? Do you think it is likely that Disney and/or DVC no longer exist in 10 years? This seems much too conservative to me.

It's not the only sensible assumption, and I never said it was. But, obviously to do any financial analysis you have to make certain assumptions. If you are way off one way or the other, the assumptions will dictate the outcome and there really won't be any credible analysis.

I'm quite confident that both Disney and DVC will still be around beyond 10 years. My assumptions have nothing to do with the duration of DVC. My basic premise is that I'd rather err on the side of caution, so I design my model to be conservative. YMMV.

I chose ten years because I'm guessing that most DVC owners will keep their contracts ten years or less. I'm sure some will hold their contract until expiration, but not many. Others will sell in a year or two for a host of reasons. (And frankly, I suspect those who cling to financial analysis of "break even" will be heavily represented in that subset!) Also, I have big trouble predicting with any certainty what I'll be doing beyond ten years from now, so I try to keep my assumptions to what seems realistic to me.

The "no recovery" aspect leaves plenty of room for argument.

A more realistic recovery guess might be to estimate a recovery of 50% of today's typical resale prices. So, just a quick glance at the ROFR thread indicates BLT selling for roughly $85 resale. Looking out ten years, is $45 a reasonable guess for resale value? To me, it's in the reasonable range, although my conservative nature would probably lead me to use $40...or $20.

Again, I don't have any exclusive on financial analysis assumptions. There is a lot of room for debate.

[ToddyLu]

DH and I were lucky we spent $250 a year on flood insurance--simply because his parents had, it seemed cheap enough and a small puddle ran up in our garage during Hurricane Georges in 1998 ( I think it was that year)....fast forward to 2005 and Katrina, with 4 1/2 feet of salt water in my home which is 2 miles from our small beach. Now that paid off--in a "it saved our butts sorta way".

DVC...never looked at cost analysis...it was how I wanted to enjoy Disney...we splurged...and have not regretted one cent.

My point is that you can consider the cost of things forever...but it is up to you to know how to spend your money...sometimes you get lucky, sometimes unlucky and sometimes just kinda "eh". We were LUCKY with Katrina and recommend flood insurance far more than DVC.