Is DVC for cruises really never worth it?

[_auroraborealis_]

Even if you bought OKW at inception, renting out the points and paying cash is probably better.

But this post has no math, so hard to say for sure.

It generally is, yes. But my experience is that some of the old-school owners are willing to shrug about the capital expense at this point in the ownership. They also didn't pay $180-odd per point.

 

[dez1978]

you cant use resale points for the cruise unless you are grandfather meaning you purchased them a few years ago. You can only use grandfathered resale points or direct points for a cruise. However there are sites that let you exchange resale points for a cruise if you rent them. Just google it. A couple sites come up.

If you swap them thru the link posted above , it doesn't matter if they are resale or direct.

 

[bananapepper]

I think your missing something. Don't think about it as your DVC will cover cruising. Think about them as separate transactions.

1) Buy DVC and pay annual dues
2) Sell your DVC points every year in exchange for cash (or credit)
3) Use the cash (or credit) and use it to pay for the cruise.

Example 1
Lets say you bought 400 Saratoga points direct @ 160.

400 x 160 = $64,000 purchase price
400 x 6.76 = $2,704 annual dues every year (then adjust for inflation)

If you use Disney's cruise swap program, they will give you about $8 per point worth of cruise credit.

400 x 8 = $3,200
Annual Dues = $2,704
Cruise Admin Fee = $95
Savings in year 1 = $401

It's going to take a lot of $401's to pay back the $64,000 you paid up front.

Example 2
Let's say you bought 400 Saratoga points resale @100 per point.

400 x 100 = $40,000
400 x 6.76 = $2,704 annual dues every year (then adjust for inflation)

If you use a cruise swap program with one of the rental brokers, they generally give you about $15 worth of credit and don't charge the $95 fee.

400 x 15 = 6,000
Annual Dues = 2,704
Cruise Admin Fee = 0
Savings in year 1 = $3,296

Ignoring things like inflation and time value of money, your pay back period is about 12 years using this method.

There are some risks you need to be aware of and be prepared to live with. The biggest risk is that demand for DVC goes down. The cruise swap programs only work because what's really happening is your renting your points to another family. If demand goes down, it may be more difficult to rent, and you may no longer get $15 per point.

Another issue could be if the brokers shut down. You may be forced to do these transactions on your own.

I believe your fine tax wise if doing one of the cruise swap programs, but if your flat out renting your points and then using the cash to book the cruise yourself, you will likely need to pay tax on the income. That could extend your pay back period.

Edit: I probably should have mentioned, that even in the second option, your really only saving $3,300 per year on a 12K cruise. To be able to cover a 12K cruise every other year, you would need close to 800 points. 800 SSR points (most economical) would cost about 80K upfront.

Thank you. I didn't think about tax on the income so that is something to consider.

 

[DougEMG]

Oh you can't use resale for a cruise? Did not know that. But I would just be swapping them or renting them out so it doesn't really matter right where I got them?

Just math to get that number. 12,000 is roughly how much it costs us OOP for a cruise divided by 15.5 = 774. If we wanted enough points to go every other year by banking/borrowing, we'd need half that amount. 774 divided by 2 = 387.

You forgot that you are paying maintenance fees on each point, so you aren't keeping $15.50 for your cruise. You only have $15.50-MF per point. So closer to $7 after MF.

 

[mustinjourney]

So a cruise is about 12,000 for us. So to go every other year we would need about 387 points. We'd basically break even after about 3.5 cruises if we bought AK resale. Then we'd just have the dues but even 2 years' worth of dues is huge savings vs the full cost of a cruise for 5 people. So that seems like a pretty good deal? Am I missing anything?

your napkin-math seems plausible to me. After your 4th cruise -- you'd basically be getting 50% off your cruises....plus you'd still have the DVC asset, which may or may not go up in value. This obviously doesn't take into account the time-value of money -- but that is another story for another day.

*ETA -- I forgot about membership dues for the first 8 years as well...that's going to add another $2600 or so each year to your costs -- so you're break-even is going to be longer than 4th trip. Looks like 6th trip would be about break-even if my mental math is correct. The good news is you'd still have the underlying asset that you could always sell.

 

[CanadaDisney05]

So a cruise is about 12,000 for us. So to go every other year we would need about 387 points. We'd basically break even after about 3.5 cruises if we bought AK resale. Then we'd just have the dues but even 2 years' worth of dues is huge savings vs the full cost of a cruise for 5 people. So that seems like a pretty good deal? Am I missing anything?

your napkin-math seems plausible to me. After your 4th cruise -- you'd basically be getting 50% off your cruises....plus you'd still have the DVC asset, which may or may not go up in value. This obviously doesn't take into account the time-value of money -- but that is another story for another day.

