Financing... Worth it to get in sooner, or wait it out while saving?

[BamaGuy44]

The info is all available on the Orange County comptrollers website ….

Should only take about a month to sift though all the current deeds and see if there have ever been a mortgage.

However, with all the negativity towards financing DVC I can see a lot of people that have finances not speaking up.

Even that wouldn't work because plenty of people finance using personal loans, HELOCs, etc. There is definitely selection bias in those kinds of polls, though, given the financing high horse some people like to ride

 

[Robbie Cottam]

Well, I wonder if all the people who paid cash realize they subsidized the ones that financed thanks to the TCJA

 

[mistysue]

That 70% is just a polling bias where it is seemed as people who say that paid cash are somehow buying DVC “better” than those who finance. So when a public poll is placed the people who paid cash tend to respond to the polls much more than people who finance.
The person who posted that 80% of DVC sales are financed sounds about right to me (especially on the direct side).
Resale may be different since rates are higher in general and DVC financing is super easy.
Honestly direct from DVC if paying off in a reasonable time frame is perfectly fine. Pushing it to 10 years less so, but something shorter term is not the end of the world.

Yes, it's amazing how frequently we forget about polling bias and how much it can skew public results when one answer is seen as more desirable.

The rep I bought our first contract from told us "almost everyone" finances, but when he follows up the majority of his clients have paid it off within 2-3 years. Paying 10% on some smaller portion for a couple years completely changes the conversation over paying it for 10 years, I don't suspect there are many people leaving the loan there for 10 years which is probably why it seems so easy to get DVC financing. He obviously didn't know who actually paid it off vs moved the financing elsewhere. We financed our direct purchase, it was completely paid off within a year but I actually moved it to a 0% credit card first to pick away at it that way.

 

[Brian Noble]

Yet nobody tells direct buyers they're 99% better off renting or that they killed their ROI.

I suspect most of us are talking about financing a direct purchase, which is the worst of both worlds. But even if you are paying cash: I've said a few times that investing the purchase price in a low-fee index fund, adding what you'd spend on dues each year, and renting as you go, can often be a better deal than a developer purchase. Here's one, though it is dated:

https://www.disboards.com/threads/is-dvc-undervalued.3426539/post-54025500

The numbers have moved quite a bit, and maybe the conclusion has too...or maybe it hasn't. If I get a moment I'll repeat the analysis.

 

[sndral]

Yes, it's amazing how frequently we forget about polling bias and how much it can skew public results when one answer is seen as more desirable.

The rep I bought our first contract from told us "almost everyone" finances, but when he follows up the majority of his clients have paid it off within 2-3 years. Paying 10% on some smaller portion for a couple years completely changes the conversation over paying it for 10 years, I don't suspect there are many people leaving the loan there for 10 years which is probably why it seems so easy to get DVC financing. He obviously didn't know who actually paid it off vs moved the financing elsewhere. We financed our direct purchase, it was completely paid off within a year but I actually moved it to a 0% credit card first to pick away at it that way.

If the rep was a DVC guide & your plan was to finance & pay off early I can see the guide saying that as part of his sales pitch. How would a guide even know whether his buyers who financed paid off their loan/mortgage early?
I think there’s a tendency to assume that how I did something is the way most folks did it too. I paid cash for my 4 contracts, thus I assume most people are like me & did that too, although my son w/ the Econ degree assures me that I’m not like most people financially.
I’m sure many direct buyers don’t have $30,000+ in cash sitting in liquid accounts and do finance but a surprising number of US households do have decent savings https://www.bankrate.com/banking/savings/savings-account-average-balance/ thus would be able to pay cash for a DVC purchase if so inclined. The pool of potential buyers of DVC I suspect is skewed towards those earning enough to vacation at WDW & stay onsite &, unsurprisingly, savings seems to correlate with earnings.
Resale buyers tend to be another demographic - the initial buy in cost is lower, & I suspect they are less likely to make an impulse purchase, so it makes sense that a larger % of those buyers paid cash.

 

[RoseGold]

I don't suspect there are many people leaving the loan there for 10 years which is probably why it seems so easy to get DVC financing.

It's easy to get financing because it's so easy to foreclose and resell, and the financing company doesn't care if you can pay it.

 

[BamaGuy44]

I suspect most of us are talking about financing a direct purchase, which is the worst of both worlds. But even if you are paying cash: I've said a few times that investing the purchase price in a low-fee index fund, adding what you'd spend on dues each year, and renting as you go, can often be a better deal than a developer purchase. Here's one, though it is dated:

https://www.disboards.com/threads/is-dvc-undervalued.3426539/post-54025500

The numbers have moved quite a bit, and maybe the conclusion has too...or maybe it hasn't. If I get a moment I'll repeat the analysis.

That doesn't take into account the fact that you can sell your contract after 10 or 15 years and get at least as much as you paid for it, right? ( Not guaranteed but a good bet) It assumes holding the contract to the end? So at the end after you sell you've had all your stays for the cost of your dues (or less). You won't be getting back any of the money you spent on rentals. Market gains with your method would counteract that somewhat, obviously.

