Paying cash or financing?

[Dsnygirl]

Just curious -- how many of you paid cash for your ownership, and how many of you financed? We're interested in a DVC sometime in the future, but really want to do it as a "cash only" purchase vs. financing.

What I'm wondering about is how much the cost may go up b/w now and then (realistically, if we didn't finance it, we'd be looking at buying in 3-4 years, as we've got some other large financial items to deal with first) and how many trips we may take b/w now & then.... and whether it's financially worth it to wait, or buy in and finance it out over just a few years.

I just can't get past the fact that financing it means that I'm paying every month for a vacation I'm only taking once or twice that year - and the interest I'm paying is such a waste! It seems so much more expensive that way...

... but then, waiting 3 or 4 years, taking the chance that DVC points will go up (have they gone up a lot over the past few years, or remained relatively static?) and paying OOP for trips over the next 3-4 years may also be more expensive.

I read another thread where most of you wished you'd bought earlier... I just don't want to become one of those folks that's wishing that in 3-4 years too!! :blush:

Any tips/advice one way or the other?? :thanks:

[CanadianWDWFan]

:hi: Blythe! Say :hi: to Dan for me!

We saved up for a few years to be able to purchase our ownership. For us we felt that it was the best choice. We really didn't want to have another monthly payment to worry over.

As for buying sooner, sure we wish we could but in hind sight it would not have been a good choice for us.

Being free and clear on your ownership is a good feeling.

PM me if you want.

[Fryguy]

When we first bought in back in 2000 we financed the transaction and have since added on and chose to finance those as well. The interest rate is a little high in my opinion but the convenience makes it worth it.

It made it easier to afford the DVC membership at the time.

[thumperbug]

When we bought our initial 150 points back in 2003 we financed them. When we added on additional 120 points a few years later we were able to pay cash. Since that time we were able to pay off the balance of the initial loan and now own all our points outright.

The monthly pmt on the financed amt was low and when we had additional $$ we made extra payments. Yea, the interest rate is a bit high but when you think about how long the ownership interest is for it doesn't seem a factor. If you do finance, check with your tax preparer. We were able to deduct the interest we paid on the loan on our taxes since it is real estate owned.

[Horizon93]

We bought in last year and financed. It made the most sense to me. I think the rate is 10.75% which is not great, but not credit card level.

I look at it as prepaying decades of vacations. The interest is tax deductible (check with your accountant to be sure) and the loan does not appear on a credit report.

It was the only way we could buy in without using up a ton of cash. There is no pre payment penalty, so anytime I want to pay it off or pay additional principal I can. At this point, I am matching principal every month, so if I keep that up, it will be paid off in 5 years. That is my current goal.

[MickeyMousse]

I financed it when I bought in 2002 and have less than 4 years left on it. I figured we would have to save more money monthly than what the payment is in order to go to WDW anyway.

There's no way we could go as often as we do and stay at the resorts that we do if it wasn't for DVC. It surely has made vacationing more affordable.

[dnickels]

I'm not a big fan of financing anything other than education and a home, but it all depends on your financial situation. There are so many things that go into it (how soon you'll be vacationing, how often, but some things I would keep in mind just from a basic financial planning perspective).

#1 of course is the interest rate. If you're paying 10% as an interest rate on a loan over 10 years and the cost of buying into DVC is going up less than that then you're probably on the losing end (yes interest deductions make a small difference) Personally if I could get a 10% or more guaranteed return on some investment I'd be happily parking my money there (meaning it's a darn good rate for Disney). I'm sure someone on here can tell you what DVC points originally cost, what they cost today and from that you can figure out the compound rate.

#2 (the Suze Orman approach) Worst case scenario - what happens if you or your husband lose your jobs for a period of time? In that situation would the additional monthly payment be a problem?

I would not do it unless I was paying cash.

[lockedoutlogic]

Paying interest on anything increases the price of the product and decreases it's value....

sure it's very convenient.....but in the end you pay more than someone who saves and buys....

if it is a reasonable goal to save up....i recommend you do it....providing you're not going to pilfer 10K away on disney hotel rooms while you do it.....


econ 101....

[lockedoutlogic]

I'm not a big fan of financing anything other than education and a home, but it all depends on your financial situation. There are so many things that go into it (how soon you'll be vacationing, how often, but some things I would keep in mind just from a basic financial planning perspective).

