Break Even Point for Disney Vacation Club Contract Purchase | DVC Cost Analysis

[@PixieDustPhD]

I hope this has helped you think a bit about the monetary side of purchasing DVC! Let me know what variables you think are most important to factor into your own break even analysis. And, as always, if you have any questions about Disney Vacation Club let me know!

[@patm95]

Best analysis ever. Thank you.

[@PixieDustPhD]

Cheers, thanks so much for watching and dropping a comment. I appreciate it!!

[@CheerupA1]

That drawing :D

[@RankingTheMouse]

Ahhhh needed this video 2 years ago. This is gonna be so incredibly helpful to so many people!!!!!

[@PixieDustPhD]

Aw cheers, Shaun, thanks! I hope people find it helpful... that's always the goal, haha.

[@RankingTheMouse]

@@PixieDustPhD definitely. 3 of my favorite points you brought up, the first 2 being what people often overlook: 1) Opportunity Cost of buying a contract rather than keeping/investing that money 2) Inflation, locking into the current price for the next 40+ years when price per point could potentially double down the road is huge 3) Philosophy/intangibles of knowing you own a timeshare at Disney that can't really be quantified mathematically. All 3 great points to be brought up that most don't talk about when doing DVC math

[@PixieDustPhD]

@@RankingTheMouse to your second point I’ve really wanted to do a video on historical pricing of DVC but also hotel prices and looking at those rates of growth… I mean obviously the direct purchase price of DVC has exploded but yeah I mean you have your points and maybe the points chart gets tinkered with a bit but not a ton. And annual dues go up but I don’t think at nearly the same rate as hotel prices. But I haven’t been able to find longitudinal historical data on this yet that seems legit (lots of blog posts with guesses but ehhh). But maybe someday! It’s definitely something I don’t think folks really deeply consider enough, along with opportunity cost and the non monetary aspects of buying a timeshare in general.

[@RankingTheMouse]

@@PixieDustPhD that really would be an incredibly helpful video. You're 100% right though I have no clue if/how that info would exist online....itd almost have to be something you researched over a few year period & did waayyyyy down the road. Thatd be so much work though haha

[@PixieDustPhD]

@@RankingTheMouse Yeah... I think I can probably find some historical DVC direct pricing data that I would consider reliable, but hotel pricing is just another beast. I could just start keeping track here and there on my own.... you've definitely planted an idea in my head haha. But we'll see lol

[@tarazanardi157]

Thanks for the incredibly thorough video! I think you presented really helpful information for understanding the basics of how a DVC contract could save someone money in the long run. That being said, I do think the emotional component is equally important, and, as you mentioned, the goal isn’t (really) to save money overall, but to ensure that you are making time for vacations at Disney and just pre-paying for the deluxe accommodations beforehand. Perhaps that’s a healthier and more realistic viewpoint, and, as you said, it all comes down to what a person values (vacations, time with friends and family, mental breaks, princesses, pixie dust, etc.). This video will certainly come in handy in the future when I can hopefully become a DVC member. Thanks again!

[@PixieDustPhD]

People always discount the emotional component but like... if you didn't love going to a place in your heart of hearts would you even consider buying a timeshare?! Thanks so much for watching and sharing, Tara!

[@quester307]

Wow, fantastic video. I need to run this past the family for our future possible purchase. Thank you for taking the time to be so detailed with it. Side Note: Come on 500 Subscribers!

[@PixieDustPhD]

Aw thanks, Jeffrey. I hope it's helpful for you and the family! And yes... we are inching closer... I'm trying not to check too often but it is so exciting! You've really been here through most of the growth, thank you!

[@NoBSEateries]

Love all your info. You make it simple for everyone to understand and love your breakdowns. -S

[@PixieDustPhD]

Aw thank you so much. I really appreciate your continued support, Stephanie!!

[@nycp1969]

This is a fantastic overview of several perspectives of looking at the value and break even points of DVC. Thank you very much, and good luck with your health concerns.

