Making sense out of insanity (DVC purchase)

[blackacex2]

I love Disney, and I could see myself taking a trip there every year until infinity. I should be a perfect candidate for the DVC, I'm 27 and married 3 years in April. DVC should provide vacation for my wife and I and future children for decades to come.

160 points, purchased resale at Old Key West price $60 per point ~$10,000
maintenance fees per year ~ $850

I could rent 160 points from an owner at $11 per point and pay $1,760. DVC ownership saves me $910 ($1,760-$850 main fees) a year, but only after approx. 11 years have passed. If we use it until 2057, that nets a savings of close to $30,000. (33 years of only paying main. fees on 160 points).

Am I missing something here, or is it that good of a deal? Here's the main hang up I have, I don't have $10,000 to lay out. I'd have to borrow the money, and that adds to the cost. At 10% APR on $10,000, that's $132 a month for 10 years, making the purchase price more like $15,840 and making my projected savings to be about $24,000 once we reach the contract's end in 2057 saving us $545 a year vs renting points at $11 per point.

Is it worth laying out all that money and making that much of a commitment to save a maximum $545 a year for 44 years? (probably much less considering increases in maintenance fees)

Realistically, I don't think I'll be able to get a personal loan to pay $10,000 off over 10 years, so I'd have to buy direct from DVC at $16,000 for 160 OKW points in order to get financing. At that point it's $211 per month for 10 years making my DVC cost for the first 10 years $25,320 + 44 years of main. fees ($37,400).

That's $62,720 for 44 years of 160 points at current main. fees. That's $8.90 per point saving $2.10 per point vs renting at $11 per point. Over 44 years that saves $14,784 or $336 a year.

On one hand, over 44 years I will be saving money, not losing money- even with financing the purchase. On the other hand, it's a huge commitment and 44 years is an eternity. Not borrowing to purchase DVC would net me the max savings ($910 per year on average). Not sure if I'll be able to swing that though.

Do my numbers make sense? What do most of you project your cost per point to be over the life your DVC contract? Ever wish you could get out of it altogether and just rent points when you want?

[bumbershoot]

Realistically, I don't think I'll be able to get a personal loan to pay $10,000 off over 10 years, so I'd have to buy direct from DVC at $16,000 for 160 OKW points in order to get financing.

That is how we felt emotionally while making up our minds. That there were only the two options.

But the reality was there was a third option. That option was to sit on our hands, not go to Disney, and save the money we would have spent on a few trips. Do that, being really honest with yourself about how much you typically spend there (hotels, transportation, souvenirs, tips, food) and you'll probably get that 10K saved quickly.

It's a VERY viable option, and I urge you to think a lot about it. While I ultimately have no regrets doing it how we did it (financed with DVC), that's only because of a very specific series of events that happened with us, and how it was basically the second to last thing in a long string of happenings that finally smacked us in the face and made us get a clue. I don't think that's how these things end for most people making weird financial decisions, LOL. It was the one spot in our life together where we had a bit of luck.

So I would really think long and hard about staycations for awhile, about seeing a great airfare and instead of booking it, put the money in a savings account, etc etc. It'll be a painful year or so (depending on how much you normally spend on Disney), but ultimately REALLY worth it.

[ELMC]

Originally Posted by blackacex2

I love Disney, and I could see myself taking a trip there every year until infinity. I should be a perfect candidate for the DVC, I'm 27 and married 3 years in April. DVC should provide vacation for my wife and I and future children for decades to come.

First off, I want to commend you for coming on here and asking these very important buying questions. Many people skip this researching step before purchasing and end up regretting it. One thing I'd like to know is how frequently you currently visit Disney. I personally think it would be a mistake to purchase DVC in anticipation of visiting Disney. Typically the best candidates for DVC are people who have a history of visiting Disney on a regular basis and have experience that tells them it's the right type of vacation for them. I would also suggest that the "perfect" candidate for DVC is someone who is financially stable, has a reasonable amount of debt (think mortgage and maybe a small car loan), and a decent chunk of savings in the bank. I don't know if this does or does not describe you, nor am I asking. I'm simply pointing out that DVC is a luxury purchase and that owners are most successful when they make this purchase with their discretionary income. Hope that doesn't sound too condescending, because that's not my intent at all.

