Buying DVC

by Tony Phoenix, staff writer

My wife and I first encountered the Disney Vacation Club in August 1999, during our first visit to Walt Disney World. The ubiquitous kiosks and friendly staff drew us in, and we agreed to do a tour of the Boardwalk Resort.

On the tour, we learned that DVC is a points-based, time-limited system. While you do receive a deed, it is time-limited, because DVC 'leases' the land from Walt Disney World. When that lease expires, so does your membership. [Note: Current sales direct from DVC are for the Saratoga Springs property, which has a lease expiration of 2054, while all other existing DVC properties expire in 2042.]

Despite all the legalese from DVC, in reality you are buying a fixed number of points to use in exchange for stays at a DVC resort. The cost of the stay in points is a function of:

  • Property – Old Key West, Boardwalk, and so on
  • Room size – studio, 1-bedroom, 2-bedroom, 3-bedroom
  • Time of year – for example, Christmas costs more than September

For an in-depth analysis of how the system works, you can read Brian Bennett's summary. It is a few years old, but there is a wealth of information available.

During that initial encounter, we listened to the sales pitch, looked at the numbers, and decided that we weren't ready to commit that kind of money to the Mouse.

Two years passed before our next visit to Orlando. By that time, I was on the road almost weekly for my job, so we found ourselves with a bounty of hotel award points that allowed us to stay for free at hotels in Orlando during our regular trips to Florida two to three times a year.

But in early 2006, I changed jobs. My hectic business travel days were finally over, but our accumulation of hotel points began drying up. For the first time in years, we were suddenly faced with paying for hotel stays.

Later that year in September, Adrienne and I were on the 11-night Southern Caribbean Cruise on the Disney Wonder. We were traveling with a large group of people we had met on the Panama Canal transit cruise the previous year, several of whom are DVC evangelists. One of these friends talked us into attending a DVC presentation onboard—mainly because they were offering a pin to members for referring someone who attended the presentation.

The sales staff was energetic and they got current owners to talk about their experiences. But there was no pressure. At the end of the one-hour presentation, we were invited to schedule a meeting with the sales staff, but could have easily walked out with no other commitment. This was quite a contrast to some timeshare presentations, where you are locked in a room for three hours facing high-pressure sales tactics.

I had not intended to do anything other than politely listen, but the knowledge of my dwindling hotel points made me wonder if this wasn't the right move for us. After all, we are dedicated Disney fanatics who love to travel. So we made an appointment to sit down with Amil—one of the sales reps on board.

As we left the presentation room, they handed us a book explaining the DVC system, the points levels, and varied use options. During the meeting, I had taken a lot of notes, costs, and other details. Between those two things, I was ready to start looking at it seriously.

While Adrienne headed up to Deck Nine to enjoy a swim in the pool, I pulled out my laptop, opened a spreadsheet, and started crunching numbers. Several worksheets later, I had run the numbers and had a good idea about the costs. So off I went to find a couple of friends. The first is a CPA who works as an auditor. We sat down and she ran through the logic of my spreadsheets. She agreed that my assumptions and methods were sound—one hurdle crossed; independent validation that I wasn't adding things up incorrectly.

The Analysis

Originally, I had created the spreadsheet to look at the opportunity cost of the purchase. If we invested thousands of dollars now in DVC, what would we lose in not investing that money somewhere else? But as I fought the numbers, it didn't feel right. So, I left them out of my analysis. In researching for this article, I ran across an explanation from MousePlanet reader John Duffy that confirmed my decision to ignore the investment opportunity cost:

The logic is, if you buy into DVC you are paying cash up front for accommodations in the future instead of investing the money today and just paying for your vacations as you go. This is certainly the case in the early years after buying into DVC, but every year you pay DVC dues instead of cash for a vacation (in which case the dues are much less then the cash cost of WDW accommodations), this "investment" decreases. An example will clarify this point...

Using some sample numbers, the up-front cash cost of joining DVC is $13,150. If invested instead of spent on DVC, this amount would have grown to $14,005 after one year (at 6.5 percent, $13,150 X 1.065=$14,005). The investment would grow by another 6.5 percent after year two, to $14,915 ($14,005 X 1.065), and so on...

But here is the problem... after one year the DVC member pays dues of $702 whereas the non-DVC member must pay for a hotel. Using a more reasonable comparison (I think we would all agree that the All-Star Resorts are no comparison to a DVC studio) of 10 days in a moderate on sale (still being too generous but it allows the point to be made) at $150 per night. The non-DVC member must pay $1,500 in hotel rent, which is more than twice the DVC members dues, at a difference of $798 (which incidentally will increase every year that hotel price increases outpace dues increases).

