Actual Re-sale Savings

[havoc315]

Obviously, a lot of people go to the re-sale market under the promise of savings. The more lengthy purchase process, the loss of blue card benefits, and what restrictions are in place, are seen as small costs when you can save 25-40%....
But what are the savings actually?
I'm going to explore 3 resorts -- Riviera, Polynesian and Beach Club. I'm going to assume 20 years of DVC ownership. I'm using 2022 dollars, which means that I'll use the 2022 MFs. (yes, they go up overtime, but the value of the dollar changes accordingly, sticking to 2022 dollars means using 2022 MFs). I'm also going to assume that Beach Club is worthless in 20 years, as the contract expires. I'll assume that Poly and RIV re-sale value will be similar to what it is today -- as they will both have over 20 years left.

200 points of each:
Direct pricing:
Beach Club: $265 per point, with closing costs -- $54,000
Riviera with current incentives -- $191 per point, with closing costs, $39,000
Poly -- $250 per point , with closing costs $51,000

Resale pricing:
Beach Club at $170 per point - $35000 with closing costs
Riviera at $145 per point - $30,000 with closing costs
Poly at $170 per point - $35,000 with closing costs

But now, let's add 20 years of MFs --
Beach Club - Direct - $84,000. Beach Club re-sale: $65,000
Riviera direct: $72,500 - Riviera re-sale: $63,500
Poly direct: $80,500 -- Poly re-sale -- $64,500

Ahhh, but now let's look at total cost after 20 years, where we re-sell Poly or Riv:
Beach Club -- Total cost, direct -- $84,000. Beach Club, total cost re-sale: $65,000 -- 22% savings.
Riviera -- Total cost direct -- $43,500. Riviera total cost re-sale -- $34,500 -- 21% savings
Poly - total cost direct: $46,500. Poly total cost re-sale: $30,500 - 34% savings.

So, savings vary largely. The biggest savings are at the sold-out resorts that you can still later re-sell.
But we see another interesting tidbit....
The total cost of buying Riviera direct is actually 35% cheaper than buying Beach Club re-sale.
The total cost of buying Poly re-sale is 53% cheaper than Beach Club re-sale!

So lessons:
Within a given resort, re-sale may save 20-30% over the long term...
But...
Buying a incentivized resort direct is significantly cheaper than buying a 2042 resort re-sale..
And buying a long-contract on the re-sale market is what actually gives you the lowest possible price, best savings.

While not calculated -- If you hold a long contract for it's full 35-50 years, then the re-sale savings would be much smaller.

 

[wilkydelts]

While not calculated -- If you hold a long contract for it's full 35-50 years, then the re-sale savings would be much smaller.

Please explain this point, cause I am just not following it. If I save $25,000 on a re-sale contract and hold they contract until expiration I still saved $25,000.

 

[pianomanzano]

Please explain this point, cause I am just not following it. If I save $25,000 on a re-sale contract and hold they contract until expiration I still saved $25,000.

It's basically a longform explanation of the dues being the driving cost for contracts. Your upfront savings is still 25k, but the percentage savings will be less if you factor in all the dues.

 

[havoc315]

Please explain this point, cause I am just not following it. If I save $25,000 on a re-sale contract and hold they contract until expiration I still saved $25,000.

As a percentage of total cost. Example, Poly -- You save $16,000 in the purchase price, but didn't save anything in dues.
So over the 43 remaining years:
If you paid direct, then the total cost was $114,554. If you paid re-sale, the total cost was $98,554. So if you resold after 20 years, then your savings was 34% (see above). But if you kept the contract to expiration, then your savings was only 14%.
14% is much smaller than 34%
For Riviera, kept until 2070, you would be looking at about 8% savings.

 

[Nursemanit]

As a percentage of total cost. Example, Poly -- You save $16,000 in the purchase price, but didn't save anything in dues.
So over the 43 remaining years:
If you paid direct, then the total cost was $114,554. If you paid re-sale, the total cost was $98,554. So if you resold after 20 years, then your savings was 34% (see above). But if you kept the contract to expiration, then your savings was only 14%.
14% is much smaller than 34%
For Riviera, kept until 2070, you would be looking at about 8% savings.

Assuming you spent and did not invest the 16k?

 

[Madame]

Assuming you spent and did not invest the 16k?

Yup. Totally different calculation if you took the savings and invested it over the length of the contract….

 

[havoc315]

Assuming you spent and did not invest the 16k?