[@PixieDustPhD]

I'm glad you liked the video! And thanks so much for the well wishes... every day is an adventure in my body hahah.

[@roseytano6385]

Great presentation!

[@PixieDustPhD]

Thank you so much -- I really appreciate the kind words!

[@thejusticejen]

I enjoyed this video. You even addressed opportunity cost of not investing the amount in an index fund. Love it. But you’re right, even though DVC isn’t an optimal investment, it’s one way to allocate a small amount of net worth to prepay for vacations specifically. I can’t understand sinking in huge amounts though (e.g., $50K+), that’s much better being parked in the S&P. I’m true to my Asian heritage and always try to get the math in my favor. We didn’t make an offer before considering how long it would take to “break even.” It’ll feel great when you’ve recouped the purchase price and are staying for “free.” Our Poly per point is $10.95 for 2021, a total bargain compared to the cash rack rate we paid for 5 days at Aulani. Don’t worry Jackie, your BLT contract has already appreciated even if you wanted to immediately turn around and sell now!

[@PixieDustPhD]

I mean, if folks have $50k to truly blow on whatever they want more power to them lol. That ain't me though! I definitely sometimes see 300+ point contracts and absolutely do a spit take haha. $10.95/point is so great compared to the general hotel prices! I think even without looking at a break even, just comparing what you're spending this year on DVC compared to the hotel rate for sure feels nice and makes DVC more justifiable haha. And gosh the BLT resales right now are WILD! I think they're up roughly $30 from what I bought in at, less than a year later. I assume this is a weird upswing and it'll come back down soon (maybe??), but yeah... definitely knowing I could get my money back is huge for me. Thanks so much for watching and providing your input, Jen! And funny--I too am Asian. Maybe that's partially why we think so similarly often haha.

[@Sunflower00987]

Interesting video. I would have liked to see how you handled if a person financed their purchase. Your example was if a person bought their DVC points in CASH. If didn’t pay in CASH, the equation would need to include the financed amount not the “purchase price” sold by Disney. Based on financial data, it would seem most ppl would finance this purchase vs pay by CASH since initial “buy in” is cost of buying a new car or house mortgage if broken out by month. If anyone is buying into DVC, this person is doing VERY well financially to have this kind of income tied up for so many years. In end, DVC intrigues me, but I cant pull trigger for it based upon the math.

[@PixieDustPhD]

Hey there! Obviously it's difficult (impossible) to customize this type of informational content to every person's individual situation, so I try to present the framework and logic behind ways you can customize it to yourself. In terms of financing you're still going to have a total cost. You can check out this video where I show you have to use an amortization table to estimate how much you may end up paying between your principal cost amount and interest: kzbin.info/www/bejne/jYKsh2CFd8yXnbc Once you know that, then you plug that estimated total cost in to whatever break even model makes most sense to you. But you're right, people paying in cash are doing well financially. And this is not a judgement statement, but my personal opinion is that DVC is not a life necessity like rent or a car (depending on where you live), and really is a luxury extra purchase item. If you can't genuinely afford it, it may not be for you (not like *you* you, but the royal you) at this time. If you take a look that the ^^ interest video, depending on what rate you get I mean the interest can be a crazy huge amount and negate any savings that may come from DVC. In my opinion I would think if you can't pay off the DVC purchase in about 6 months to a year or so it may not financially make sense. If you have to torture the math to make it work out that's probably a sign it may not be for you at this time!

[@justinbaker2883]

This was awesome. Video idea do that opportunity cost section. The cost you would have spent in upfront + 1st year dues, then YOY adding in dues amount; growth rate of 8% per year. Each year subtract cost of renting said points. How would it come out.