Originally Posted by blackacex2

160 points, purchased resale at Old Key West price $60 per point ~$10,000
maintenance fees per year ~ $850

I could rent 160 points from an owner at $11 per point and pay $1,760. DVC ownership saves me $910 ($1,760-$850 main fees) a year, but only after approx. 11 years have passed. If we use it until 2057, that nets a savings of close to $30,000. (33 years of only paying main. fees on 160 points).

Am I missing something here, or is it that good of a deal? Here's the main hang up I have, I don't have $10,000 to lay out. I'd have to borrow the money, and that adds to the cost. At 10% APR on $10,000, that's $132 a month for 10 years, making the purchase price more like $15,840 and making my projected savings to be about $24,000 once we reach the contract's end in 2057 saving us $545 a year vs renting points at $11 per point.

Is it worth laying out all that money and making that much of a commitment to save a maximum $545 a year for 44 years? (probably much less considering increases in maintenance fees)

Your numbers make sense to a point, in that you are looking at the right comparisons when deciding whether or not you should buy. The big mistake you are making (and it's actually a really big mistake) is not factoring in annual increases in maintenance fees. Traditionally, maintenance fees are rising at a rate of about 4% per year. Point rental prices are not increasing at an equal rate, which means that the savings will not be as much as you are projecting. Go back and rework your numbers using a 4% annual increase in maintenance fees. If you don't, you'll be making a decision based on faulty assumptions.

One way to alter these numbers is to find a contract that is loaded with points. Then, rent them out and receive $11 per point to offset your purchase price. Then start using the points the following year. When you do that you'll see that the numbers get nicer faster.

Originally Posted by blackacex2

Realistically, I don't think I'll be able to get a personal loan to pay $10,000 off over 10 years, so I'd have to buy direct from DVC at $16,000 for 160 OKW points in order to get financing. At that point it's $211 per month for 10 years making my DVC cost for the first 10 years $25,320 + 44 years of main. fees ($37,400).

That's $62,720 for 44 years of 160 points at current main. fees. That's $8.90 per point saving $2.10 per point vs renting at $11 per point. Over 44 years that saves $14,784 or $336 a year.

On one hand, over 44 years I will be saving money, not losing money- even with financing the purchase. On the other hand, it's a huge commitment and 44 years is an eternity. Not borrowing to purchase DVC would net me the max savings ($910 per year on average). Not sure if I'll be able to swing that though.

As for the financing question, I'm going to reword what I think I hear you saying. I think I'm hearing you say that your thought is that buying a resale DVC contract is a good long term savings as compared to renting points. However, since you cannot currently afford to make that resale purchase, you will need to pay 60% more up front and pay interest up to 13.99% a year in order to realize that savings. When you put it like that it doesn't sound like such a great deal any more.

Originally Posted by blackacex2

Do my numbers make sense? What do most of you project your cost per point to be over the life your DVC contract? Ever wish you could get out of it altogether and just rent points when you want?

If you use the 4% increases, annual maintenance fees will end up being somewhere around $25-30 a point, depending on your home resort. That is a big deal and it is the uncertainty that surrounds DVC long term. Furthermore, you need to factor in the actual costs of a Disney vacation. DVC is just lodging, you also need to pay for transportation, park tickets, food, souvenirs, etc. each and every year. Some people here have calculated that their annual trips will cost about $250,000 over the course of their lifetime.

As far as people wanting to get out of their contracts, it happens all the time. That's why there's a resale market. And if maintenance fees keep increasing at the current rate and there is not a corresponding increase in point rental prices, renting will start to look like a more attractive option.

Keep asking questions and reading as much as you can on here. You might find that DVC is not right for you at this time, and that's ok too. Good luck.

[blackacex2]

Thanks for the responses.

Since we have been to Disney for a week the past 3 years running and can't wait to go back this April, I think we are the right kind of people for DVC purchases.

I didn't include the increase in maintenance fees in my projections, and over a 44 year contract if I'm being realistic it will eat into any realized savings to a point where we would probably only break even if we financed through DVC directly.

As far as skipping going on vacation for a few years so we can pay cash- that's certainly the intelligent decision. Unfortunately I look forward to our vacation every year way too much to give that up, I'd rather stay at motel 6 every year if that's what it takes to go to disney.

I can afford DVC, but I just don't know if that's where I want to my "extra" income unless we save money over the long term.