Now, back to the investment analysis. After one year we got to $14,005. But now we must decrease this number by the difference between the year one DVC dues and year one hotel costs, $798, before calculating the investment balance for the start of year two. So after two years, instead of having an investment worth $14,915, you really only have $14,065 [($14,005 - $798) X 1.065 = $14,065] Now, before calculating the return for year three we must reduce this amount again by the difference between year two DVC dues and year two hotel costs (at this point the investment begins to go down instead of up). This goes on until the investment balance runs down to zero and eventually it is the DVC member with extra funds to invest at an increasing rate every year so long as DVC dues are lower than equivalent hotel costs. I have played around with the numbers and it is difficult to get the original $13,150 to last more than 8-10 years.

The net result is that in the long term, the opportunity cost of a DVC purchase is negated by the long-term savings. So for our purposes, I ignored that calculation. It also had the net benefit of making the analysis that much easier to do and understand.

By running the numbers for our proposed purchase, I concluded that each point would cost us between $10 to $13 a year, every year, for the life of the contract, with the margin of error in that number depending on some assumptions. Running that number out, it became obvious that while we would pay more for lodging in the first few years, we would break even after about seven to 10 years, with subsequent years showing some real savings.

These numbers assumed that we would stay at a DVC resort every one to two years for the next 47 years, or at least for the next 10 years at which time we would reach the break-even point. Was that reasonable for us? We ultimately decided that we would travel to a Disney property at least that often. If this is not the case for you, however, be sure to give it consideration because it may not be worth your investment. You can use points to exchange for a non-Disney timeshare resort through Interval International, but availability there can be really hit-or-miss, so don't base your decision solely on that ability.

One of the key advantages to buying into DVC is that hotel costs increase by 6 percent annually—the average rate of increase for WDW properties over the past 10 years. This means that if the cost of a room is $100 a night today, you can expect it to cost $106 next year. Does that mean it will continue at that rate? Not necessarily, but that rate is pretty comparable to the hotel industry as a whole.

By contrast, annual DVC dues have increases at a rate of 3 to 4 percent annually over the past 15 years. So, the annual rate of dues increase only goes up 4 percent, the hotel rate is going up by 6 percent. Through the magical power of compounding, that 2 percent difference results in a huge cost difference over the long run. Is this difference a reasonable comparison over the long term? Probably, but remember the old adage—past results do not guarantee future performance.

The Results

Two primary factors drive the savings of DVC when compared to the moderate resorts:

  • The expected rate of increase in the annual dues
  • The average number of points needed for a night's stay


Dues represent the largest "uncontrollable" factor in your ultimate cost. I use the term uncontrollable, because although Disney is limited by Florida law in how dues and increases are calculated (so there are limits on growth in place), for all practical purposes, the increase will be whatever Disney says it is. It is the largest factor over time because the dues increases are compounding, which means you will pay a lot more in dues at the end of your contract than you will at the beginning.

For example, assuming that the current $3.98 dues cost for Saratoga Springs increases annually at a 3.5 percent rate, you will pay $20.05 per point in dues in the last year of your contract (2054). A 4-percent rate would increase that final dues payment to $25.14. Contractually, Disney cannot increase dues by more than 15 percent in a given year without a majority vote of owners, so there is an upper ceiling.

In the past 15 years of DVC operation, some years have seen rate reductions of 1.1 percent (Old Key West in 2001) while other years have seen increases of almost 10 percent (Old Key West in 2006). Based on all DVC properties over time, the average rate of increase in dues is approximately 3.5 percent. 2006 was especially high, as the high cost of oil significantly increased the operating costs of each property. The good news is that each property sets its dues independently, which means that if one resort sees an unusual cost increase because of something unique at that property, the other properties do not share in that cost.

Points Needed for Your Stay

The second major factor in value for DVC is the number of points required per stay. A week-long studio stay at Old Key West in the Adventure season runs 80 points while a week-long studio stay at Boardwalk Villas in a view room during the Premier season will set you back 181 points, a huge difference in points cost. In my analysis I used an average of points cost for a night at Saratoga Springs of 16.9. For your calculations, you may want to look at what a week would run for the time you are likely to visit, and adjust your points cost appropriately. (Just divide the week's total point cost by 7 to get the daily number).

Upgrading to a one-bedroom will set you back even more, although at that point, the cost comparison to a Moderate resort room isn't exactly "apples to apples" since you now have amenities such as a full kitchen, washer and dryer, and so on.