[@PixieDustPhD]

Oh that's a thought, nice, thanks. I think obviously it would really depend where you rent and if you had the actual upfront cash to spend fully on DVC. And then realistically, I think I mentioned this in the video (sorry it's been so long since I made this one, I forget lol), if you did just have that lump of cash would you purely invest it? For me, I know I wouldn't. I think a lot of people would put it toward other vacations or a wedding or a car or a downpayment on a house, etc. So it's always hard to do a truthful head to head comparison, but I love where your head is at!

[@johnaesposito1737]

I nearly ignored the buy in cost, figuring I’m likely to eventually resell and will get back more than what I paid for. Instead I focused on the dues. The problem is, of course, you just never know. I bought VGF partly because I figured, with so few rooms, there would always be demand for contracts. But now that they are selling more contracts for new VGF rooms, I’m not sure I’d have made the same choice! The math would have changed a lot if I’d had to finance.

[@PixieDustPhD]

That's perfectly sound logic imo! I didn't necessarily do break even math when prepping for my purchase... it was just like, I knew how much renting points costs. I knew we enjoyed staying in a studio on property way more than staying off property. So I figured it would pay for itself eventually haha. Dues did come to mind, luckily for both of us our dues are pretty low. But like you said, you never really know about the future! And yeah with the new 200 studios at VGF I'm sure that would factor in. VGF is still, overall though, not gonna have very many rooms. And studios are the most in demand by far so Im sure your contract will still retain excellent value!!

[@nycp1969]

Something to note about opportunity cost is that some people have the idea that they can invest what they might spend on a contract and then vacation on the yearly interest they earn while holding on to their principal. But modest sums of money don't grow much when you make yearly withdrawals on them. A contract of, say $20,000, if invested, will not likely yield enough growth each year to pay for a WDW accommodation. Like you said, financial investments are best seen as long term and need to be left alone to achieve compound growth. You can't game the S&P to pay for your WDW vacation. I think anyone considering DVC needs to look at their own financial picture. Important questions to ask are: If you don't own your home, would you like to? If you have children, have you planned for their college tuition? If you have a car payment, is it a reasonable one? Do you have retirement savings? Do you have an emergency fund? Do you have to pay for health care or elder care? Do you have credit card debt? If your financial situation is is good shape, I'd say buy the DVC contract if you want it and don't think about opportunity cost.

[@PixieDustPhD]

Yeah I fully agree with all these points. I had no idea there are people who legitimately think they can invest smaller sums of money and use the gains to pay for vacations... that's definitely not gonna work out if you aren't investing a LOT and I'm guessing anyone who has to actually think about DVC doesn't have that kind of money to invest hahah. Financial literacy, at least in this country, seems pretty low and it's sad and scary. I've had some email chains with folks trying to assess if they can buy DVC and like you said they wanted to buy a house but didn't even have $5k to put down... well then don't buy DVC! What! Priorities lol. I suppose what folks consider is "good financial shape" varies widely and I am probably more on the conservative end of that. But at the same time it's a bit ridiculous to say oh you really want a house or you want to save for law school or your kids tuition etc, but you don't even have a "small" amount of money to put towards that but you're looking at financing a $20-40k DVC purchase. That's just... not logical to me at alllll lol. Sometimes emotions / desires get the best of people I think!

[@nycp1969]

@@PixieDustPhD I would love it if Disney didn't offer financing for DVC. People should not do that except under a very narow set of circumstances I'd prefer to not discuss. I hate to think of people not having financial literacy but from what I've heard, half of people have no savings at all and struggle under credit card and medical debt. I'll bet some of these people have at least considered financing a DVC. I think financial literacy is not promoted in this country because if people understood why they have so little, they might stop carrying water for a political system that prioritizes corporate interests over their interests. Sorry to get political. Disney magic, Disney magic...lol.

[@PixieDustPhD]

@@nycp1969 Ha I think we are of a very similar mindset here. And yeah Disney magic, but also uh real life comes first! And certainly corporate interests permeate all aspects of life in some positive and some negative ways. No worries about being too negative if it's a fair and thoughtful criticism. I will delete comments that are just straight up hateful but you are no where near that territoy!