#1 of course is the interest rate. If you're paying 10% as an interest rate on a loan over 10 years and the cost of buying into DVC is going up less than that then you're probably on the losing end (yes interest deductions make a small difference) Personally if I could get a 10% or more guaranteed return on some investment I'd be happily parking my money there (meaning it's a darn good rate for Disney). I'm sure someone on here can tell you what DVC points originally cost, what they cost today and from that you can figure out the compound rate.

#2 (the Suze Orman approach) Worst case scenario - what happens if you or your husband lose your jobs for a period of time? In that situation would the additional monthly payment be a problem?

I would not do it unless I was paying cash.


this is perfecty put....i failed to read it before my oversimplified post above.....

my only disagreement is that many kids now finance college educations that don't yield a good return on the huge outlays up front....

but that's an argument for a different day....

i agree.....vacations should not be financed.....because it would have to go if money becomes tight....and DVC is only a "good" deal if you use it, own it, and are either able to keep it long enough to get a good return or sell it and recoup most if not all of your upfront price....

[Dsnygirl]

:mickey: Thank you all so much for your posts... I am of the "don't finance vacations" mind-set, as well, and over the past few days since I posted, have become even more strongly entrenched in that line of thinking. I'd much rather put $300/month into retirement or college for my girls and save what is any excess towards a DVC goal than feel like it is a "burden" someday if finances get tight for any reason.

As much as we love Disney, I know we probably won't continue to go every year/year and a half, and with some of our other goals, it would become a "we really should go" rather than a "want to go" situation.

That being said... I sure hope we find a way to save up some extra $$ quickly over the next few years and re-think it then! ;)

Keep the input coming -- it's great! :thanks:

[lockedoutlogic]

:mickey: Thank you all so much for your posts... I am of the "don't finance vacations" mind-set, as well, and over the past few days since I posted, have become even more strongly entrenched in that line of thinking. I'd much rather put $300/month into retirement or college for my girls and save what is any excess towards a DVC goal than feel like it is a "burden" someday if finances get tight for any reason.

As much as we love Disney, I know we probably won't continue to go every year/year and a half, and with some of our other goals, it would become a "we really should go" rather than a "want to go" situation.

That being said... I sure hope we find a way to save up some extra $$ quickly over the next few years and re-think it then! ;)

Keep the input coming -- it's great! :thanks:

good luck to you....and i hope to see you at the pool at Beach Club soon.....

you seem to be very leveled head and wise about this.....

[Dsnygirl]

good luck to you....and i hope to see you at the pool at Beach Club soon.....

you seem to be very leveled head and wise about this.....
Thanks! That'd be so great... :cloud9:

.... and my DH would be :rotfl: and :funny: so hard he'd split something if he read that... :D I'll be sure to save that post to show him when I need it!! :thumbsup:

[Tink&Goofy]

:hi: Hi Blythe!
WE have done a little of both. When we bought, we weren't sure how often we would go, coming from the west coast, so we bought 160 points, thinking that we would go every other year for about 8-10 days. Well.....somehow that just hasn't worked out to be enough. :blush: So we added on.
We financed originally - mostly because my oldest was already 14 at the time - and I didn't want to wait until she was off to college before we did it - we wanted to be able to use it NOW. When we added on - we paid cash. The nice thing is, you can add on in small chunks. If you pay cash, you can add as few as 25 points at a time.
That being said....
If you are not ready to pay the full up front cost for a membership, you should consider paying cash for a small resale. Once you have an ownership, you can purchase small add ons for cash, as you can afford it. Meanwhile, you are still able to use it. Granted, you won't have a ton of points, and will have to bank/borrow and maybe combine with a cash stay, but still can start using it. This also may help you determine exactly how many points you really will want.
One more thing - if you buy in smaller "chunks" you are then very flexible, and able to sell off small chunks if you no longer need as many points. If you get all points in one purchase, they cannot be split later.
Hope this helps!

[Nurse Kim]

We too were going to buy DVC points and finance them but after thinking about it we decided to wait. We are planning a trip in March 2009 and between now and February we will save $9800 for our trip. We figured if we can save that for a trip in just 7 months we can do that and purchase DVC after our March trip so that is our plan. We probably won't go every year but our kids are older and DH and I would like to take a cruise so it's nice for us that that is an option for us with our points.

It will also be nice not to have to put another monthly payment in our budget. My car will be paid off in December and it just didn't make sense for us to add another monthly payment.

[mouse-logic]

Cash.

I am allergic to interest.