Paying for DVC


#1

As some of you know, I have been doing “extensive research” (ie questioning DVC members here at MB) into purchasing DVC.

This weekend I was having a “pretend you won a million dollars” talk with a friend and I stated that I would invest in Tys education, get an appropriate house (not a mansion but a comfortable house in a good neighborhood), pay for DVC cash and invest the rest.

My friend freaks out and says that paying for a DVC in full would be the dumbest :blink: thing I would ever do b/c I could go on the payment plan and not give WDW the satisfaction of having earned the interest on my money when I could earn that interest.

I figured I would save in the finance charges anyway.

So the question is…

If I were to purchase DVC through WDW what kind of interest rate would they charge me?

OR

Who is right in general?

Lisa


#2

Paying cash is always best because it lowers your end total. I believe the lowest interest rate DVC offers is 10.9%. You are not going to earn more than 11% on that money if you were to keep it in the bank so your friend is wrong.


#3

But you pay interest to Disney if you get on an installment plan, and the rate is fairly high. It is not an interest-free loan. You have to decide whether you feel confident that, if you invest in something else, you can earn more interest than you’d be paying Disney for the loan.

We paid in cash for our membership, so I don’t have all the numbers in front of me, but for instance, if they are charging 10 percent for the loan, are you sure that you would earn more than 10 percent if you invested the money some other way.

And anyway, by the time you are done with all your installments, you have paid a lot more for the membership than someone who has paid cash.


#4

Pay cash, if you have it, there is NOT a good enough reason to make payments if you don’t need to. That’s just silly talk to me.


#5

I said the same thing. I used 10% as the example. So if I just so happened to find something that was more than 10%, ie 11% would it really be worth it in the end? For 1%? I don’t think so.

PLUS, this question is valid b/c there is a possibility that I may be coming into money in about 2 years, that is why I am taking this seriously.

Thanks everyone for your input!

Lisa


#6

[QUOTE=lisalovesmickey;868718] I may be coming into money in about 2 years, that is why I am taking this seriously.

[/QUOTE]

My address is 215 Jonson Place…

:laugh::laugh::laugh:


#7

[QUOTE=WishUponAStar;868723]My address is 215 Jonson Place…

:laugh::laugh::laugh:[/QUOTE]

LOL! Not millions or anything but something that will allow us to invest for Tys education and DVC!

For Anything in excess of that I have made note of your adderss! :laugh:

Lisa


#8

Paying cash always makes more sense than doing payments.
DVC has 2 different interest rates depending on your credit rating.

However, the payments aren’t unreasonable according to the schedule we received in our Dreams book, and even with the interest it still pays for itself over and over for the time you get to enjoy it.


#9

[QUOTE=lisalovesmickey;868727]LOL! Not millions or anything but something that will allow us to invest for Tys education and DVC!

For Anything in excess of that I have made note of your adderss! :laugh:

Lisa[/QUOTE]

Thank you :happy: Duely noted, should I come into any money I will ask for your address. :tongue:


#10

LOL… if you find an investment that pays 11%, please tell me what it is! :laugh:


#11

We could put it into a “who needs to go to Disney right now” fund… Then we could all meet for a trip…

Just a thought-HA HA!


#12

I echo everyone’s opinion that cash is best, if you can afford it. However, many people miss the true interest rate, or more appropriately, the return on investment. Essentially it works this way:

The interest +/- the realized equity over the life of the real estate that is owned/leased. If you by something for $10,000 and pay 10% interest annually for 10 years it costs $20,000 (assuming it is paid for after 10 years). If the property appreciates to $15,000 over the same 10 years you made $5,000 in real estate value, subsequently only costing you $5,000 in interest if you sold it for $15,000. Your real interest rate (ROI) is 5% not 10%.

On the other hand, if you take the same property for $10,000 and pay the same 10% interest annually for 10 years, costing you the same $20,000 total (assuming it is paid for at the end of the 10 years) and you can only sell it for $5,000, it has cost you $25,000 total, which is a 15% annual interest.

Now I feel like I have done some work today.