Honestly, maybe paying Disney prices are just not worth it. We can stay at Bonnet Creek in a 1 bedroom for $550 a week and save boatloads of money and just drive over to the resorts to enjoy them.

[chalee94]

Originally Posted by blackacex2

Honestly, maybe paying Disney prices are just not worth it. We can stay at Bonnet Creek in a 1 bedroom for $550 a week and save boatloads of money and just drive over to the resorts to enjoy them.

if you don't have the cash to pay off a resale immediately, i would not recommend DVC.

if you are happy offsite and don't want to pay a big premium to stay onsite, i would not recommend DVC.

[Brian Noble]

Honestly, maybe paying Disney prices are just not worth it. We can stay at Bonnet Creek in a 1 bedroom for $550 a week and save boatloads of money and just drive over to the resorts to enjoy them.

This is a pretty wise move. I've stayed at several DVC resorts, as well as several of the nicer off-site resorts, including Bonnet Creek. Is the DVC experience a little more convenient, and in some ways a little nicer? Sure it is. Is it worth spending three times as much (or more) on the DVC experience? Well, that depends on how much discretionary income you have. In your situation, maybe it is not worth it. In my personal experience, my offsite vacations are much more similar than different.

You are just getting started. If you are like most people at your stage of life, the "opportunity cost" of your money is very high, because there are many demands on it. Take care of some of the other things you should be doing first, if you haven't already. Establish your 3-6 month cash reserve. Make sure you are fully funding your retirement accounts. Remember that those future children will also be expensive---cribs, clothes, and car seats don't come cheap. If you are both working outside the home, doubly so, because you'll either have to cut back on your time devoted to work, or you'll have to be paying for child care. During this period, you may find your income stretched more tightly than you anticipated, making annual WDW vacations difficult.

That doesn't mean you can't vacation along the way, but it might mean that you don't have to stay in such expensive lodging, and it probably means that you should not make a long term commitment. Many of the offsite resorts are lovely. The less expensive Disney resorts might work for you. And, lots of things can change as you start a family. It is hard to anticipate those changes, and how they will impact you, until you go through them.

[myxdvz]

Originally Posted by blackacex2

Here's the main hang up I have, I don't have $10,000 to lay out. I'd have to borrow the money, and that adds to the cost. At 10% APR on $10,000, that's $132 a month for 10 years, making the purchase price more like $15,840 and making my projected savings to be about $24,000 once we reach the contract's end in 2057 saving us $545 a year vs renting points at $11 per point.

I think this is the key for me. If you can't afford it, unless you borrow - then it's not for you. DVC is just lodging. Having it means you will HAVE to come to the world and spend for tickets, airfare, food, etc.

[jkpatrick]

Originally Posted by myxdvz

I think this is the key for me. If you can't afford it, unless you borrow - then it's not for you. DVC is just lodging. Having it means you will HAVE to come to the world and spend for tickets, airfare, food, etc.

I agree with this. DVC is a luxury purchase. I would not think it's the best financial idea to make interest payments on a luxury purchase. On the other hand, many people do, because it's an emotional decision and that's what they want.

Originally Posted by blackacex2

renting at $11 per point. Over 44 years that saves $14,784 or $336 a year.

Remember rental prices will go up, although, as other posters have noted, not as fast as MFs.

It sounds like you will, no matter what, visit WDW once a year. However, you stated that you don't mind staying offsite.

I'd recommend that you stay offsite, save the money, then in a few years with $10k saved up, revisit purchasing DVC, through resale, again.

[Jasonkat]

A lot of people (myself included) have run the numbers a zillion ways and we all differ on the pay-back period (the year after you purchase where you've saved more than you initially spent to purchase the points), we will differ on the different inflation rates to use to increase MFs and room rates, we will differ on the investment return you could get if you invested the money rather than buy DVC, we will differ on just about everything. But not everything. The only certainty in all of these simulations I've seen (and I've looked at quite a few and even built one myself before deciding to buy) is that no matter how you look at it you will come out behind if you finance your purchase. Or maybe pay-back period is like 42 years from now and it is, frankly, impossible to predict what any of us will be doing 42 years from now..

That's just the reality of mathematics.

If you stayed at AKL or BLT or any of the resorts and used the current Disney promotion (they always have something, either a minor room discount or free dining or something) and you paid cash for your stays you would come out ahead vs financing DVC.

