How did you pay for resale?

[taurus8012]

I have to laugh when the pay cash crowd come up with all the worst case scenarios when financing, like that wasn't considered when financing ,We might not agree on how to attain DVC but we can agree that the price will never go down. When I bought I knew two things DVC prices will go up and my family will continue to love Disney. I am Soooooo Happpy I did

 

[Ben E N]

I have to laugh when the pay cash crowd come up with all the worst case scenarios when financing, like that wasn't considered when financing ,We might not agree on how to attain DVC but we can agree that the price will never go down. When I bought I knew two things DVC prices will go up and my family will continue to love Disney.

Everybody is allowed to spend their own money how they best see fit. I like that this board is a good counterbalance the pixie dust salesmanship of DVC guides. Nobody is telling others what they should do, just what variables to consider when making a decision.

 

[Bing Showei]

I have to laugh when the pay cash crowd come up with all the worst case scenarios when financing, like that wasn't considered when financing ,We might not agree on how to attain DVC but we can agree that the price will never go down. When I bought I knew two things DVC prices will go up and my family will continue to love Disney. I am Soooooo Happpy I did

Historical data suggests that this is true as a long term trend. On a long term basis, Disney will likely track the health of the economy and stock prices.

But looking at it on any historical two or three year stretch the value could go up or down. 2007-2009 was not all that long ago. People dropped like flies from DVC because what made sense on skyrocketing home values (HELOC, anyone?) made a lot less sense just a year later. People lost jobs and had to sell. For every “I bought resale in 2009/10/11 and the value has since doubled” there’s another story attached to that same contract where somebody paid a lot more than that and took a hit on that sale.

Is this a “worst case scenario” that I’m holding up as an example? Sure. But it’s a reality just 10 years ago. And the market seems to be showing signs we’re coming down steadily from record market highs and record low inflation. Who’s to say we’re not on the precipice of another “worst case scenario”?

Looking at the OCC site, the number of foreclosed DVC properties today, even in a healthy economy, is disheartening. There is a correlation between when people have to sell and when prices are at their lowest. Luxury items are the first things to go in a down economy. Prices do go down.

The reality is the views on these boards are self-selecting and skewed.

Those advocating cash are likely to have a nest egg, emergency fund, secured life insurance, have the luxury of tens of thousands of dollars in disposable income, and that security is an important factor to their happiness.

Those that advocate financing have likely been able to do it with success. They’ve worked hard, paid their bills and have enjoyed Disney in the meantime with their families in a way they can’t imagine having forewent.

Absent from these perspective are the people who defaulted on their loans and wrecked their credit, or sacrificed their family’s ability to move on after they passed.

Absent also are the people who saved and saved but never had a chance to enjoy Disney and regretted it on their death bed.

Balancing out what works best for you and your family is going to be a very personal choice. Ignoring the economic reality of the market and seeing DVC as a sure financial bet is also another choice. But like financing a luxury purchase you really can’t afford, there will be people who will advise against it. And of course it’s your choice to laugh that off as well.

 

[DVCDisneyRunner]

When talking about the value obtained by DVC we like to throw in the idea that most are not taking into account the time value of money in their calculations on how much they have saved... Seems we do the same thing when it comes to purchasing DVC. There is an opportunity cost lost even when paying cash. If you pay $10k cash for a contract you have not done so without loss of something. You could have invested the cash. If someone else took 10k at the same time as you and invested it for 5 with a return rate of 8%, then you purchasing DVC (assuming no appreciation on DVC) cost you 8% interest that is $4693. (keeping it simple here)

If you have anything financed including a home, car, education.... you are giving up paying down the principle on that loan in order to pay for DVC with cash, so in effect you are financing the DVC with the money not paid to lower the principle of these other loans.

