Why do people regularly use rack rate for break even?

[grease1739]

I’m tracking our trips since purchasing in May and am comparing our total out of pocket costs to pay cash vs. whatever the current discount for the same room and same dates would be.

I’m curious why most people always seem to say they compare rack rate…(including the numerous and unashamed DVC podcast that exist as nothing more than advertisements for resale)?

No one in their right mind pays rack rate so my assumption is it helps people mentally justify their purchase by “breaking even” quicker.
Even using a basic 20% discount vs rack rate seems more logical.

To each their own, but the podcasts and “trusted” agents seem to be completely misleading people into when you can break even. Granted buyer beware and do your research but I’m curious for thoughts from others.

 

[Sandisw]

Well, there are times of the year when there are no discounts and people do indeed pay rack rate. I have talked to people who were at RIV and had indeed paid rack rate…didn’t even think about discounts. I know, I know…

But, outside of that, I do think it makes sense to use a modest discount….since typically is something.

 

[RivShore]

We based our break even analysis on what we were actually paying for the moderate rooms we usually stayed in. That is the ONLY correct way to do it IMO - compare it against what you would have paid for real world trips, if DVC did not exist.

 

[BeachClub2014]

I’m tracking our trips since purchasing in May and am comparing our total out of pocket costs to pay cash vs. whatever the current discount for the same room and same dates would be.

I’m curious why most people always seem to say they compare rack rate…(including the numerous and unashamed DVC podcast that exist as nothing more than advertisements for resale)?

No one in their right mind pays rack rate so my assumption is it helps people mentally justify their purchase by “breaking even” quicker.
Even using a basic 20% discount vs rack rate seems more logical.

To each their own, but the podcasts and “trusted” agents seem to be completely misleading people into when you can break even. Granted buyer beware and do your research but I’m curious for thoughts from others.

There are a ton of ways people calculate break-even on their DVC purchase. Some do it based on rack rate, some on typical discounts, and some look at both. Some people also include the time value of money in their analysis, while many do not. Some people project the future value of their points if they were to sell; others do not. And many of us don't worry about it at all. There is no one right way of doing the analysis.

 

[_auroraborealis_]

Emotional math.

 

[lilsonicfan]

The only right way to do the math is the way that works best for a buyer and their family. For some people it's just fun money that they can afford to spend in that way.

I know someone who buys very fancy hand soap for their bathrooms at $50+ for a small bottle. I prefer the Costco size jug for $10. Literally washing money down the drain, but if it makes them happy and they feel it's worth it, who am I to nitpick their justification

 

[Sammie]

Actually lots of people pay rack rate because they don't want to be limited to the time frames that discounts are offered. It's their money so not sure anyone should judge. Everyone buys something that someone else feels is foolish. For me that would be the people that buy expensive coffee. LOL

When we bought, discounts on rooms were few and not very much which is why we bought. Discounts come and go so not sure that is an accurate milepost either. Discounts on 2 bedrooms which we always book, are very rare.

 

[Sandisw]

I will also add that in many cases, the break even never happens because people get the bug to add on and you go from 180 to 900 points and in no way save a darn thing!!!

 

[SheSingsAlong]

I consider the value proposition of my money. The whole reason we bought is because we could stay at Beach Club for Pop Century prices. Even if I never break even, I'm very happy with the value I'm getting out of the money I have/will spent.

 

[HIRyeDVC]

I will also add that in many cases, the break even never happens because people get the bug to add on and you go from 180 to 900 points and in no way save a darn thing!!!

OMG, this is so me. I first thought my breakeven point was 7 years with my first 225 points. Now I'm at a thousand so it'll probably take me 30 years

I’m tracking our trips since purchasing in May and am comparing our total out of pocket costs to pay cash vs. whatever the current discount for the same room and same dates would be.

I’m curious why most people always seem to say they compare rack rate…(including the numerous and unashamed DVC podcast that exist as nothing more than advertisements for resale)?

No one in their right mind pays rack rate so my assumption is it helps people mentally justify their purchase by “breaking even” quicker.
Even using a basic 20% discount vs rack rate seems more logical.

To each their own, but the podcasts and “trusted” agents seem to be completely misleading people into when you can break even. Granted buyer beware and do your research but I’m curious for thoughts from others.

I agree with you for the most part. But discounts really depend on the season and the resort. Trying to get summer discounts at WDW might be easy, but not so much at Aulani. Same can be said for Grand Cal pretty much year round. We all go through hoops with our mental math to help justify our lavish DVC purchases. In the end, if your purchases went above your means, no amount of math can justify it. But if it was within your means, then you don't haveto justify it to anyone, let alone yourself. Still, we go through the hoops because it's fun at times. For example, I love looking at Grand Cal rack rates during Christmas time. We usually stay in a DVC 1BR for a week, which costs me ~$3700 with my "DVC justification math." A 1BR rack rate would cost me almost $15k. (Btw, there rarely are any discounts at DLR during the holidays and the DVC 1BR is far superior than the cash 1BRs.) Of course I would NEVER stay in a 1BR at Grand Cal paying cash. I'd probably spend less than $1k staying offsite if it weren't for DVC. This is why it's almost impossible to compare, even though we can't help it.