You can also get a lot more bang for your points by arriving on a Sunday and leaving on a Friday. That avoids the much higher cost weekend nights and gives you a lot more value. One family I know arrives on Sunday, and stays for almost two weeks, leaving on a Friday. That means they only pay for one weekend, getting a longer stay for a lot fewer points. If your travel times are flexible, you can really work the system to your advantage.

Other Cost Factors

Interestingly, the initial cost per point is a lot less important over the long term. Why? Because $86/point over 48 years costs $1.79 a point per year, while $101/point is only $2.10 a point per year. At $0.31 a point difference per year, it is dwarfed by the dues cost ($3.98/point/year for Saratoga Springs in 2006). And that $0.31 doesn't increase over time the way dues will. So, while it does have a small factor in the overall equation, it is a minimal impact.

In the same vein, the cost of financing versus paying for cash is not really significant over the 48 years. Yes, you will pay more because of interest charges, but that increased cost is not a major factor in the overall cost analysis.

You might ask why I did not take into account the inflation rate in this analysis. That kind of calculation is helpful when you want to compare the cost of something in 2006 to the cost of something in 2050. But in our case, we are comparing DVC lodging to non-DVC lodging for exactly the same period of time. So, while we could make those adjustments, the end result would be the same. So, in the interest of keeping it simple, we didn't factor that into the math.

You may be able to write off the tax portion of your annual costs on your income taxes as well as some financing costs since DVC counts as a vacation home, but be sure to check with your tax advisor. DVC members get some great discounts, including $100 off a new Walt Disney World Annual Pass and $125 off a new Premium Annual Pass (discounts are slightly less for renewals.)

Non-DVC Property Stays

When I began looking at the DVC purchase, I also examined the cost of staying at non-DVC properties at places such as Disneyland, Tokyo, Paris, and the Cruise Line. I excluded them from my benefit analysis since at $10-12 a point per year, the exchange was just not worth it.

For example, I received a quote of $2,000 for two people on a one-week Eastern Caribbean Cruise for September 2007 in a Category 9 cabin. In points, the same cruise would cost us 412 points. At $10 a point, that came out to $4,120! Not at all reasonable. When I talked to the DVC sales representative about it, he agreed that using points for cruises or other non-DVC properties was not as good a value.

I discussed this with Peter, a friend of ours who regularly uses points for cruising, who said, "I love paying only $75 for a cruise," which is the cost of the port fees and booking costs. I argued back, "But it doesn't make any financial sense—the exchange rate stinks, and you are losing money every time you cruise, by wasting your points. $10-12 a point—you're paying Disney double price, and they are laughing all the way to the bank!"

"Double price?" he countered. "Cruising only costs my about $6 a point." I was certain that he had lost his mind as I wandered off shaking my head. After all, I had spent hours crunching numbers, had a CPA review my results, and knew without a doubt that it couldn't cost him $6. His comment kept churning in my mind that night—Peter was crazy. The next morning, a light bulb went on, and I realized—he wasn't crazy. There was a problem with my assumptions:

It all boils down to how you cost out your points. Most people average the cost of the points and maintenance out over the life of the contract—this is how I did it originally. And that's not a bad way to do it, but it averages the rate of inflation on the maintenance, and has the effect of inflating the current year costs while reducing the cost in later years. So while one calculation will give you a average life cost of $10 to $12 per point per year, the other method of analyzing the cost would be to take the average annual cost of the point and add just the dues cost for that specific year.

The reason this is valid is that it reflects what that year's actual cost would be. Since cruise costs change annually and can't be predicted or averaged, you end up inflating your DVC costs inaccurately. Under this calculation method, for example, a Saratoga Springs member would pay approximately $5.77 per point in 2006 and $5.93 in 2007 (neglecting the cost of financing, if you do).

So going back to my original cruise quote, 412 points would now represent a cost of $2,377. OK—so now we have a 10 percent premium by using points. This actually makes the thought of using points a lot more reasonable. [Note: This is based on 2006 point costs. The point cost schedule for the second half of 2007 has not yet been published. Also, if you book your next cruise while onboard a cruise, you get a 20 percent reduction in point cost. This would actually bring your DVC point cost below the cash price.]