Basically everyone is giving up something to purchase DVC and most are "financing" it even if they are telling themselves they are not, since very few of us are debit free. For the few that are debit free there is still opportunity cost lost from not investing the money in something with higher yields than DVC. The thing is all that have purchased have decided that the money is better spent on DVC to provide a better quality of live then to use the money to it's "full potential" to create more wealth we can not take with us.

I agree you do not want to get in over your head financing things you can not afford. I agree you need to be aware of the cost involved to finance and how that impacts the overall value of something (DVC in this case). However, if you are in a position to purchase based on your personal financial situation and are comfortable giving up the "opportunity cost" regardless of how you pay for it then it is your decision to make.

Here is another very interesting thread discussing "would you buy again"

https://www.disboards.com/threads/would-you-buy-again.3670850/

People brought up the opportunity cost you give up if you are keeping DVC. Basically if you are keeping your contract you are essentially saying you would buy again because every day you decide not to sell you are deciding to buy more or less (of course you have to ignore transaction cost... but none the less a solid point).

 

[bababear_50]

I was planning a Disney World vacation.
The vacation was being put on a home equity line of credit till my tax refund came in.
I had read a few posts about DVC and then went into full blown investigation of timeshares.
http://tug2.net
The total cost of my trip was what a 40 point OKW resale contract would cost me.
Yearly dues are taken care of by setting up a *Christmas Time Fund* at my work credit Union.
By using banked and current points we were able to take a wonderful first trip.
It was a good way to get my feet wet with DVC.
I'll also mention that without buying into DVC I am one of those people that probably wouldn't take a vacation,,at least I hadn't up to that point.
I completely understood that the *value* of what I bought will go down as the years go on.
BUT you can't put a *value* on the excellent vacations, shared times and memories that I've made with my family.
Hugs Mel

 

[nikerbokers]

When I first considered DVC a couple years ago, I would have had to finance and I wasnt willing to do that. I didnt need another monthly payment when we didn’t even own a home yet.

Fast forward 2 years later, our financial position (which wasn’t bad in the first place) has massively improved due to circumstances. I paid cash for our 160 point GCV contract last year and my cash offer for 100 points at Poly (same UY) was accepted and waiting for ROFR. I would never finance. Cash is the only way to go for us. My thinking (again just my thinking... no judgment to anyone) is if I have to finance it, I probably cant afford it and have other obligations I need to pay first.

 

[DVCDisneyRunner]

When I first considered DVC a couple years ago, I would have had to finance and I wasnt willing to do that. I didnt need another monthly payment when we didn’t even own a home yet.

Fast forward 2 years later, our financial position (which wasn’t bad in the first place) has massively improved due to circumstances. I paid cash for our 160 point GCV contract last year and my cash offer for 100 points at Poly (same UY) was accepted and waiting for ROFR. I would never finance. Cash is the only way to go for us. My thinking (again just my thinking... no judgment to anyone) is if I have to finance it, I probably cant afford it and have other obligations I need to pay first.

Is your home paid for 100% no mortgage? is your retirement fully funded? if you own a car is it also done without financing (including future cars)? if not then you are also financing your DVC. You are just doing it in a more round about way... not saying if one should or should not, but giving up cash for DVC while financing other things is the same as financing the DVC.

See my previous post https://www.disboards.com/posts/59056783/

 

[DianeW]

Cash. I don't finance my vacations, so I would never finance a DVC purchase. We paid cash for 300 OKW points, and next year, we're planning on paying cash for another 160-200 points at AKV.

 

[nikerbokers]

Is your home paid for 100% no mortgage? is your retirement fully funded? if you own a car is it also done without financing (including future cars)? if not then you are also financing your DVC. You are just doing it in a more round about way... not saying if one should or should not, but giving up cash for DVC while financing other things is the same as financing the DVC.

