Simple "Cost of DVC" Calculator

[crisi]

crisi - Couldn't agree more. I cringe every time I read about some DVC purchases that really aren't made with discretionary funds ( at least from what is posted). Those folks are/will be the first to get in financial trouble when "life happens" - we saw a lot of examples of that when so many lost jobs during the last recession.

They are also, I suspect, the first to look at calculations like this and use them to justify the purchase. For those that can afford it - risks, opportunity costs, and all - the calculations are just fun - whether I save money on my room at Disney over time or not might be important in abstract, but it isn't likely to change my life significantly one way or the other. I think DVC is a little like J.P. Morgan's yacht. "If you have to ask the price, you probably can't afford it." Though in this case "if you have to run the calculations to justify it - you probably shouldn't buy."

 

[pmaurer74]

Buying DVC can cause you to increase your number of vacations per year and/or cause you to increase the number of expensive Disney vacations taken each year. While we are looking to buy DVC for a resort cost savings, Disney knows that DVC ownership actually increases their profit far more than non DVC guests do. That's why they keep building and converting resort rooms to DVC.

Bill

for us we are taking the same number of trips, BUT we have been taking family members. There were 20 of us last year and 6 of us this year.

 

[jerseyduke]

While I love numbers and you always have to make some assumptions (such as your 5%), for you to "save money" on Disney vacations, Disney has to make less...do you really think that that is happening?

Since I have bought DVC, I am now in for an AP every year, since I usually take 2 week long trips a year. Since I have an AP and can drive down from 'Lanta for the weekend, I do that a few times a year (usually stay in a value or mod since those trips are largely park oriented, get out of dodge for the weekend, not enjoy the resort trips) so that is a few hotel stays added.

I'm not saying I regret DVC, in fact the total opposite...I just think that Disney is making more money off of me now; I ain't saving Jack

 

[ELMC]

Interesting analysis and discussion. One thing I'd like to add to the discussion of opportunity cost is the element of discipline. I started in the insurance industry over 20 years ago, and so many clients over the years talked about not purchasing whole life because they could simply purchase term and invest the difference to come out way ahead. This is a parallel to renting points on a year by year basis and taking the difference and investing it as opposed to buying DVC. What I discovered over the years, however, is that very few clients actually had the discipline to invest that difference. Instead they spent it on something else, and from an insurance portfolio perspective, they were much worse off.

I agree that opportunity cost should be looked at in situations like these, but we also need to realistically consider the degree to which it actually applies.

 

[bwvBound]

While I love numbers and you always have to make some assumptions (such as your 5%), for you to "save money" on Disney vacations, Disney has to make less...do you really think that that is happening?

Since I have bought DVC, I am now in for an AP every year, since I usually take 2 week long trips a year. Since I have an AP and can drive down from 'Lanta for the weekend, I do that a few times a year (usually stay in a value or mod since those trips are largely park oriented, get out of dodge for the weekend, not enjoy the resort trips) so that is a few hotel stays added.

I'm not saying I regret DVC, in fact the total opposite...I just think that Disney is making more money off of me now; I ain't saving Jack

At some point you might stop purchasing the APs, might take shorter trips, might skip the parks entirely, and may even skip years. ???

 

[DVC Doctor]

Let me know if you guys have any comments or think I'm missing something.

This topic has been fiercely debated for many many years and I have always accounted for "opportunity" costs, but not everyone agrees with that and especially what value to put in there (I personally think 2% to 3% is more appropriate). Also, you pay taxes on that 5% so it really is a lower value than 5%.

However, what everyone does agree with is that "if" you finance the purchase, then that is a HUGE factor and is quite scary. Perhaps change the value for B:13 to be "Interest / Opportunity Cost" as the label "Rate of return on investment" is not the best description. People will be shocked to see how much Disney's 10% or more interest has an impact on their purchase as the best way to buy DVC is cash and no financing.

There are wildcard issues that nobody can predict like the future value of a resort. For example, VGC went up in value significantly while HHI and VB went down in value significantly. The value and years remaining is not a linear relationship.

Also, the purchase price per point is highly variable as the difference between a loaded contract and stripped contract can have a huge impact on the effective annual cost per point. I have seen BLT contracts with banked, current and next year points for sale that when factored in properly are priced cheaper than SSR stripped.

I am a firm believer that SSR and BLT are the best resale values and "most" people should avoid HHI and VB unless they specifically want to go there. Also, we are getting close to the tipping point with OKW and past the 1/2 way point for RTU and that may cause a drop in resale values. AKV is a huge resort and their annual dues is higher than what I would expect and the location is less desirable as it is further out than other resorts.

I personally think the prices for BWV and BCV are higher than they should, but people really love and want those locations, so the math does not make sense for their higher cost in terms of pure math logic, but makes perfect sense if you love F&W or that location.