[@choreomaniac]

I personally think it best to only forecast about 10-20 years out. Beyond that very small differences in assumptions can mean very large differences in outcome. So, if we look at total costs and benefits for a contract held for 10 years we can see it would cost about $20k total including fees. I think it’s ok to leave out inflation as it seems like a wash. The real unknown in this scenario is the value of your contract at resale. In 2030, if you can get $10k in today’s dollars for it (which I think is quite reasonable) then it only cost you $1000 per year net for 4.5 resort days per year or about $220. That’s about what you would get at a value resort. Looking at contracts bought in 2010, it appears that they are selling for more than they were purchased for, so if you could sell it in 2030 for 15k, that would mean only paying about $110 per resort day. I don’t see many people including this in the calculation, even though it might be the largest financial factor. I think it is hard to forecast because it requires continued good management of DVC by Disney: buying back contracts, building new resorts, investing in upgrades, etc. If Disney stopped these things, the value of the contract would drop like a stone.

[@PixieDustPhD]

As always, all super valid points! And I think the ability to resale if needed is crucial, but for the most part I think folks buy DVC with the intent on keeping it. Hopefully! I have taken a brief look based on limited past resale data on trying to predict if you sold a contract how much you'd make back -- this was specifically for Hilton Head and Vero Beach on this video: kzbin.info/www/bejne/qpuUi6amftGZh9k It's definitely an interesting thing to consider and try to predict, though of course the future is uncertain. I totally hear your point and it's absolutely valid, I do think it's a big of a side tangent from the main topic of a break even point though. I do think Disney has huge incentive to keep managing DVC well though. They definitely want to protect the value of their product... even if thats folks going to the resale market, it still helps them with direct pricing and overall that means folks buying resale are still coming to Disney and spending their money there! So good to hear your perspective and points, as per usual!

[@jcbnyc2009]

Direct contracts. I compare moderate/value discounted rates vs my cost. I was never going to consistently stay deluxe, let alone a villa.

[@PixieDustPhD]

Oh wow! So you bought a direct contract, when you previously would go at discounted rates for moderate/value? That's so interesting! Obviously there's more than just monetary value for a timeshare, but do you feel like its working out for you overall? For people consistently staying in deluxe's the math is easier, your situation is definitely more unique!~

[@jcbnyc2009]

@Pixie Dust PhD yes. Because eventually we would staying at Poly and basically paying All Star prices. Regret was not buying resale earlier. We are locals and do short stays. So it is different since I know I won't get a full week 7 months out.

[@PixieDustPhD]

@@jcbnyc2009 Ahhhh gotcha! Yes being local definitely changes the equation. And for sure as the value prices go up and up, DVC is starting to hold its own! Definitely with all DVC the earlier you can buy the more it will pay off, but hey we all have our own journey with getting to that purchase (or not). I sometimes look at historical pricing and wow, ya those folks who bought into OKW back in the day are the real winners here hahaha. Thanks for sharing!

[@geoffreyoltmans4356]

You might come out ahead on the used market… might… but using the DVC Model Point at the Riviera it’s a total ripoff. I don’t know who is paying rack rates of $600/night at a Disney hotel, I know they must, but I would never pay those rates, and neither should anyone else!

[@PixieDustPhD]

Riviera is rough in some respects, for sure lol. And I hear you about rack rates, it's not something I think I would do probably...? But ya I actually know a decent amount of people who go every 2 or 3 years and DO pay that full rate to stay at Grand Flo. I think that Disney World appeal is sttrroonnngg and staying off site adds a pretty big layer of inconvenience for a lot of travel parties with kids or folks with mobility issues.

[@CheerupA1]

One of the issues with these types of analyses is that if you were not a DVC member you would comparison shop many hotels and sometimes get much lower rates

[@PixieDustPhD]

So so very true! The underlying assumption absolutely is you would stay on property anyway. If you're happy largely staying off property, DVC probably isn't a good choice!