One feature DVC likes to trumpet is the ability to use your points to stay at non-Disney properties through Interval International (II). This is a nice benefit, but there are some significant caveats: You cannot exchange for all II properties. Instead, you are limited to a subset of approximately 450 resorts and timeshare properties worldwide that Disney has pre-selected as being of comparable value. All exchanges are done on in weekly units, and can cost between 124 and 160 points for a week, depending on season for a one-bedroom. There are no Interval properties on the list for Los Angeles, Orlando, Paris, Japan, or Hong Kong, so you can't use interval properties to bypass areas that have existing Disney exchanges.

Resale vs. Direct

Huge debates rage over the question of purchasing DVC directly from Disney or purchasing through a reseller. In general, you can only purchase the newest resort directly from Disney.* (At the time of writing this article, that resort is Saratoga Springs although Animal Kingdom Villas has been announced and is on sale to existing DVC members). Purchasing points for another resort, such as Old Key West usually requires going through a resale agent. Be aware that when buying through a reseller, DVC has the right of first refusal on all deals. This means that if the asked-for selling price is lower than market, expect DVC to purchase it instead of you. When they purchase a contract under a right of first refusal, they will usually sell those points to an existing DVC member who has asked to be on a waiting list.

[*Note: You can use your DVC points to stay at any DVC resort. The key is that where you buy your points at is considered your home resort. You can book your home resort up to 11 months in advance, whereas you can only book non-home resorts a few months out. So there is an advantage to having a home resort ownership if you really want to be at Boardwalk for, say, the Marathon or Christmas Week.]

In general, the cost of purchasing from Disney or through a reseller works out to be about the same. If you have your sights set on owning at Boardwalk Villas, then resale may be the better choice. Keep an eye on DVC incentives—they frequently make buying directly from DVC a better deal. Otherwise, there isn't much difference.

The Decision

OK, so we talked with a lot of people and I had crunched my numbers. Now it was time to brave the lion's den. DVC has occupied a couple of staterooms onboard the Disney Wonder, and we marched in to one very much on our guard. I had my laptop in hand, spreadsheet loaded and ready.

What ensued was probably the lowest key sales process I have ever encountered. I was ready for battle—but my laptop didn't even faze Amil. He sat down next to us, asked to see what I had put together, and proceeded to make some suggestions regarding my assumptions. Some helped his sales pitch, but others hurt it. But in the end, I felt that we had an accurate picture of how this would work from a financial standpoint.

He was very open with us, explaining both the upside and downside of membership. He gave us a printed breakdown of all final costs (including the closing costs estimates which we had not yet received) for a couple of different purchase scenarios. But we were not yet ready to commit. After all, now that we knew the variables, we needed to discuss if this made sense for us. Amil very graciously thanked us for our time and let us know that he was available at any time to answer further questions. We left the room and proceeded to enjoy the next several days of our cruise. To his credit, we did not hear from Amil again during those days. He gave us time and space to talk—no pressure at all.

Now the debate began. Did we want to buy into DVC? Not simple to answer, because it involved a lot of variables. Our decision-making process boiled down to these questions:

  • Were we in a financial position to do this?
  • Did we expect that the annual dues cost would be manageable in the future?
  • Did we want to own a timeshare by Disney (as opposed to another company)?
  • Would we use the benefits we were purchasing—using all the points, at least every 2-3 years?
  • If we did not buy into DVC, would we stay in lodging comparable to the Moderate resort were comparing to?
  • For popular vacation times, would we be able to plan our trips far enough in advance to be able to book rooms where we want them?

A lot of discussion and debate went into each of these points. In the end, we decided, that that buying a DVC membership made sense for us. We talked about our preferred stay times, and figured out how many points we wanted to purchase. A brief call to Amil, and we scheduled a time to meet for the initial paperwork.

So on the second formal night of our cruise, we again met Amil in the sales room. He took our personal information and our desired the number of points, then generated an initial purchase agreement form. We signed the initial paperwork, and headed out 20 minutes later. In our hands was a goodie bag with pins, lanyards, hats, and more, along with our copy of the purchase agreement. Since they don't have all the paperwork available on the ship (along with a notary), we couldn't complete all of the agreements. Amil offered to have all the paperwork mailed overnight to our home. Instead, we decided to meet him at the DVC sales center at Saratoga Springs after we finished our cruise so that we could sign all of the paperwork (and get a tour of the Saratoga Springs resort).

At the sales center, we were offered breakfast and ushered into a conference room. In the three adjoining conference rooms, several friends were finishing the paperwork on additional points purchases. The actual signing process only took a few minutes.

My wife and I are now proud owners of 150 DVC points, and we look forward to using our points for our regular visits to Disney resorts.

[For your own copy of the Excel calculation spreadsheet that I designed in the process of making our decision, see this detailed description and download the file.]