Buying Aulani

[DanCali]

My math is that subsidized isn’t worth the premium. You can get unsubsidized Aulani for $90/point and subsidized for $115/point. You pay basically a 25% premium upfront for about a $25% savings on dues. The problem is the time value of money. That $25 per point you spend today is worth A LOT more than any savings on dues you’ll get 10, 20, 30 years down the line. You could instead invest that upfront savings and save more down the line. Or alternatively, you could do the prudent thing and just buy more unsubsidized points .

You are correct that the dues matter and also the time value of money. But don't forget (1) the dues also grow over time - the more they grow, the more the value of the subsidy increases, and (2) the annual savings from the dues can/should also be invested and whatever rate of return you picked - this is actually key because you're investing a growing annuity and it eventually catches up to what the nonsubsidized contract saves upfront.

You're not likely to get a subsidized contract for $115. But, for example, using your numbers, a person buying a 100-point unsubsidized contract at $90 (instead of $115) gets to invest $2500 at X% for 38 years. If you pick a high number like 10% you end up with $112K after 38 years(!) - That's likely the point you're making, and it's totally valid if you can get that 10% rate of return over 38 years.

But the person buying the subsidized contract gets to invest $243 in annual dues savings in the first year also at 10%. And if the dues grow at 4% annually they invest another $253 the following year, and another $263 the following year etc all that that 10% rate of return... and after 38 years they end up with over $133K in savings(!!)

The math can be simplified quite a bit and if you run the numbers like I did (see post #15), taking into account both the dues growth rate and your expected return on investment (aka "time value of money"), you will see that the value of the subsidy is a lot more than you might think.

Based on that analysis, if you assume that the dues grow at 2% and your return on investment (aka "opportunity cost", aka "time value of money") is 10% the subsidy is worth about $30/pt (a bit more than the $25 you are suggesting). But with more conservative numbers like dues growing at 3% and opportunity cost of 6%, the value of the subsidy doubles to around $60/pt.

 

[Jlo85]

You are correct that the dues matter and also the time value of money. But don't forget (1) the dues also grow over time - the more they grow, the more the value of the subsidy increases, and (2) the annual savings from the dues can/should also be invested and whatever rate of return you picked - this is actually key because you're investing a growing annuity and it eventually catches up to what the nonsubsidized contract saves upfront.

You're not likely to get a subsidized contract for $115. But, for example, using your numbers, a person buying a 100-point unsubsidized contract at $90 (instead of $115) gets to invest $2500 at X% for 38 years. If you pick a high number like 10% you end up with $112K after 38 years(!) - That's likely the point you're making, and it's totally valid if you can get that 10% rate of return over 38 years.

But the person buying the subsidized contract gets to invest $243 in annual dues savings in the first year also at 10%. And if the dues grow at 4% annually they invest another $253 the following year, and another $263 the following year etc all that that 10% rate of return... and after 38 years they end up with over $133K in savings(!!)

The math can be simplified quite a bit and if you run the numbers like I did (see post #15), taking into account both the dues growth rate and your expected return on investment (aka "time value of money"), you will see that the value of the subsidy is a lot more than you might think.

Based on that analysis, if you assume that the dues grow at 2% and your return on investment (aka "opportunity cost", aka "time value of money") is 10% the subsidy is worth about $30/pt (a bit more than the $25 you are suggesting). But with more conservative numbers like dues growing at 3% and opportunity cost of 6%, the value of the subsidy doubles to around $60/pt.

Yeah,I don’t get your numbers. If I save $25/point unsubsidized upfront, it is certainly going to take longer than 4 years to realize dues savings when the savings today are only like $3/point.

I instead compare based on savings over rack or rental rates. And in that context, I would argue unsubsidized is a better value. So, with a budget of $20K, you’d save more overall money on vacations buying 220 unsubsidized points vs 170 subsidized.

 

[DanCali]

Yeah,I don’t get your numbers. If I save $25/point unsubsidized upfront, it is certainly going to take longer than 4 years to realize dues savings when the savings today are only like $3/point.

I instead compare based on savings over rack or rental rates. And in that context, I would argue unsubsidized is a better value. So, with a budget of $20K, you’d save more overall money on vacations buying 220 unsubsidized points vs 170 subsidized.