See my previous post https://www.disboards.com/posts/59056783/

Not to get too personal but I paid off my car and my home before I did DVC. We also had much more debt I wanted to pay off before pursuing DVC- the mortgage and car were just bonuses/blessings. A home and car are necessities, which financing in my life (not yours or others have to feel the way I do) is fine. If DVC will make things tight on paying those necessities or I can’t pay other debt obligations, then it wouldn’t fit my life. If my mortgage wasn’t paid off before DVC, that’s fine as long as I can still live my life not struggling bc of an extra payment and I’m not going to add debt somewhere else. No matter how much I love the Disney life.

 

[DisneyRegulars]

To answer OPs original question, good idea or bad idea, we took out a personal loan from my credit union for the very reasonable interest rate of 4% for 5 years. So that may be an option for you if you decide that financing is in your best interest.

 

[crisi]

People brought up the opportunity cost you give up if you are keeping DVC. Basically if you are keeping your contract you are essentially saying you would buy again because every day you decide not to sell you are deciding to buy more or less (of course you have to ignore transaction cost... but none the less a solid point).

But there are other factors than opportunity cost - there is the idea of marginal utility. We could sell our DVC and get about $15k for it. We could invest that $15k.....but that $15k would represent less than 1% of my overall stock holdings. The marginal utility of that $15k in the stock market isn't very much - since I have money, I value more money less. This plays out in ways that would be really strange to someone else. For instance, my husband quit a job he hated to become an independent consultant with no income security, knowing that the chances were very good that the company would be sold in less than a year and his stock buyout would be worth nearly six figures. But opportunity cost is more than just money - its value - and the value he placed in not having to go into a soul sucking job every day exceeded the value of the potential buyout (which did happen - and he would have gotten an extra $80k had he stayed six months).

 

[MrInfinity]

I appreciate the sentiment of the pay cash or nothing crowd, but from a strictly numbers standpoint financing can make sense. Consumer Reports did this analysis in 2016 on Poly assuming a $168/point purchase price financed with a 7 year/8% loan: https://www.consumerreports.org/personal-finance/is-a-timeshare-vacation-a-good-value/

From Consumer Reports of all places, ignoring the biggest costs. Sure you recover your initial outlay in 13 years. But it blatantly ignores the fact that if you didn't buy a timeshare, your $25,200 would (should) be earning you ~5% in the stock market, which historically has earned 7%-10%. Over 13 years, 1.05^13 is 1.88, so you would have earned .88 * 25,200 which is another $22,318 in profit. Your $25,200 in the bank would be $47,518 after 13 years at even a modest rate. THAT is what you need to earn back to break even.

I can tell you my experience as I asked the same question thirteen years ago.... the pay cash or nothing advice almost won out. Tide turned when I realized my family and I was a Disney addict LOL...

On the other hand, I agree with this notion. Life is short, and one should spend their money doing what they want to do. It doesn't have to be a savings to be useful, fun, or something you'll thoroughly enjoy. In that regard, if you have to finance and that gets you a timeshare that you'll get oodles of joy from, then go for it. That's what money is for. As long as you have a plan to pay for it and it's within your budget then what else matters? You're not buying it to make money you're buying it to get vacations!

 

[pineapplepalms]

We paid cash for our resale contracts and used credit cards for our direct purchases to earn rewards but paid them off right away, so effectively cash. Everyone's financial and life situations are so individual that no one can really say what is best for someone else, but it's nice to share our stories and perspectives. We liquidated some stock that keeps accumulating through job bonuses (we should really be doing this more often) so we thought of buying DVC as a sort of diversification.

 

[Madame]

From Consumer Reports of all places, ignoring the biggest costs. Sure you recover your initial outlay in 13 years. But it blatantly ignores the fact that if you didn't buy a timeshare, your $25,200 would (should) be earning you ~5% in the stock market, which historically has earned 7%-10%. Over 13 years, 1.05^13 is 1.88, so you would have earned .88 * 25,200 which is another $22,318 in profit. Your $25,200 in the bank would be $47,518 after 13 years at even a modest rate. THAT is what you need to earn back to break even.

But you’d be spending that money, & perhaps more on vacations to replace your timeshare vacations.

