Rfc0001, the way you are figuring annual cost is very different from how financial experts figure annual costs. Your analysis excludes the time value of money. In other words, your analysis assumes that $1 in a person's pocket today is worth the same as $1 (adjusted for inflation) in that person's pocket 50 years from now.
Financial experts agree that money in one's pocket today is more valuable than the same amount of money at some point in the future, even after adjusting for inflation. Even when inflation is very low (as it is now) billions of people worldwide are willing to pay interest (often very high interest) to borrow money. If there was no such thing as the time value of money, no one would be willing to pay interest on a loan.
I understand what you are saying. We don't disagree. Time value of money says the opportunity cost of spending that money on DVC is investing it at x%. So if you could earn 8% ROI on PVB, and 8% in the stock market, then it's a wash.
We agree.
That said, I doubt most people buying DVC or any time share are going to put that 8% to work in the stock market if they didn't buy DVC. They'll probably go buy a car, or do something else with the money -- so that is their opportunity cost.
If you treat PVB as an investment, I agree it only returns 6% a year, which relative to any other investment, is a marginal one, at best. However, if you buy Poly to stay at Poly (which I did), it's real saving is over booking DVC direct, which if you are going to compare apples to apples, you have to do since the only way to ensure you can book what you want when you want at Poly is to book through Disney direct ($24/pt. after tax and typical 30% discount). At that annual value, Poly jumps up to 12% ROI (savings per year). Sure, SSR returns more if make the same assumptions, but SSR can only be used at 7 mos. to book other resorts, which at that point you could easily rent points for $13/pt. at which point your ROI on SSR is still only 12% -- a wash with Poly.
This is exactly what we do -- we own SSR resale to book most resorts. We own AUL resale to book AUL. We own PVB to book PVB. The value of those points is $13, $16, and $24 respectively (the cost we would have to pay to book the same accommodations). With those assumptions, DVC saves as around 12% annual ROI using a financial approach . Could I find an investment worth that much consistently for 40-50 years? Personally, no. FWIW, I don't own any stocks (including my 401K) -- I am extremely conservative -- I'm waiting for the next major market correction and will be pushing my 401K in as everyone else is pulling theirs out.
Even if I could find an investment that has a 12% ROI I still would prefer DVC since it provides me what I want when I want it (even more so that booking direct, which you can't control availability and discounts). You also get ancillary savings with DVC AP (annual pass renewal for the price of a ticket 7-day ticket), TiW, discounts, etc. It also gives me great flexibility in financially engineering the benefits and cash flow it provides. So, in my example, I can rent enough points to pay all my MFs (And the cost of those rented points) and the resulting points will cost me
nothing in cash flow for several weeks of vacation). I know that just eat into my ROI since it's more ROI in terms of savings to book the points than to rent the points, but I don't care who you are,
getting to stay 3 weeks a year in Disneyworld for free is pretty darn cool 
Here's how the time value of money works in this particular situation. Let's say a purchaser (call him Developer Dave) buys a 200-point Polynesian Villas contract from the developer (Disney) at $160 a point, which is $32,000 total. That Polynesian Villas contract will be good until 2065 (at least I think it's 2065.) Another purchaser (call him Resale Reginald), buys a 200-point Saratoga Springs contract resale at $75 a point, which is $15,000 total. That Saratoga Springs contract will be good until 2054.
Just to clarify, Poly's last UY is 2064 (Dec UY of 2064 runs through Dec, 2065; so all UYs will expire by Jan 2066); SSR's last UY is 2052. So, PVB has 51 years left (if you bought presale) and SSR has 39 if you buy resale this year.
Sure, Dave gets an extra 11 years on his contract compared to Reginald, but Dave doesn't get to start using those extra years until 2055. Yet, Dave has to come up with the extra $17,000 in purchase cost now. (Home resort booking priority also is important, plus Disney offers a few developer-only 'privileges' that are generally a poor value. But here, I'm focusing only on the time value of money.)
To provide a counter point, The majority of the price you pay is in MFs, which are paid as you go. The difference in upfront purchase price per point is small from $1.70 for OKW in 1991 to $3 now for Poly. You're just buying more points up front. So that 12% ROI (and benefit of vacation stays) is lasting you 12 years longer with PVB than SSR -- do you want/need 12 more year? That's an individual choice. If you don't want/need it, then SSR is your man.
You and I agree that when valuing different DVC contracts, people should take into consideration all the factors, such as differing annual fees between different DVC resorts, and also the amount of years left on the right-to-use. Where we disagree is that I am also considering the time value of money, whereas you insist that the time value of money doesn't exist.
You misunderstand my perspective, or perhaps I was making a different point unrelated to this; however, I agree, nonetheless.
You are entitled to value your DVC ownership anyway you want, but for other people who come to this board, especially those new to timeshare, it's important to point out all the costs of timeshare ownership. This includes the fact that coming up with thousands of dollars today is harder than coming up with thousands of dollars over a period of decades.
Agree people
should run the numbers and analyze the benefits and costs (and alternatives)
for them. Clearly, when it comes to timeshares and Disney, people
do not. I don't want to add fire to that flame. There are plenty of people who default on 9.99% mortgages with DVC (the new member rate). That said, I consider the folks at TUG a little more sophisticated (or if they are new, they soon will be) and therefore able to understand the long game on extremely expensive timeshares like DVC, which still can make sense if you understand what you are getting for what you bought.
8.99%??!!!!????
is this true??? That is a crazy percentage for an interest rate!!! Yes, I live in Canada, but my home owner line of credit is 3.35%. How can people afford 8.99%???
Yes! Keep in mind, it's not recommended -- if you are earning 12% ROI (best case -- compared to booking Poly direct) and paying 10% interest, clearly you aren't coming out ahead. Not that what I say has any bearing on what someone buying DVC direct thinks or does, but for the record, I do not recommend anyone use 10% financing to buy DVC. For short term financing to transfer to a 3% (after tax credit) HELOC, or pay off -- maybe.
