DVC Analysis
 

 

Is DVC a good buy?

Well first and foremost it depends on if you expect to vacation at Disney World on a regular basis. If you do then great DVC may be for you, if not then no need to go any further.

So the next step is to compare apples to apples. So I will compare a studio at VWL to a room at WL. Roughly the same space and the same resort experience.

A week at a studio in March is 132 points BUT you have to get a minimum of 150 points so Iíll base the DVC numbers a 150 point purchase. DVC will have maintenance of about $4 a point.

The room at WL cost $299 a night discounts may apply or not but I didnít factor in room taxes and fees either so I see it as a push.

Inflation will increase the cost of the room and maintenance at 3% per year.

So for each there will be annual case flows. In the case of DVC is big the year you buy in. Renting a room increases every year.

These cash flows will be ďdiscountedĒ back to Net Present Value. That is the amount of money it would take now to generate those future cash flows.

Say you need 100 bucks tomorrow you need $100 today, but you need $100 next year you need $90 some now and to earn some interest for a year. If you need $100 in ten years you earn interest on interest etc. you need less now. So a dollar today is worth more than one next year and even more than on in ten years.

These numbers are calculate-able and with a spreadsheet it isnít all that hard. So once we have the cash flows we can calculate the amount of money it would take invested now to cover the two different sets of cash flows.

So letís look at some cash flows: Here are the first few years so you get the idea - it goes on for 40 years.

 

DVC

 

DVC

DWL

Year

Investment

Maint

Total

Total

2003

-12600

-600

-13200

-2093

2004

 

-618

-618

-2156

2005

 

-637

-637

-2220

2006

 

-656

-656

-2287

2007

 

-675

-675

-2356

2008

 

-696

-696

-2426

2009

 

-716

-716

-2499

2010

 

-738

-738

-2574

2011

 

-760

-760

-2651

2012

 

-783

-783

-2731

2013

 

-806

-806

-2813

2014

 

-831

-831

-2897

2015

 

-855

-855

-2984

2016

 

-881

-881

-3074

Ok using an average investment rate over the years of 7.3 (or in our example 4.3 real return over the rate of inflation rate of 3) The Net present value is $22,980 for DVC and $39,200 for the hotel. DVC saves $16,220 in net present dollars or 40%

Ok that isnít all that realistic, say you get sick of Disney and want out? Fine letís say you have kids expect to go for ten years and then when they are grown do something else. (Now in my case that would be go to Disney without the kids but hey we are making assumptions here.) You have DVC on one side and hotels on the other. Well in ten years your DVC has some life left in it. It is going to be worth something but what?

We need to do some more assuming. (Yes I know how to spell assume, one of the few worked I do know how to spell.) Disney seems to be cranking out and selling DVC resorts. The prices are going up but  the life of the contract ends and the new ones have a longer life. So lets say the price of a point goes up with inflation buy after ten years you contract is only got 30 year left and the new ones have 50 so you are only 3/5 the value. Simple but fair enough OK. Here goes, annual inflation will take the 12,600 investment to 16,440 but donít get excited you only get back 3/5 of that or 9864 and we are going to discount that back to present dollars and for fun we say you sell it in year 11 after the year 10 trip.

Here are then new cash flow assumptions: (This table updated based on reader comments)

Disney Vacation Club Oprtion Wilderness Lodge Option
DVC   DVC  NPV  PV WL NPV  PV
Year Investment Maint. Total Factor of flow Total Factor of flow
2003 -12,600 -600 -13,200 0.931966 -$12,302 -2093 0.931966 -$1,950.61
2004 -618 -618 0.868561 -$537 -2156 0.868561 -$1,872.44
2005 -637 -637 0.80947 -$515 -2220 0.80947 -$1,797.40
2006 -656 -656 0.754399 -$495 -2287 0.754399 -$1,725.37
2007 -675 -675 0.703075 -$475 -2356 0.703075 -$1,656.23
2008 -696 -696 0.655242 -$456 -2426 0.655242 -$1,589.85
2009 -716 -716 0.610663 -$437 -2499 0.610663 -$1,526.14
2010 -738 -738 0.569118 -$420 -2574 0.569118 -$1,464.98
2011 -760 -760 0.530399 -$403 -2651 0.530399 -$1,406.27
2012 -783 -783 0.494314 -$387 -2731 0.494314 -$1,349.92
2013 9,864 9,864 0.460684 $4,544
           
      NPV
-11,882.55
  NVP
-16,339.20

 

 

The Net Present Values are DVC $11,882 and Hotel $16,340 DVC is $4,458 less in net present dollars.

The DVC contract will have extra points 150 vs 132 used. These are assumed of no value in the deal but with good point management could get some extra trips that make DVC a better value.

 

Another Study for Storm Along Bay fans with 4 kids.

OK that was low end DVC. Say you have 4 kids and like Storm Along Bay. You can join DVC get 2 bdrm BCV or get two rooms at the Beach Club (occupancy limit of room is 4 you need 2) Same as above on a ten year and out assumption.

DVC   DVC      BC
Year Investment Maint. Total     Total
2003 -29400 -1400 -30800     -5516
2004   -1442 -1442     -5681
2005   -1485 -1485     -5852
2006   -1530 -1530     -6027
2007   -1576 -1576     -6208
2008   -1623 -1623     -6395
2009   -1672 -1672     -6586
2010   -1722 -1722     -6784
2011   -1773 -1773     -6988
2012   -1827 -1827     -7197
2013 23707   23707      

NPV of DVC = 27,400    NPV of Beach Club = 43,050   DVC NPV advantage = 15,660

Run it out 40 years to the end of the DVC contract.

NPV of DVC = 53,616    NPV of Beach Club = 103,295   DVC NPV advantage = 49,678

OK some more caveats before we end. 7.3 investment and 3% inflation may note be the best numbers. I picked them because the seemed like good historic averages. The lower the investment rate the better DVC does in the comparison.

Financing and tax implications can be factored in for fun by someone else. I donít think it changes the base assumptions.

Your mileage may vary.

This analysis has been a service of your benevolent evil emperor, Zurg.

Maistre Gracey writes:

Well, I thought I was following everything okay, untill.... "The Net Present Values are DVC $11,882" I am a little confused where this number came from. I am also confused where you factored in the 7.3% lost interest.

Thanx for putting this together...

The Emperor responds:

Well I as too lazy to do the NPV calculations by hand so I can't "show my work." like in a blue book back in school.

So here is the formula for discounting a number back to the NPV.

1/(1+R)^N where R = Rate and N= number of years. This give you a factor that you multiply the future amount by to the the NPV.

So at 7.3% for 3 years the factor is 1/(1.073)^3 .. 1/1.235376017 = 0.809470142

You calculate (or the computer calculates) this factor for each year. Than you multiply the factor times that years cash flow to get that years contribution to the NPV. Next you add up each years contribution and you get the total of all cash flows.

- or-

you use the NPV() function in Excel and it does all the calculations for you.

Guess what method I use?

But so you can see it I added the factors and to the first ten year table so you can see them. I am a Prince of an Evil emperor aren't I?