In any case a straight dollar analysis of contract vs renting isn't that interesting to me, since I don't consider them equivalent. I don't mind renting, I've done it several times but I don't want that to be my primary method of using DVC. The experience of using points is just nicer and more flexible to me, and I pay a little more for things to be more convenient all the time. YMMV

 

[mistysue]

If the rep was a DVC guide & your plan was to finance & pay off early I can see the guide saying that as part of his sales pitch. How would a guide even know whether his buyers who financed paid off their loan/mortgage early?
I think there’s a tendency to assume that how I did something is the way most folks did it too. I paid cash for my 4 contracts, thus I assume most people are like me & did that too, although my son w/ the Econ degree assures me that I’m not like most people financially.
I’m sure many direct buyers don’t have $30,000+ in cash sitting in liquid accounts and do finance but a surprising number of US households do have decent savings https://www.bankrate.com/banking/savings/savings-account-average-balance/ thus would be able to pay cash for a DVC purchase if so inclined. The pool of potential buyers of DVC I suspect is skewed towards those earning enough to vacation at WDW & stay onsite &, unsurprisingly, savings seems to correlate with earnings.
Resale buyers tend to be another demographic - the initial buy in cost is lower, & I suspect they are less likely to make an impulse purchase, so it makes sense that a larger % of those buyers paid cash.

He actually addressed that, because I responded with a bit of "not sure I believe that" - he said the bulk of people finance and that most seem to pay it off early- and that he had figured this out because he would follow up, giving people add-on deals and they would tell him. Again, this is obviously going to be skewed by that same issue that people only reply if they have the situation that is viewed as "positive" - that it is paid off. I suspect the number of "paid off" direct contracts is skewed by people refinancing it at lower rates, all DVC would know is that they are no longer involved.

 

[Madame]

We financed both of our contracts through a HELOC - DH gets an employee rate so around 2-3%. 200 SSR $80 pp resale in 2016 then 270 BCV resale $130 pp in 2018. Each took 4 years to pay off. We just made the last BCV payment in March

I think SSR routinely goes for over $100 pp and BCV at something ludicrous like $150 pp so I consider the interest paid well worth it.

Also, as a family of 5 our choices for getting cheap/deal room packages while also saving up for a DVC purchase were non-existent. Even the cheapest (and our favourite) CBR is so expensive now

I can see where the numbers might work out differently for a family of 4 or less choosing value as they save up for DVC, but for us it was a no brainer.

 

[Brian Noble]

That doesn't take into account the fact that you can sell your contract after 10 or 15 years and get at least as much as you paid for it, right? ( Not guaranteed but a good bet)

Like I said, you can come to any conclusion you want, all you have to do is play with the assumptions.

But, your statement was, roughly: "None of you people telling someone not to finance have ever said that buying direct was a bad idea," and I was just bringing my receipts.

 

[BamaGuy44]

Like I said, you can come to any conclusion you want, all you have to do is play with the assumptions.

But, your statement was, roughly: "None of you people telling someone not to finance have ever said that buying direct was a bad idea," and I was just bringing my receipts.

You got me, i wasn't aware of that thread from 2015. I'm sure there are others. I'll rephrase to "rarely" instead of "never". My point is buying direct for cash doesn't get the automatic knee jerk reaction that it's a bad deal, while a lot of people would be quick to mount their high horse about someone financing resale, even though they could get the same points for overall less money.

 

[jennyq87]

I can twist a financial analysis to give pretty much any answer I want by playing with the assumptions. That doesn't change the fact that I'd be borrowing for a luxury purchase, which just seems like a bad idea.

This is what I was going to say. You can play with #s to justify just about any decision. Is financing a luxury purchase the best FINANCIAL decision you can make? Unlikely. But does the value of experience you're purchasing outweigh that cost for YOU? That's for you to decide.

 

[BeachClub2014]

This is what I was going to say. You can play with #s to justify just about any decision. Is financing a luxury purchase the best FINANCIAL decision you can make? Unlikely. But does the value of experience you're purchasing outweigh that cost for YOU? That's for you to decide.

I agree 100% that whether to finance a DVC purchase is truly a personal decision. People finance luxury purchases all of the time, including cars, campers/RV's, boats, homes, and even timeshares. It's not for everybody, that's for sure, but for many, it is, which is also fine.

 

[Brian Noble]

My point is buying direct for cash doesn't get the automatic knee jerk reaction that it's a bad deal, while a lot of people would be quick to mount their high horse about someone financing resale, even though they could get the same points for overall less money.

I'm going to guess that most people aren't too worked up about low-rate/short-term financing for a resale purchase. Heck, even I thought the OP's plan of 70/30 on a resale was reasonable, and I'm a Never Finance person.

I think what most people mean when they say "finance" is: from Disney, at their usurious rates, over many years, for a direct purchase. I bet that's how most DVC points are sold, and it's possibly worse than renting in more or less any set of assumptions one cares to make.

