Understanding the finances of a Disney Vacation Club (DVC) is hugely important to helping you make the right decision about whether to buy, how much to buy, and how to plan for the associated expenses. Essentially, DVC ownership has three mandatory expenses and one optional expense:
Expense 1: The Points Cost
This is the basic item you're purchasing: DVC points. Every point has a dollar cost, which raises over time and differs between different resorts. This is a one-time fee you pay, and if you're smart you'll pay it in cash (more on that in a moment). You'll pay this no matter who you buy your points from - Disney, or a previous DVC owner who no longer wants their points. Points are cheaper when bought from a previous owner, but come with some strings attached - more on that in a future DVC FAQ article.
Expense 2: The Closing
This is another set of one-time fees, usually pretty nominal, that you pay to take ownership of the points. This includes closing costs, county recording fees, and so on, and is usually less than a few hundred dollars. You'll usually pay these no matter where you buy your points.
Expense 3: Maintenance
This is a per-point fee that Disney charges each year that you own your points. It differs between resorts, and is usually a few dollars per point. But since you tend to own hundreds of points, this can easily stack up. Annual maintenance fees of $1000 or more are usual. You'll pay these fees no matter where you buy your points, and you'll pay them every year. They'll go up a bit every year, too, reflecting the increased cost of labor and materials that it takes to maintain the resorts.
Expense 4: Interest (Optional)
If you buy your points for cash, you won't pay this, but you'll pay it if you take a loan. DVC point purchases aren't a mortgage, because you don't technically own real estate (even timeshares where you receive deeded real estate interests don't usually qualify for mortgages). That means these loans can often carry interest charges of 6%-12%, unless you qualify for a promotional rate. Over a typical 10-year term, interest can cause you to pay a lot of extra money for those points, so it's often wise to avoid this expense if you can.
So what's all that mean? Let's do a comparison of vacation costs. Let's say that you want to stay at Disney's Animal Kingdom Resort, one of their more expensive hotels. Your goal is to stay in a 1-bedroom standard view unit, featuring a full kitchen and living room, two bathrooms, and great savannah views. You want to go every other year, and you prefer going in mid-May for a full week (seven nights).
Now, right there is something you need to be a bit careful of. Many people who buy DVC end up getting much more than the smaller hotel room that they'd normal vacation in. On the one hand, it's definitely more luxurious. On the other, it makes you do a comparison for something you might not normally buy. So you need to think carefully about whether this is in fact how you want to vacation, and if it's not, then do your own comparison. DVC does offer "Studio" rooms, which are much closer to the standard hotel room you'd normally stay in.
The rest of this comparison will use actual numbers, and I'll reference where they came from. I'll also be making some assumptions about how much those numbers could be expected to rise over time, and where possible I'll reference my sources for those assumptions. But they're just assumptions, and market conditions mean they could end up being lower or higher than reality. This is just something you have to accept. Buying a DVC share is, in effect, taking a bit of a gamble. Remember that you're pre-paying for decades of vacation time; you're gambling that your up-front purchase will end up being cheaper than just paying for a normal hotel room over that time. Disney is gambling the opposite. Someone's going to lose.
And before I get into the comparison, know that owning a DVC interest is absolutely not a financial investment. You will never sell your points for more than you paid for them. Eventually, your points will expire and go away. This is a purchase that you make. You are buying something, just as you'd buy a car, that will not appreciate in value.
OK, here we go.
DisneyWorld.com quotes a $610/night rate, for a total stay of $4270, plus taxes. Taxes bring the total to about $4800. Doing some research on the Internet, it seems as if hotel prices tend to increase about 4% per year over a yearlong period, assuming no major economic downturns. So over 20 years, you'd be staying 10 times (every other year), bringing your 20-year total to about $65,000. Remember, this assumes that every stay is going to be 8% more expensive than the previous stay - so a big part of the assumption here is that the hotel rate-of-increase will remain relatively constant. In fact, it could be more or it could be less.
That same room will "cost" you 200 points. Because you only want to stay every other year, you only need to purchase 100 points - you can use the bank/borrow trick to "combine" two years' worth of points. Assuming you buy from Disney, you'll pay $155/point, or $15,500, for your 100 points. There are some closing costs involved, but they're pretty small. Let's just round the number to $16,000.
Your 100 points are going to cost you maintenance. Right now, that's $6.2989 per point, or about $630 per year. Because you're staying every other year, that's about $1260 per "stay." Animal Kingdom's maintenance has increased at about 5% per year, so over 20 years, maintenance will cost a total of about $21,000, again assuming a steady rate of increase over time. So your "total cost of ownership" is about $37,000. That's about half of what the hotel would cost if you just paid cash.
Now, that's the same kind of fairly straightforward comparison your DVC salesperson will walk you through. It does miss a couple of items, which is that you might be able to invest your money instead of spending it, and generate a 5-8% return. That'd negate the rise in hotel costs, and if you could do it consistently, your 20-year total for just renting a hotel room would only be about $48,000. That's still more than buying the DVC.
You can, of course, do even better by buying from a previous DVC owner. Your maintenance will be the same, but you could probably spend around 20% less on that $16,000 initial point purchase.
All of this assumes that you really, really do go every other year and use your points. And most DVC owners do, by all accounts. So the point is, for regular visitors of a certain type, DVC can make financial sense. By pre-paying for your vacation, you're more or less "locking in" today's pricing (less maintenance fees), and gambling that hotel prices will rise over time.
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