Yes, that changes the equation slightly. It increases the savings by a little bit, with the smaller lost opportunity cost. We do get to the point where we need a massive excel spreadsheet and an MBA in finance to really factor in everything.

 

[Nursemanit]

Yup. Totally different calculation if you took the savings and invested it over the length of the contract….

But let's be real, we would just buy more points.

 

[Madame]

But let's be real, we would just buy more points.

True

 

[RoseGold]

Yes, run the clock out on BC and then everyone who bought RIV is a freaking genius!

Massive assumption there with Poly depreciating like that. No historical basis for it, and it would indicate a huge drop system wide. I mean HUGE.

I did the math for 10 years of ownership when I bought in 2019, and I was OK with pretty much anything but 2042s. Now, I think I would actually flip that. I would feel comfortable holding BC for 10 years and selling.

 

[RamblinWreck]

It's really difficult to estimate these things that far out.

To do it properly, you have to make a bunch of assumptions. Many of them will be wrong.

Trying guess at dues and estimating some net present value to them, future resale value, etc.

Then it's even more complicated if you are planning on taking advantage of Annual Pass discounts while using the contract.


It's really easy to calculate how much you will save up front on the purchase though. And while dues may be the biggest factor in the long run, the initial purchase price is the biggest hurdle to get over for most people.

 

[Grumpy by Birth]

An Engineer, a Chemist, and an Economist are stranded on a tiny desert island with a single coconut tree on it. A can of beans from their shipwreck washes up on shore. The starving trio needs to open the can to survive until help arrives.

The Engineer begins developing a pulley system made out of palm fronds designed to pull a coconut off the tree at the proper angle with enough force to smash the can open when it hits the ground.

The Chemist proposes to start a fire by rubbing the palm fronds together in order to heat the can until enough pressure builds inside to blow the top off.

The Economist says "Let's assume we have a can opener."

 

[aoconnor]

As others have alluded to you ignored the opportunity cost of the $$ saved day one which is material - nearly as material as the upfront savings.

Using Poly as the example, you save $16k upfront. Instead of investing that $16k in DVC at a 0% return (since you assume you sell for the same amount) if you invested it at a 5% real return (adj for inflation) that $16k is worth $42k at the end of 20 years. That would imply the savings is more like $26k (in today's $), not $16k. Now the savings are 56%. You can argue the rate of return, for me I feel confident I can get a 5% real return over 20 years.

 

[havoc315]

Yes, run the clock out on BC and then everyone who bought RIV is a freaking genius!

Massive assumption there with Poly depreciating like that. No historical basis for it, and it would indicate a huge drop system wide. I mean HUGE.

??? I didn't assume any Poly depreciation. I assumed that in 2022 dollars, re-sale value in 2042 would be the exact same as re-sale value in 2022. Certainly, it might appreciate a little, it might depreciate a little. But I didn't factor in ANY depreciation.

I did the math for 10 years of ownership when I bought in 2019, and I was OK with pretty much anything but 2042s. Now, I think I would actually flip that. I would feel comfortable holding BC for 10 years and selling.

I suspect BC will depreciate significantly in 10 years, but we really don't know. You'd be taking a big risk. I'm guessing that in 2032, BCV re-sale will be at about $80-$110 per point.

 

[Brian Noble]

But what are the savings actually?

I mean, this is all very interesting, and it is important to remember that the costs of DVC are much more than just the purchase price. For that matter, it is also more than the purchase plus dues, as you have to get there, eat while you are there, and will probably find some way of keeping yourself entertained.

All that adds up, and should be considered before taking on the obligation of ownership.

But it doesn't change the fact that resale is saving you $45-$95/pt vs. the retail price of the same contract in your examples.

 

[Lumpy1106]

200 points of each:
Direct pricing:
Beach Club: $265 per point, with closing costs -- $54,000
Riviera with current incentives -- $191 per point, with closing costs, $39,000
Poly -- $250 per point , with closing costs $51,000

Resale pricing:
Beach Club at $170 per point - $35000 with closing costs
Riviera at $145 per point - $30,000 with closing costs
Poly at $170 per point - $35,000 with closing costs

These are the only $s that matter. Dues are the same, direct or resale. "% difference" is just another way to jigger the analysis.
Beach Club difference = $54,000 - $35,000 = $19,000
Riviera Difference = $39,000 - $30,000 = $9,000
Poly difference = $51,000 - $35,000 = $16,000

The question is; what are you getting (or vice-versa; missing out on) when you pay that extra to buy direct? What is that worth to you? Understand that most of that is not written into your contract and could go away tomorrow. Also, what makes DVC so much better than other time shares is you CAN turn around tomorrow and sell it. Amortizing the difference between Direct and resale over the full life of the contract kinda negates that advantage.