This is only true to the extent that you wouldn’t be using that money for vacation anyway (which many of us would I think).

 

[MrInfinity]

But you’d be spending that money, & perhaps more on vacations to replace your timeshare vacations.
This is only true to the extent that you wouldn’t be using that money for vacation anyway (which many of us would I think).

Right. But you wouldn't spend it all, now. To account for this I made a spreadsheet that took the amount spent on cash vacations out of the principal while adding back interest. For example out of your $25k cash, you might spend $4k on a vacation. But you'll earn $1250 interest, and not spend $900 in dues. So compared to DVC, you'll have $23,150 left next year, from which you'll repeat the math. Point is the biggest cost in these equations is the value of having $25k ~now~ and Consumer Reports glossed over this to conclude that if one buys retail -- you'll break even after 13 years which is crazy. Buying retail the break-even is more in the 30-40 year range depending on the parameters used.

 

[Madame]

Right. But you wouldn't spend it all, now. To account for this I made a spreadsheet that took the amount spent on cash vacations out of the principal while adding back interest. For example out of your $25k cash, you might spend $4k on a vacation. But you'll earn $1250 interest, and not spend $900 in dues. So compared to DVC, you'll have $23,150 left next year, from which you'll repeat the math. Point is the biggest cost in these equations is the value of having $25k ~now~ and Consumer Reports glossed over this to conclude that if one buys retail -- you'll break even after 13 years which is crazy. Buying retail the break-even is more in the 30-40 year range depending on the parameters used.

Maybe it’s because we are a family of 5, but we are not vacationing anywhere for $4000. It costs us over $1000 USD for a couple nights (inclusive) at a close by Great Wolf Lodge.

I can see if you have a family of 4 or less, maybe the value would be less & the upfront outlay would seem more maybe.

 

[gharter]

Is your home paid for 100% no mortgage? is your retirement fully funded? if you own a car is it also done without financing (including future cars)? if not then you are also financing your DVC. You are just doing it in a more round about way... not saying if one should or should not, but giving up cash for DVC while financing other things is the same as financing the DVC.

See my previous post https://www.disboards.com/posts/59056783/

You are combining unrelated things. Financing a house or car that is a necessity is totally different than financing a vacation which DVC is. I have no issue with a home mortgage of car payments. I don't personally believe that financing a DVC purchase is wise unless you have a dependable income coming in and a well defined plan to get it paid off.

 

[kboo]

We paid cash for both of our resale contracts. (more on this later).

Thanks for all the input! We have half of the money saved and would not take out a high interest loan. The max amount I would take any loan out would be a couple of years. I was going to buy enough points for a week in March and 4 days the week before Thanksgiving. We would have enough cash to buy 100 points now and get another 100 in a year or two. Is there a downside to doing it that way? I just hate to spend thousands of dollars on renting points when that could go towards my own. I am probably over thinking all of this but I really do not want to stay off property or skip a year. I am also concerned that when they are done with all the parks and resorts the prices will go up. Thanks again.

If you have the cash for 100 pts now, and 100 in a year or 2, break it up that way and then you don't have to worry about the financing issues. 2x100 point contracts are more liquid in the event that you decide to sell, or god forbid, HAVE to sell in the near future. We did essentially the same thing (but different contract sizes) in early and late 2017 for our 2 resale contracts. And also glad, in retrospect, to have our contracts at 2 different home resorts. Again, this is a very personal decision based also on how you vacation. If you bought 100 points now, the earliest you'd be planning a vacation would be March 2019 anyway (depending on your home resort), I wouldn't think of buying now to book anywhere for Thanksgiving 2018. So by March 2019, most likely if you bought 100 points you'd have access to at least 200 points (and maybe up to 300 points) because of the ability to bank and borrow. Thus, you could put off your decision to buy more points for another year or so.