When you "break even" depends on your assumptions - how fast do dues grow? what is your opportunity cost? I never said it will take 4 years to break even, and I don't know why you'd expect to break even in 4 years? This is a 38 year contract. If you "break even" in 15 years and are ahead for the next 23 years, is that a bad thing?

I've done these calculations in many ways and they come out consistently. I usually just prefer to calculate the value of the subsidy - meaning how much more is a subsidized contract worth more than an identical unsubsidized one? But here is a different way to look at it consistent with how I tried to explain with words it in my prior post, but with more realistic numbers. This assumes that dues (and dues savings) grow at 4% and that your opportunity cost (time value of money) is at 6%. It assumes you pay $130/pt for a subsidized contract vs $95 for unsubsidized. You "break even" in 2040 and come out way ahead by 2062 when the contract expires. But if you also sell the subsidized contract in 2040 for a higher price than the unsubsidized contract, you still come out ahead even at that point.

 

[AwfulWaffle]

I wouldn't have ever bought into Aulani, wasn't even on my radar, if it weren't for it being a subsidized contract. Hawaii is a beautiful place but Oahu is not my preferred destination , give me Kauai and Maui any day, and since its very expensive to fly a family of 5 to Hawaii it is hard to commit to travel plans every few years here. At least with a subsidized contract I can spend those points on the east coast and not feel the guilt had I done it with a contract that cost me over 10PP annually. Unlike my SSR points, these SAP points come with the added bonus of giving me the 11 month booking window during peak travel times at one of my preferred destinations. I know I would have spent in the 130's but in the 115's then sure, it's on par with a small AKV contract but a bit more than a small SSR contract. Could I invest my money elsewhere, sure, but that principle goes to anything timeshare related....
Back to the discussion at hand, get you points now and over time you might get lucky and grab a unicorn here and there. You will likely be able to sell at or around the prices you pay today so it's more like borrowing until that tomorrow contract And who knows you might really lucky, as one other member here did, and grab a unicorn when you thought you were buying a stallion

 

[AstroBlasters]

When you "break even" depends on your assumptions - how fast do dues grow? what is your opportunity cost? I never said it will take 4 years to break even, and I don't know why you'd expect to break even in 4 years? This is a 38 year contract. If you "break even" in 15 years and are ahead for the next 23 years, is that a bad thing?

I've done these calculations in many ways and they come out consistently. I usually just prefer to calculate the value of the subsidy - meaning how much more is a subsidized contract worth more than an identical unsubsidized one? But here is a different way to look at it consistent with how I tried to explain with words it in my prior post, but with more realistic numbers. This assumes that dues (and dues savings) grow at 4% and that your opportunity cost (time value of money) is at 6%. It assumes you pay $130/pt for a subsidized contract vs $95 for unsubsidized. You "break even" in 2040 and come out way ahead by 2062 when the contract expires. But if you also sell the subsidized contract in 2040 for a higher price than the unsubsidized contract, you still come out ahead even at that point.

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So in this scenario, someone would have to spend $12,600 upfront for 360 points for a breakeven that will happen in 16 years…. and it would be longer if the cost was closer to the $137 being asked for the subsidized…. So… it’s a long breakeven….

 

[DanCali]

So in this scenario, someone would have to spend $12,600 upfront for 360 points for a breakeven that will happen in 16 years…. and it would be longer if the cost was closer to the $137 being asked for the subsidized…. So… it’s a long breakeven….

I think you meant $12,250 ($35 extra per point x 350points)?

The answer re "breakeven in 16 years" is both Yes and No... I'd argue for the "no", the breakeven is much earlier and I'll explain below.

Yes - if you consider the "breakeven" the point at which the math flips in that spreadsheet from post #23 and the subsidized contract is ahead (turns green). Personally, I don't think 16 years breakeven is terribly bad for a 38 year contract, but I also don't think it's a 16 year breakeven (see below).