End of the day, direct or resale, we all make some assumptions when deciding to buy at all. Are you happy with your decision? That's all that matters.

 

[havoc315]

I mean, this is all very interesting, and it is important to remember that the costs of DVC are much more than just the purchase price. For that matter, it is also more than the purchase plus dues, as you have to get there, eat while you are there, and will probably find some way of keeping yourself entertained.

All that adds up, and should be considered before taking on the obligation of ownership.

But it doesn't change the fact that resale is saving you $45-$95/pt vs. the retail price of the same contract in your examples.

That might or might not be worth the hassle, loss of perks, etc., but the numbers are what they are.

Absolutely... but saving $45 on a $100 jacket purchase isn't the same as saving $45 on a $500 airfare which isn't the same as saving $45 on a $40,000 automobile purchase which isn't the same as saving $45 on a $600,000 new house purchase.

Instead of looking at absolute dollars, it is important to contextualize the savings relatively.
If I told you that you could save $45 on your $600,000 new house purchase... if you let me stick a billboard on the front lawn for the next 20 years... You probably wouldn't agree to it. If I said you could save $300,000 on your $600,000 new house purchase if you let me stick that billboard on the front lawn, you might be more willing to go for it.

So for a 20-25% savings..... It's a fair question, is it worth dealing with restrictions (inability to book future resorts), dealing with a ROFR hassle, missing out on blue card extras....
I'm not saying there is any "correct" answer. It's partially objective but mostly a subjective measurement.
But much like DVC marketing tends to overstate the degree of savings by purchasing DVC, the re-sale market tends to overstate the degree of savings when you buy re-sale.

 

[havoc315]

It's really difficult to estimate these things that far out.

To do it properly, you have to make a bunch of assumptions. Many of them will be wrong.

Trying guess at dues and estimating some net present value to them, future resale value, etc.

Actually, dues is pretty easy. Not with 100% certainty but with a high confidence rate. Dues are actual operating costs. Operating costs will fluctuate with inflation. So if costs of all things double, then dues will double. But that means the costs have remained the same in 2022 dollars.
While over a short time frame, dues increases can vary wildly, over the long term, you are looking at increases in line with inflation.

If inflation over the next 10 years is 40%, then I'm confident dues will be approximately 40% higher in 10 years.

Then it's even more complicated if you are planning on taking advantage of Annual Pass discounts while using the contract.

Yes, I didn't factor in anything like that. That's very unknown.

It's really easy to calculate how much you will save up front on the purchase though. And while dues may be the biggest factor in the long run, the initial purchase price is the biggest hurdle to get over for most people.

 

[Brian Noble]

but saving $45 on a $100 jacket purchase isn't the same as saving $45 on a $500 airfare which isn't the same as saving $45 on a $40,000 automobile purchase which isn't the same as saving $45 on a $600,000 new house purchase.

Sure it is. Every single one of those examples gives you $45 you can use on something else. $45 is $45 is $45 is $45. The absolute value of $45 doesn't change (assuming those purchases all happen around the same time).

The relative value might change, but only in the sense that the marginal value of a dollar for someone who can afford a mid-six-figures home is probably less than that for someone squeaking by rent on a studio apartment. It doesn't matter what each person is using the money on, only that discretionary dollars are more/less available for spending.

 

[havoc315]

Sure it is. Every single one of those examples gives you $45 you can use on something else. $45 is $45 is $45 is $45. The absolute value of $45 doesn't change (assuming those purchases all happen around the same time).

But you're not being handed $45. There is a remaining cost.

I have widgets for sale! I'll sell you this pristine brand new widget for full price. Or I'll sell you this scuffed up used widget for $45 off!

Doesn't the full price inform your decision... or all that matters is you save $45 buying the scuffed up used widget?!

If the brand new widget is $50, and you can reduce that price to $5 by purchasing the scuffed up used widget, that's a very different situation than if the brand new widget is $1 million, and it is $9,999,955 for the scuffed up used widget.

When you are evaluating whether to accept an inferior good for a discounted price, the relativity of the discount is absolutely something to consider.

The relative value might change, but only in the sense that the marginal value of a dollar for someone who can afford a mid-six-figures home is probably less than that for someone squeaking by rent on a studio apartment. It doesn't matter what each person is using the money on, only that discretionary dollars are more/less available for spending.