It CAN make sense, but it involves risk....and you need to be able to afford the risk. If the economy crashes, you lose your job, and you can't pay your DVC loan, you'll find yourself trying to sell - probably at a loss. Financing works best when you don't need to finance. Or when you are lucky or in a situation where you know that the risk you are taking on isn't high (you work in a high demand field, you are properly insured against illness or death). The people who understand the nuance don't tend to ask the question.

Your money value to time idea is flawed - because if you have a family that is dependent on you - then unless you are very well insured, if at some point in the future you can't enjoy DVC, then you are probably not going to be doing a great job of supporting your family. Your first obligation should be to providing them with financial stability - not Disney vacations.

This is the risk that often gets overlooked when people talk about DVC prices always going up, and there "always" being a market, so one can sell "if" they need to. If there is a serious financial emergency going on in one's life, then one doesn't have the luxury of time to hold out for asking price.

No one gets married expecting to get divorced later, and yet ~50% of marriages end in divorce. That doesn't mean one should never get married, but one should carefully consider THIS relationship with THIS partner and whether marrying them now is the right choice at the right time.

In support of your point:
When I bought some additional points at VGF, I looked in detail at the recent transactions on the Orange County Comptrollers site to try to understand retail pricing. I was surprised how many of the total were foreclosures by Disney. DVC contracts have pretty high value in the resale market, but for people in financial distress, many found it was better to let Disney foreclose, than trying to sell on the resale market and come up with principal, delinquent interest, and delinquent dues. They end up wrecking their credit rating because when they are in financial distress, the Disney contract becomes a low priority compared to their primary residence, food, utilities, and the like.

I did the same - and learned that our VGF contract was a foreclosed one being sold by the finance company. Disney did not want it back, and the bank that owned it made a non-emotional, commercial decision to sell that contract at $135 pp when private sellers were listing at $145-$160. THE BANK had no emotional attachment to Disney or any ongoing financial outlay or mortgage payments, and they decided it was in their cold hard financial interest to sell at $135pp. So I wouldn't rely too much on what resale market asking prices are now as a backup to what one can do with a financed contract if one's financial situation heads south.

Is your home paid for 100% no mortgage? is your retirement fully funded? if you own a car is it also done without financing (including future cars)? if not then you are also financing your DVC. You are just doing it in a more round about way... not saying if one should or should not, but giving up cash for DVC while financing other things is the same as financing the DVC.

See my previous post https://www.disboards.com/posts/59056783/

Our car is a 12 year old car that we paid cash for. No plans to buy a new car anytime soon, and if we do, it will be for cash as well. Retirement and kids' 529s are fully funded (max tax benefit), and DH and I are in recession-proof jobs. Credit cards paid in full every month. Only about 25% of our home's value is financed, at about 3%. so yes, to some extent we are "financing" our DVC, but at a much lower 3% rate.

 

[ScubaCat]

All these calculations are great, but it's the intangible ones that really sell this product. For instance, if you want to take kids over the years, what's it worth to you to have a comfortable 2BR villa onsite every year and not have to cough up the outrageous price for it every year, knowing it'll progressively get more expensive over time? For me, I enjoy the Disney resorts enough to go annually, DW wanted DVC, I looked at the cost of DVC vs. therapy from now until 2042, got a headache, and made an offer. That was my calculation.

YMMV.

 

[crisi]

All these calculations are great, but it's the intangible ones that really sell this product. For instance, if you want to take kids over the years, what's it worth to you to have a comfortable 2BR villa onsite every year and not have to cough up the outrageous price for it every year, knowing it'll progressively get more expensive over time? For me, I enjoy the Disney resorts enough to go annually, DW wanted DVC, I looked at the cost of DVC vs. therapy from now until 2042, got a headache, and made an offer. That was my calculation.

YMMV.

I've said it before, the best calculation is "does it work for me" + "can I afford it" = "go ahead and buy" However, those first two points can be sticky - it does NOT work for everyone and for some people it does not end up working well financially. Do the research on both of those.