 

[ELMC]

AKV is a huge resort and their annual dues is higher than what I would expect and the location is less desirable as it is further out than other resorts.

I personally think the prices for BWV and BCV are higher than they should, but people really love and want those locations, so the math does not make sense for their higher cost in terms of pure math logic, but makes perfect sense if you love F&W or that location.

Great points all around. I'd like to add that a big driver in the costs of AKV is the cost of caring for the animals. While there is no guarantee that AKV will continue to have animals, a large portion of Jambo is a hotel and not DVC, so can you really see them taking the animals away?

With regards to BWV and BCV, I think those two resorts defy logic for the very reasons you mention. Not only F&W but also F&G, Festival of the Arts and whatever else they decide to add. Not to mention the proximity to the parks. If DVC at Caribbean Beach materializes that may be a draw away from the demand of the Epcot resorts, depending on proximity and access to the parks.

 

[edk35]

For our family we would vacation once in awhile but since buying DVC, we vacation at WDW at least a couple times per year. While vacations are nice our vacation spending has increase by thousands and thousands of dollars because of DVC. My guess is that Disney knows this and our family is not alone. That's why DVC has become such a profit center for Disney and why they are converting cash rooms to DVC and why new DVC resorts will continue to be built.

Bill

YUP US TOO!!! The AP is a double edged sword!!! I hear my DVC friends saying....we surely got our use out of our AP's. We went 4 times in a year. However, that also means 4 times MORE SPENT on vacations. LOL YOU still have to figure in transportation cost, food and such.

 

[DVC Doctor]

One small issue is "wasted or unused points"

Now I know that everyone on DISboards used 100% of their points and never ever wastes one point, but other DVC members may, on occasion waste points or let them go unused.

Any unused points is a total loss and will have a negative impact on ROI and cause the price per night to go way up.

 

[kboo]

Thank you for this, it's very timely for me! I'm using the sheet now to help me determine which would be the best "home resort" to choose. I know I want to do resale but not sure if I want to take the plunge.

Me too! Thank you!

I actually came here to post a request for a chart that could outline DVC Math and here you were! Of course, now this has me rethinking whether our initial home resort choice is really the right one...

 

[kboo]

Now having read the whole thread - does anyone have a chart or tool to comparison shop costs per point that also factors in loaded v/ stripped contracts?

 

[jerseyduke]

Now having read the whole thread - does anyone have a chart or tool to comparison shop costs per point that also factors in loaded v/ stripped contracts?

I do not know of one, but there is an aggregator out there that pulls listings from multiple sites, enables you to sort by price per point, points, total cost etc. It also has how many current points are on the contract, as well as the nest year and the year after.

Might be tough to find anything beyond that, as resale listings merely list the price the person is asking to get...does not mean they will get it

 

[Devin Wood]

I don't know if this is the right thread....but i have tried to research if there is any lifetime max on Maint increases. I am currently looking at BLT resale and i said the current maint cost isn't bad, but looked at the rate of increase and got a little concerned. I have read there is a 15% cap per year. So my concern is if you take the current maint. cost per point and run it at 4% increase by the end of the 42 years it would be around $28 per point or $4200 per year for 150 points...and if the 5% increases keep up it would be $41 per point by the last year or around $6200 per year for 150 points. I know that is a long way off but it is sure making me question whether I want to be locked into that. Any insight is welcome.

 

[Ben E N]

I don't know if this is the right thread....but i have tried to research if there is any lifetime max on Maint increases. I am currently looking at BLT resale and i said the current maint cost isn't bad, but looked at the rate of increase and got a little concerned. I have read there is a 15% cap per year. So my concern is if you take the current maint. cost per point and run it at 4% increase by the end of the 42 years it would be around $28 per point or $4200 per year for 150 points...and if the 5% increases keep up it would be $41 per point by the last year or around $6200 per year for 150 points. I know that is a long way off but it is sure making me question whether I want to be locked into that. Any insight is welcome.

There is no lifetime cap, and your price predictions sound about right. It may be comforting to you to know that Disney cannot profit off of these fees, so they are directly related to property taxes, insurance, maintenance, and the costs for staffing. These costs are typically directly related to the strength of the economy. If MFs are rising at 5% per year, odds are pretty decent that your pay is going up at a similar rate as well. They may outpace your wage growth a bit, but in 42 years, I really doubt $6000 will be that much money. 42 years ago, people used to be able to buy whole houses for less than $100,000, and would have thought that having a million dollars would make you almost the richest person in the world. Times have certainly changed, and they will continue to do so.

 

[Cyberc1978]

I don't know if this is the right thread....but i have tried to research if there is any lifetime max on Maint increases. I am currently looking at BLT resale and i said the current maint cost isn't bad, but looked at the rate of increase and got a little concerned. I have read there is a 15% cap per year. So my concern is if you take the current maint. cost per point and run it at 4% increase by the end of the 42 years it would be around $28 per point or $4200 per year for 150 points...and if the 5% increases keep up it would be $41 per point by the last year or around $6200 per year for 150 points. I know that is a long way off but it is sure making me question whether I want to be locked into that. Any insight is welcome.