 

[pianomanzano]

I will also add that in many cases, the break even never happens because people get the bug to add on and you go from 180 to 900 points and in no way save a darn thing!!!

So true!

Emotional math.

If we're using emotional math, I've more than doubled my initial investment! Some great core memories developed in the 2 years of ownership from watching my eldest daughter take her first steps in our Copper Creek studio to having my dad hold my youngest while watching fireworks from outside of Gasparilla during her first bday trip, and many more to come!

 

[laurend]

I will also add that in many cases, the break even never happens because people get the bug to add on and you go from 180 to 900 points and in no way save a darn thing!!!

Not us over here already thinking about an Epcot area resale contract to go with our MK area direct points at VGF

I believe my very fuzzy, very conservative math puts our break-even somewhere around 8 years with our first purchase, but very possible that we break even sooner than that with DVC/AP discount, having kitchen and laundry in room (so I don't need to supplement my Northern US wardrobe with quite as many Florida-appropriate outfits), etc. We just recently stayed at Contemporary but got a summer deal on an okay room in the garden wing, so not comparing to full-price rack rates or even apples to apples with DVC rooms for the math there, just to where we would stay and what we'd be willing to fork over without DVC.

The emotional math is where it's at! Paid off and then some already by those calculations, lol!

 

[DVCjj]

2014 Bought Poly Direct/BCV Resale.
Don't know. Don't care. Worth every penny for my mental and emotional health.
A blessing during stressful times.
A privilege to go and thankful each and every trip.

 

[Spivey378]

Personally I use rack rate because it gets me to break-even faster.

 

[zavandor]

It sort of makes sense. As others have said, discounts vary wildly. There were none 2 years ago, last year there were barely 20% discounts and for just a few weeks. This year they're up to 30-40% for Florida residents and Disney Visa and perhaps even better discounts are coming with the current slow down. Free dining is probably around the corner.
So how do you compare the DVC purchase against something that can vary so much even by the day?
Making a calculation that DVC is a x% discount over rack rates allows you to decide if that amount of discount is OK, relative to what you usually get. For some people, maybe even having just a comparable discount is OK, because this way they don't have to worry monitoring the offers, hunting PIN codes, calling when there are 2 hours long waits or fighting Stitch that eats their page online.

Personally, DVC has saved me a lot of money on accommodations, but I'm spending so much more than before for flights, tickets, foods, special events and so on. But who cares, I'm having a very good time.

 

[WAstateDVCDaddy]

OMG, this is so me. I first thought my breakeven point was 7 years with my first 225 points. Now I'm at a thousand so it'll probably take me 30 years

If it makes you feel better, your break even point (assuming you are actually staying 1000 points worth of nights each year) probably hasn’t changed.

What probably has changed is your ratio of on vacation to non-vacation days. And if that’s the case, you win!

 

[New Mouse]

Rack rate was an anomaly until recent years it was just an arbitrary number so Disney could say X percent off.

I'd imagine there were marketing meetings within DVC where they discussed raising rack rate to make dvc look good (remember those 70% off rack rate flyers?), but at the same time offering a great discount.

Disney is one of the only places where a 50% discount still equated to a butt ton of money!

 

[Straulin]

Not us over here already thinking about an Epcot area resale contract to go with our MK area direct points at VGF

I believe my very fuzzy, very conservative math puts our break-even somewhere around 8 years with our first purchase, but very possible that we break even sooner than that with DVC/AP discount, having kitchen and laundry in room (so I don't need to supplement my Northern US wardrobe with quite as many Florida-appropriate outfits), etc. We just recently stayed at Contemporary but got a summer deal on an okay room in the garden wing, so not comparing to full-price rack rates or even apples to apples with DVC rooms for the math there, just to where we would stay and what we'd be willing to fork over without DVC.

The emotional math is where it's at! Paid off and then some already by those calculations, lol!

We went the other way. BCV resale then added on direct at VGF! Now I wonder if we got enough at VGF…

 

[HIRyeDVC]

If it makes you feel better, your break even point (assuming you are actually staying 1000 points worth of nights each year) probably hasn’t changed.

What probably has changed is your ratio of on vacation to non-vacation days. And if that’s the case, you win!

It’s also what someone else said. I’m spending much more on airfare and other travel expenses because I’m going to Disney more. My tastes have also elevated like dining, merch, and paid experiences. I think you’re right about my break even though. And I’m definitely all the more happy about. My whole family wins, minus the wallet! But that’s ok. Yolo!

 

[Brian Noble]

Usually, people have an answer they want to get to, and they come up with the "rational" reason why that's the right answer. That works both ways, and it is not only used to get to yes.

The only right way to do the math is the way that works best for a buyer and their family.

I'd reframe this a little bit. As Mr. Incredible reminds us, math is math, and you don't really get to just decide to do it differently. Instead, I'd put it this way: Each buyer should consider value in a way that works best for them. Value is only partly about cost.