No - in the sense that it's ignoring the resale values of the contracts, which is an extra layer of assumptions not included. For example, if you look at 2030 in the spreadsheet you'll see the unsubsidized contract ahead by about $27/pt ($49.65 vs $22.81). But what if you cashed out then and sold those contracts in 2030 and the subsidized contract sold for $30/pt more than the unsubsidized one at whatever resale prices prevailed at the time, after fees? In that case subsidized still comes out ahead and that's in just 6 years. In the most extreme example (ignoring broker fees and other transaction costs for illustration purposes), if you bought those two contracts today and sold them next year for exactly the same price you bought them, the subsidized one comes out ahead because of the lower dues ($2.43, plus a few pennies from one year of interest) even if you invest the $35/pt difference at 6% for one year and earn $2.10 in interest.

So while it's tempting to think of breakeven in terms of "years" the real breakeven is in probably more in terms of "price". Up to how much extra can you pay for the benefit of the subsidy to still be worth it, taking into account also future resale value differences?

 

[Jlo85]

When you "break even" depends on your assumptions - how fast do dues grow? what is your opportunity cost? I never said it will take 4 years to break even, and I don't know why you'd expect to break even in 4 years? This is a 38 year contract. If you "break even" in 15 years and are ahead for the next 23 years, is that a bad thing?

I've done these calculations in many ways and they come out consistently. I usually just prefer to calculate the value of the subsidy - meaning how much more is a subsidized contract worth more than an identical unsubsidized one? But here is a different way to look at it consistent with how I tried to explain with words it in my prior post, but with more realistic numbers. This assumes that dues (and dues savings) grow at 4% and that your opportunity cost (time value of money) is at 6%. It assumes you pay $130/pt for a subsidized contract vs $95 for unsubsidized. You "break even" in 2040 and come out way ahead by 2062 when the contract expires. But if you also sell the subsidized contract in 2040 for a higher price than the unsubsidized contract, you still come out ahead even at that point.

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So, I get your math now. I just look at it from a different angle:

1. I would use a higher opportunity cost. Avg stock market returns are 10%. Also, 6% undervalues the risk of buying a timeshare on an ocean IMO. At 10%, I show the NPV is only $4. At an initial investment of $35... I just think that's meh.
2. It undervalues that you can use those $35 savings to buy more points and save more money. Viewing it just in terms dues to me just really doesn't see the overall savings. Ands that's why IMO cheaper upfront = more points = more overall vacation savings.

 

[DanCali]

So, I get your math now. I just look at it from a different angle:

1. I would use a higher opportunity cost. Avg stock market returns are 10%. Also, 6% undervalues the risk of buying a timeshare on an ocean IMO. At 10%, I show the NPV is only $4. At an initial investment of $35... I just think that's meh.
2. It undervalues that you can use those $35 savings to buy more points and save more money. Viewing it just in terms dues to me just really doesn't see the overall savings. Ands that's why IMO cheaper upfront = more points = more overall vacation savings.

Assumptions are assumptions - can't argue with that! Historical annualized stock market returns will depend on the period you're looking at. Start in 1980 and it's probably 11%-12% annualized returns. Start in 2000, and it's more like 6%-7%.

If the stock market had an annualized return of 10% even just for the next 15 years, I'll be very happy - even if my Aulani subsidized purchase had a low NPV in hindsight

 

[AstroBlasters]

OP got an unsubsidized for $90pp with full 2023 points in OCT UY in ROFR! I think they will be very happy!

 

[lilsonicfan]

I have been looking at Aulani contracts, both subsidized and unsubsidized, and really like the analyses presented here. I was also thinking it might be about a 16 year breakeven, but if we sell the contract it may pay off sooner to have a subsidized one. Lots to consider.

 

[lilsonicfan]

There are a couple of sub contracts I'm looking at. One is my UY but doesn't have points till 2025 UY. One is not my UY but has 2024 points too. Similar price. I imagine I'd MOSTLY use the points at Aulani if I had them rather than using them as SAP but i don't know that for sure. Am I signing myself up for disaster to have two different UYs? I should mention that my WDW points are at SSR so I may well book FL at the 7 month mark anyway...

 

[AwfulWaffle]

There are a couple of sub contracts I'm looking at. One is my UY but doesn't have points till 2025 UY. One is not my UY but has 2024 points too. Similar price. I imagine I'd MOSTLY use the points at Aulani if I had them rather than using them as SAP but i don't know that for sure. Am I signing myself up for disaster to have two different UYs? I should mention that my WDW points are at SSR so I may well book FL at the 7 month mark anyway...