#13

[QUOTE=CarolinaTilt;868856]I echo everyone’s opinion that cash is best, if you can afford it. However, many people miss the true interest rate, or more appropriately, the return on investment. Essentially it works this way:

The interest +/- the realized equity over the life of the real estate that is owned/leased. If you by something for $10,000 and pay 10% interest annually for 10 years it costs $20,000 (assuming it is paid for after 10 years). If the property appreciates to $15,000 over the same 10 years you made $5,000 in real estate value, subsequently only costing you $5,000 in interest if you sold it for $15,000. Your real interest rate (ROI) is 5% not 10%.

On the other hand, if you take the same property for $10,000 and pay the same 10% interest annually for 10 years, costing you the same $20,000 total (assuming it is paid for at the end of the 10 years) and you can only sell it for $5,000, it has cost you $25,000 total, which is a 15% annual interest.

Now I feel like I have done some work today.[/QUOTE]

It is unbelieveable but i actually understand what you just said…

I was right and my friend is wrong.

Right?

Lisa


#14

[QUOTE=lisalovesmickey;869236]It is unbelieveable but i actually understand what you just said…

I was right and my friend is wrong.

Right?

Lisa[/QUOTE]

Lisa – Our rule of thumb: ALWAYS avoid paying interest whenever possible. Otherwise you end up paying MUCH more for the same purchase.

And even though I don’t believe you can count appreciation or resale value of a DVC membership into your equation, it is still a great value. We felt that to look at this membership as a reasonable investment, it was wise to only consider the lump down payment as a total loss. So after we spread that amount over a few vacations, our investment still will have paid for itself in 6-7 vacations. My point is that if you plan on going on 6-7 vacations in the next couple of decades, you have made a wise investment in DVC.

And more good news (which someone will be able to confirm in a minute… DVC MIKE?):
What you will benefit from most, is that the points required at your home resort don’t change (at least this is what I have been told) – so, as vacation prices continue to increase over time, you will be saving more and more over the prices you’d be paying as a non-member.


#15

Add me to that list for info.

And yes, we believe paying cash is the way to go.


#16

I’ve always paid cash. I can borrow it cheaper that Disney rates and if I have cash on hand I can’t get as much in interest as Disney charges.

That said, DVC rates are higher that most mortgage rates but WELL below most credit card rates.

So unless DVC offers ZERO percent interest…


#17

[QUOTE=MissDisney;869245]Lisa – Our rule of thumb: ALWAYS avoid paying interest whenever possible. Otherwise you end up paying MUCH more for the same purchase.

And even though I don’t believe you can count appreciation or resale value of a DVC membership into your equation, it is still a great value. We felt that to look at this membership as a reasonable investment, it was wise to only consider the lump down payment as a total loss. So after we spread that amount over a few vacations, our investment still will have paid for itself in 6-7 vacations. My point is that if you plan on going on 6-7 vacations in the next couple of decades, you have made a wise investment in DVC.

And more good news (which someone will be able to confirm in a minute… DVC MIKE?):
What you will benefit from most, is that the points required at your home resort don’t change (at least this is what I have been told) – so, as vacation prices continue to increase over time, you will be saving more and more over the prices you’d be paying as a non-member.[/QUOTE]
You would be correct because that is what I was told when we took the tour or open house in January so in 30 years when the resort room sky rocket you are still paying the same price in essence. My feeling is you can always adjust what you eat, if you go to the parks or not, and usually you have payed for your way down and back. Making the resort stay some of your biggest expense out there Just my feeling though


#18

No one mentions the tax write off. We are able to consider the DVC a second home and write off the interest.

Or am I an IRS audit waiting to happen?


#19

[QUOTE=Boss Mouse;869868]No one mentions the tax write off. We are able to consider the DVC a second home and write off the interest.

Or am I an IRS audit waiting to happen?[/QUOTE]

We didn’t ask our tax guy, since we paid cash. But I can call him and find out… I’ll post his answer.


#20

[QUOTE=Boss Mouse;869868]No one mentions the tax write off. We are able to consider the DVC a second home and write off the interest.

Or am I an IRS audit waiting to happen?[/QUOTE]

Ohhh that would be great…

 The tax write off, not you going to federal prison.

Lisa