Their napkin-math is missing annual dues.

 

[mustinjourney]

Their napkin-math is missing annual dues.

yeah -- I noticed that and updated. You responded before I finished the edit.

 

[RoseGold]

So a cruise is about 12,000 for us. So to go every other year we would need about 387 points. We'd basically break even after about 3.5 cruises if we bought AK resale. Then we'd just have the dues but even 2 years' worth of dues is huge savings vs the full cost of a cruise for 5 people. So that seems like a pretty good deal? Am I missing anything?

This isn't just dues. Buying that many points would be 40K. Even assuming the points aren't depreciating (BIG ASSUMPTION), they are costing you market income, let's say a conservative 6%, or $2,400 a year. That's $4,800 every two years, which is 1/3 of the cost of the cruise.

And using up eight years of the contract could also tank the value of your 40K in points.

 

[Deb & Bill]

To cruise using points, you must pay a $95 fee to book and additional $95 fees every time you modify that reservation. Plus if you need to cancel, you can no longer use the points to book a DVC resort. You can only use them for the Disney Collection since their status changed to Reservation Points and you must pay another $95 to book a new trip with those. If you rent out your points to pay for a cruise, you don't have to worry about these issues.

 

[CanadaDisney05]

This isn't just dues. Buying that many points would be 40K. Even assuming the points aren't depreciating (BIG ASSUMPTION), they are costing you market income, let's say a conservative 6%, or $2,400 a year. That's $4,800 every two years, which is 1/3 of the cost of the cruise.

And using up eight years of the contract could also tank the value of your 40K in points.

Don't forget inflation on the cost of the cruise, rental income, and annual dues. Since Rental Income > Annual Dues, this eats into your relative gain. Doing up a super quick spreadsheet, assuming dues & rental income go up about 4% on average, and you can earn 6% on average in investment income, you would still come ahead by renting your points after about 14 or 15 years.

One thing to keep in mind is that buying points with the sole purpose of renting them out is really just starting up a side business. It's the smaller scale version of buying a rental property and using the proceeds to pay for your cruise. Buying a DVC contract and paying for the cruise are two independent actions that other than having the Disney name attached to them really have nothing in common. It's really just a matter of deciding whether this side business provides enough profit to justify the effort, risks, and opportunity costs.

 

[mike314]

I'm confused, for any DCL cruise (DCL member cruises or just regular itineraries) you only pay in points or can you pay in cash?

 

[_auroraborealis_]

I'm confused, for any DCL cruise (DCL member cruises or just regular itineraries) you only pay in points or can you pay in cash?

You can pay with points for a DCL cruise that is not the member cruise.

 

[Sandisw]

I think if you have your points and decide you are only going to use them that year for a cruise, and it replaces your WDW trip, then using then can make sense, even if it is not worth it,

However, I am slated to do a NCL Cruise in the fall and decided to rent some points vis David’s to help cover the cost. I’ve never done it and it was easy. Yes, it was a little less than doing on my own, but worth it,

Given that, I will always rent and then use the cash and cover the cruise, I rented 111 points, and it’s covering not only my fare but a few hundred extra to use toward my daughters fare!

 

[mike314]

You can pay with points for a DCL cruise that is not the member cruise.

I see so member cruises you pay with cash

 

[_auroraborealis_]

I see so member cruises you pay with cash

Member cruise can be points or cash but you have to have a blue card.

 

[Lilsia]

Simple, find the cruise that you want and see how much it would cost for cash and how many points it would take. If you can sell that amount of points for more then it would cost you to pay cash for the cruise, then it is not worth it. Most likely you can make more money selling those points out to pay for your cruise instead of using them.

 

[_auroraborealis_]

Buying DVC to rent for cruises as your consistent use, rather than incidental use, is unlikely to be worth it based on capital expense and time value of money.

 

[jodifla]

In 24 years of ownership, we used our points once for a 4 night cruise. We only booked 3 months out during spring break, so the point cost was much cheaper than the cash cost. I wouldn't do have my DVC just for cruises.

 

[Hokie2005]

Look at how many points it would cost to take the cruise you want and multiply it by $15.5 (that is the amount David's is currently paying for pts at a premium resort and 7+ month rental) and then add the $95 cruise booking fee. Then look at what the cash rate would be for the same room. I have NEVER not seen it make sense not to rent out the points and then pay cash. Use Costco to book the cruise and you can get the Costco cash card on top of that. David's is extremely easy to rent points through for anyone that may be new to it. If you want to rent them on your own, you can get about $2-$3 more per pt but just takes more work.