There is however a yearly max that the MF can increase I think it’s 15% but the property tax is excluded from the max increase as that is sort of outside Disney’s control.

 

[Cyberc1978]

I see a lot of talk about opportunity cost, to me that does not apply and I don’t think it does for a lot of others too.

Had I not purchased DVC I would not have invested the money, and I don’t get any interests from my bank. I would however have used the money toward other vacations instead.

 

[disneynutz]

There is no lifetime cap, and your price predictions sound about right. It may be comforting to you to know that Disney cannot profit off of these fees, so they are directly related to property taxes, insurance, maintenance, and the costs for staffing. These costs are typically directly related to the strength of the economy. If MFs are rising at 5% per year, odds are pretty decent that your pay is going up at a similar rate as well. They may outpace your wage growth a bit, but in 42 years, I really doubt $6000 will be that much money. 42 years ago, people used to be able to buy whole houses for less than $100,000, and would have thought that having a million dollars would make you almost the richest person in the world. Times have certainly changed, and they will continue to do so.

RCID receives money from property taxes, it is a separate entity like a county for the land that WDW is on, it's board is made up of Disney executives and the people living within the jurisdiction of RCID are Disney employees.

IMO BLT dues were set low when the project was completed as was Aulani.

Bill

 

[AdamsMum]

I don't think BC and BWV are overpriced in relation to other resorts. I agree that's the case if you judge them only as older resorts with only half their contract left, but the location (not just for F&W, F&G and other events) is fantastic. Location is a very big factor. For instance, I live in a big city. If I want to buy a condo in a great downtown location (walkability, close to restaurants, entertainment venues, work), it's going to cost me more than an equivalent condo on the outskirts of the city where I would either have to drive downtown and sell my first born to pay for parking (if I can find it) or take public transit that isn't all that great the further out you go.

I'm biased as I own at both of those resorts. When I first bought, there were other contracts I could have purchased for less money, but I loved the location of BWV, so I bought there. I was lucky enough to find a smaller resale contract to start with. Then I added on direct.

All that said, lately I think all resort direct prices are too high, but until the market stops supporting that pricing, it will continue to increase. I'm so glad I bought 10 years ago.

 

[crisi]

I see a lot of talk about opportunity cost, to me that does not apply and I don’t think it does for a lot of others too.

Had I not purchased DVC I would not have invested the money, and I don’t get any interests from my bank. I would however have used the money toward other vacations instead.

Opportunity cost isn't just investing it. Opportunity costs describes anything you would do with your money - or your time - that you are forgoing to vacation at Disney.

For instance, when we go to Disney, we don't go to Europe. We don't cruise. We don't stay home and re-watch The West Wing. Or spend time with my relatives. Or write the Great American Novel. All of those are lost opportunities - hence opportunity costs - related to the time we spend - not even necessarily the money.

When we bought DVC, our financial opportunity costs were what you are thinking about- since we were using a bonus that wasn't in our normal budget and were financially fairly well positioned for a luxury splurge - we weren't going to do anything else with that money - but invest it. If you are buying a DVC contract for $15k - unless you'd spend $15k on lodging at Disney this year you were going to do something else with that money - or at least the part you weren't going to spend on a hotel room. Maybe not invest it - maybe get new carpet. Maybe get a different car. That's still opportunity cost. Every dollar you spend is a dollar you can't spend somewhere else. And that's where the time value of money gets involved. You weren't going to spend $15k on lodging this year, but its completely reasonable as a Disneyphile to spend $15k on lodging over a few years. That few years of not spending that money is worth something - possibly not a lot. Possibly dinners out that you forgo because you bought Disney this year, or a smaller Christmas. Or possibly the ability to buy Facebook when it first IPO'd and make 300% on your money in five years.

 

[deerh]

Great points all around. I'd like to add that a big driver in the costs of AKV is the cost of caring for the animals. While there is no guarantee that AKV will continue to have animals, a large portion of Jambo is a hotel and not DVC, so can you really see them taking the animals away?

With regards to BWV and BCV, I think those two resorts defy logic for the very reasons you mention. Not only F&W but also F&G, Festival of the Arts and whatever else they decide to add. Not to mention the proximity to the parks. If DVC at Caribbean Beach materializes that may be a draw away from the demand of the Epcot resorts, depending on proximity and access to the parks.

As far as BWV and BCV, they won't defy logic for long. With "Toy Story Land" set to open in 7 months, and "Star Wars Land" set to open in 18 months
that BWV and BCV will skyrocket in price. Those "lands" will be a big draw and a short walk to both resorts.. Let's put it this way-- I don't
think those 2 resorts will be going down at all....