 

[davidl81]

I'm going to guess that most people aren't too worked up about low-rate/short-term financing for a resale purchase. Heck, even I thought the OP's plan of 70/30 on a resale was reasonable, and I'm a Never Finance person.

I think what most people mean when they say "finance" is: from Disney, at their usurious rates, over many years, for a direct purchase. I bet that's how most DVC points are sold, and it's possibly worse than renting in more or less any set of assumptions one cares to make.

Oh I’m sure that’s how most are sold. Just look at the pricing sheet you get from DVC when buying direct, it’s just monthly payments broken down into options of putting 10 or 20% down.

 

[Robbie Cottam]

I'm going to guess that most people aren't too worked up about low-rate/short-term financing for a resale purchase. Heck, even I thought the OP's plan of 70/30 on a resale was reasonable, and I'm a Never Finance person.

I think what most people mean when they say "finance" is: from Disney, at their usurious rates, over many years, for a direct purchase. I bet that's how most DVC points are sold, and it's possibly worse than renting in more or less any set of assumptions one cares to make.

You do realize you can recapture most of the interest you pay on a DVC mortgage, right ?

 

[BamaGuy44]

I think what most people mean when they say "finance" is: from Disney, at their usurious rates, over many years, for a direct purchase. I bet that's how most DVC points are sold, and it's possibly worse than renting in more or less any set of assumptions one cares to make.

That’s what everyone assumes someone means, as soon as the word finance is mentioned. So they put on their judgy pants without knowing anything about the person’s finances or their financing terms. But yeah in your set of assumptions, which is basically the worst possible way to buy DVC, it’s a bad idea

 

[RichVIII]

I am going to share a different perspective.

So many friends/family/neighbors have come had moments to buy in, whether it be inheritance, bonus, or reasonable financing. Each is often amazed at how much we enjoy our DVC points and say things like "could have" or "should have" and then see the prices have gone up since they first inquired. While I don't expect them to skyrocket as they have increased - will that be sustained, who knows - probably not at these levels. But what COVID taught our family and what DVC points often "forces" you to do is actually take a vacation - enjoy time with friends, family, or simply by yourself.

Are you taking vacations now and could put that money towards a DVC purchase? Will DVC create the opportunity for vacations? I am certainly not advocating for dumb financial decisions but based on your comments, you seem fiscally responsible. Will this slight financial risk or additional cost create a better opportunity for you and those around you? That is the question I would ask.

 

[Bo1203]

I think mostly everyone can agree making minimum payments at 10% for 10 years isn't the move. I do think its reasonable to finance even with a high interest rate, long as you have a plan in place to get it paid off asap. If you have a history of being smart with credit, there's lots of options using 0% interest card offers and balance transfers. Take into account paying a couple thousand in interest and add that to your break even point vs what ever amount that is for you, renting, rack rate, swan and dolphin.

The golden parachute of dvc, and what wrecks renting, swan and dolphin, lowering the costs of all these vacations is the option to sell your contract one day. Will there be points in time where that might not be the case, sure, but historically I'd wager 10+ years from now you've more than broke even.

 

[Ashlotte]

Curious where you all weigh in on this.

My good friend has DVC and has been talking me through her experience. I've also been listening to the DVC podcasts and reading here religiously as I enter the researching phase. For background, I tend to be pretty conservative financially. I am not an impulse buyer and focus on saving. We have the money to buy a small contract, but it's not there for "that" so to speak, so I don't want to touch it. We are currently starting a specific DVC savings fund.

With that said, I do not tend to finance items other than my house and my car and prefer to save and buy. My friend, who bought her many points cash and is also conservative financially, said to consider that the prices always climb, so there's a balance between waiting and saving and getting in with the points lower.

I guess I look at the interest at financing probably outpaces the rate it increases. If you financed, did you feel it was "worth it" when in the end you spent so much more per point? Are you glad you did it?

I think my current goal is to save enough to do 60-70% cash and finance the last 30-40%, with the plan to pay it down ASAP. I've never financed for "fun" and it makes me nervous to be honest. But this is a true passion. I'm curious where others fell on this topic. As I listened to The DVC Fan podcast episode on financing I realized most of the people on it financed it, so that made me feel slightly less nervous to do it... Still weighing my options.

I haven't read all of the replies, but I personally would not feel comfortable taking on debt for vacations. I would have loved to have DVC twenty years ago, but we are buying it now, when we have the cash to buy a contract (resale) without financing, and have no other debt.

Is your goal to go to WDW or to stay at DVC? There are tons of great places to stay around WDW for much less. We have a different timeshare (WorldMark) that has allowed us to trade into DVC (BWV, SSR, OKW) over the years at a fraction of the cost. We were paying less for the week than the DVC owners because our dues are less. A WorldMark resale account is super inexpensive and you can still vacation at WDW while you save up for DVC. Even if there is no DVC trade available (never guaranteed), there are multiple WorldMark properties available in Orlando near the parks. Just a thinking outside of the box idea.

I do think people should go on vacations and not wait forever (who knows what curveballs life will toss you in the future), but there are a lot of less expensive vacation options that are also fun that you can take while you save up for DVC.