You are authorized one transfer a year so if you don’t go one year and you feel you won’t be going the following year then you can always transfer those points to your SSR member id.

 

[DanCali]

You are authorized one transfer a year so if you don’t go one year and you feel you won’t be going the following year then you can always transfer those points to your SSR member id.

I believe transfers are not limited if you are transferring between your own memberships. You can do multiple.

But I think there's an issue with "seeing" those points online when you try to make a reservation(?) So you have to call and book on the phone at 9am if you want to combine points from different use years(?) I haven't done it but at least that's what I seem to recollect reading somewhere.

 

[AwfulWaffle]

I believe transfers are not limited if you are transferring between your own memberships

Good to know in case I ever get another use year. I got lucky with finding an Aulani in my use year but it wasn't a criteria since i never plan on using my Aulani point, subsidized or not, for anything other than Aulani Same would be true if I ever get any Grand Cal points, which I doubt will ever happen lol

 

[AstroBlasters]

I have been looking at Aulani contracts, both subsidized and unsubsidized, and really like the analyses presented here. I was also thinking it might be about a 16 year breakeven, but if we sell the contract it may pay off sooner to have a subsidized one. Lots to consider.

I think one thing that helps the unsubsidized buyer is the sheer number of contracts available, which means that an aggressive buyer is more likely to have a fatigued seller take an offer.

The subsidized sellers seem to subscribe to the “it only takes one buyer willing to meet my price” mentality.

 

[DisneyMimiUSMC]

I think one thing that helps the unsubsidized buyer is the sheer number of contracts available, which means that an aggressive buyer is more likely to have a fatigued seller take an offer.

The subsidized sellers seem to subscribe to the “it only takes one buyer willing to meet my price” mentality.

Why do you think there are so many contracts available. It's an amazing resort! Is it due to airfare costs?

 

[AstroBlasters]

Why do you think there are so many contracts available. It's an amazing resort! Is it due to airfare costs?

There are 110ish contracts on the market.

Compare that to:

OKW: 250
BWV: 107
SSR: 377
AKV: 225
BLT: 176
CCV: 131

So, I don’t consider it an outlier relative to the size of the resort.

 

[RichVIII]

Why do you think there are so many contracts available. It's an amazing resort! Is it due to airfare costs?

Cost. Distance. Not best Island (in many people’s opinion).

We LOVE the resort but the at least two flights, a day in the air, general cost of things in Hawaii, time zone difference make it hard to justify the trip from the East Coast on the regular. We can generally fly to WDW in 2ish hours. West coasters have it a little easier. Now that Southwest flies there, we see it as more reasonable but it is still a lot of effort. We can be to Europe faster.

 

[DisneyMimiUSMC]

Cost. Distance. Not best Island (in many people’s opinion).

We LOVE the resort but the at least two flights, a day in the air, general cost of things in Hawaii, time zone difference make it hard to justify the trip from the East Coast on the regular. We can generally fly to WDW in 2ish hours. West coasters have it a little easier. Now that Southwest flies there, we see it as more reasonable but it is still a lot of effort. We can be to Europe faster.

We just purchased an Aulani contract and plan to visit every other year. We are deep into the points/miles game, so we will use those points to fly. For families that are paying cash for flights, I can see how that would be prohibitive for many.

 

[tidefan]

Cost. Distance. Not best Island (in many people’s opinion).

We LOVE the resort but the at least two flights, a day in the air, general cost of things in Hawaii, time zone difference make it hard to justify the trip from the East Coast on the regular. We can generally fly to WDW in 2ish hours. West coasters have it a little easier. Now that Southwest flies there, we see it as more reasonable but it is still a lot of effort. We can be to Europe faster.

Well, comparatively, it's not bad.

We went for 3 straight years from the East Coast (thanks SW!) and even with paying airfare, it was cheaper to go to Aulani for a week in a 2-bedroom than it was for us to drive the 8.5 hours down to WDW. This was because they stopped selling Annual Passes, so we would have had to shell out for tickets every visit. Now that APs are back, we have moved WDW back as primary, but we love Aulani so much that we will go every 2-3 years. In fact, we've been 6 times since 2012 (never, ever, before I bought DVC did I think I'd have 6 "once in a lifetime" trips...)