Financing DVC is just not a wise move from a mathematical perspective. It's not just my opinion, either.

http://www.mousesavers.com/other-dis...vacation-club/

"This may not make me popular in this day and age of “instant gratification,” but realistically, it is hard to argue that DVC membership is a financially responsible decision if you don’t have the upfront cost in the bank. If I had to borrow the money, I definitely would not join. Naturally Disney will suggest otherwise, because it makes a lot of money on the financing. "

[ELMC]

Originally Posted by blackacex2

Thanks for the responses.

Since we have been to Disney for a week the past 3 years running and can't wait to go back this April, I think we are the right kind of people for DVC purchases.

I would agree.

Originally Posted by blackacex2

Honestly, maybe paying Disney prices are just not worth it. We can stay at Bonnet Creek in a 1 bedroom for $550 a week and save boatloads of money and just drive over to the resorts to enjoy them.

This is a very good point. For the first five years we went to Disney my family used our Marriott Vacation Club to stay at the resorts near Sea World and we absolutely loved it. We were no more than 15 minutes from door to turnstile and we loved the accommodations. However, with two young kids, the time in the car, loading/unloading strollers, etc. started to become a bother. So much so that we will only stay at BWV or BLT because we don't even have to use the buses, we can just walk to the parks.

It has been said on here many times (and Dean is the most vocal about it), there are many options in the Disney World area that are much nicer and MUCH less expensive than DVC. Yes, when staying at DVC you stay inside the "Disney bubble", but you are paying a huge premium for that. For many it's just not worth it.

[crisi]

Brian saved me the typing. But those future kids will be more expensive than you can imagine. Any timeshare is a commitment, but its probably not as high a commitment as diapers and daycare (and later sports fees, after school fees, clothing, shoes, braces, any idea what a decent baseball bat costs? - you will never believe what the grocery bill for a fourteen year old boy is - and then there is COLLEGE, you think "we will only pay daycare for five years and then it will get cheaper" - we all thought so too - but we won't say we told you so).

(And now I'm wondering, is it too late to turn in my kids and vacation more?)

[lovin'fl]

If you are WDW every year kind of people now...before kids...you will definitely be, even more so, after kids. And when you have kids, the beauty of DVC is the 1BR and 2BR villas with master bedroom and kitchen and laundry. You may be able to make staying off-site work now, but when lugging kids around and having diaper bags and nap schedules...well, DVC will be all the more appealing.

I do agree that you should only buy DVC resale if you can pay cash...so why not get a smaller contract and maybe even go with one of the cheaper resorts (VB, HH, OKW, SSR)? You can always add more points down the road.

[disneynutz]

I have posted this on other threads. Buying is the least expensive part of ownership. 300 points at BCV, bought resale, used for 30 yearly vacations will cost 2 adults $250,000 including food, travel, and admission.

Bill

[ELMC]

Originally Posted by lovin'fl

If you are WDW every year kind of people now...before kids...you will definitely be, even more so, after kids. And when you have kids, the beauty of DVC is the 1BR and 2BR villas with master bedroom and kitchen and laundry. You may be able to make staying off-site work now, but when lugging kids around and having diaper bags and nap schedules...well, DVC will be all the more appealing.

I do agree that you should only buy DVC resale if you can pay cash...so why not get a smaller contract and maybe even go with one of the cheaper resorts (VB, HH, OKW, SSR)? You can always add more points down the road.

I agree with the OKW/SSR part of this statement, but HH and VB are potentially problematic. No on site 11 month booking and in the case of VB skyrocketing annual maintenance fees make these two resorts not so great a choice. But a 100 point contract at SSR might be a great place to start.

[lovin'fl]

Originally Posted by ELMC

I agree with the OKW/SSR part of this statement, but HH and VB are potentially problematic. No on site 11 month booking and in the case of VB skyrocketing annual maintenance fees make these two resorts not so great a choice. But a 100 point contract at SSR might be a great place to start.

Well, yeah. I like HHI because we can do an occasional beach trip and save on park passes and dining plan and airfare (we can drive to HHI). And I like getting the 11 month window at HHI because it's difficult to book at 7 months out for summer and holidays. We have some points there and some at OKW (SSR may now have a leg up because they have the TH villas...didn't when we bought OKW).