This article is an attempt to provide an in-depth financial analysis of Disney Vacation Club (DVC) ownership at Disney’s Animal Kingdom Villas (AKV). Prospective and existing DVC owners will inevitably want one simple question answered: is DVC worth it? This is a complicated question because it requires considering multiple factors including purchase price, anticipated inflation, opportunity cost, expiration date, ownership duration, and more. Check out our review of Animal Kingdom Lodge.
This article will not cover the basics of Disney Vacation Club. There are many great resources out there to get the basics.
Disclaimer: this analysis is for informational purposes only and should not be taken as financial advice.
Break Even Point? It Isn’t Quite That Simple
The easiest way to discuss the finances of DVC is to determine a “break even point”. This is the point at which the purchase price of a DVC contract is equal to the cash cost of purchasing a similar accommodation year after year. For example, the cost of a Studio Savanna View room for a particular week might be $5,000. The cost of a DVC contract to cover the same room might be $25,000. Therefore, after your fifth stay, you have “broken even”. A potential owner can then ask themselves the following question: do I plan on staying in a similar deluxe accommodation at WDW more than five times in the coming years? If yes, buy into DVC. Otherwise, pay cash.
This type of analysis can be a good starting point but there is a lot that is left out of the equation. Will Disney raise prices? What if you rented points instead of booking direct through Disney? How do annual dues effect the break even date? In this article, I will try to address these questions, along with the following:
- Inflation and Price Increases
- Time value of money (TVM) or opportunity cost
- Anticipated contract market value
- Tax
- Loan interest
Disclaimer #2: I am an engineer and a math nerd. This may be more complex than it needs to be. I can’t help myself once I get in front of an excel spreadsheet.
Assumptions
A rigorous cost-benefit analysis of DVC requires predicting the future. Since that is not possible, we will have to make some simplifying assumptions:
| Inflation rate | 3% |
| Average market returns | 7% |
| AKV resale appreciation | 3.18% |
Additionally, I cannot account for every possible use case. One family might buy AKV to stay every three years over Christmas week in a Grand Villa and sell the contract after 15 years. Another might stay twice a year for a long weekend in a Value Studio and keep the contract until 2057 expiration. The good news is that the real value of DVC is in the difference between what you pay once and what Disney charges when booking for cash. This difference is pretty consistent across accommodation types and times of year. That means that the analysis can likely be generalized to different contract sizes, accommodation preferences, etc.
The Sample Use Case
The coming analysis will be based on the following use case: the Smith family plans on taking a seven night vacation each year to Walt Disney World in early May. They want to stay in a Deluxe Studio with a savanna view, or a similar studio elsewhere on property. The whole family loves WDW, and their two kids are young, meaning many more yearly trips are to come. Here are their options:
- Pay cash by booking directly through Disney
- Pay cash by renting DVC points
- Purchase a DVC contract direct from Disney
- Purchase a DVC contract on the resale market
The Numbers
Feel free to skip to the next section for analysis and conclusions. This section is a breakdown of the raw numbers and the methodology for comparison.
| Item | 2023 Cost |
| Room Cost (booked through Disney) | $5,488 |
| Room Cost (rented points) | $2,507 |
| DVC Points Needed | 110 |
| DVC Annual Dues | $906 |
| Cost Per Point (direct) | $200 |
| Cost Per Point (resale) | $144 |
I will assume that room costs and annual dues will increase year over year by a nominal 3%. I used historical data for AKV resale contracts to determine the contract appreciation, which is 3.18%. This is a limited data set, since AKV has only been for sale since 2007, however it is a fair assumption given the baseline inflation rate and data from other DVC resorts that have been around for longer.
On Future DVC Contract Values
No one knows what will happen to contract values during the last 20 prior to the expiration dates, because the oldest resorts are just now 20 years away from expiring. To account for this unknown, I will assume that the price per point will stop appreciating (be constant) 20 years before expiring, and will begin to depreciate during the last 10 years. In the final year, the contract might be worth the cost to rent the same amount of points, minus the annual dues.
Time Value of Money
This is where the opportunity cost discussion comes in. Many DVC critics and skeptics will point out that the “time value of money” means that today’s dollars will be worth much more in the future. Think of it this way: $1 today (if invested in a market fund that yields 7% interest annually) will be worth more than $10 in 35 years, when AKV contracts expire. So how can anyone justify spending $20k on a DVC contract when that $20k will be worth $200k in 2057? There are two approaches to answer that question:
- Ignore the question – someone with a large sum of cash ready to buy into DVC is not likely to invest that money as an alternative to DVC. It is more likely that this is disposable income that would be used to purchase a new car or to put in a pool. There could be fair arguments in favor of one of those options as opposed to DVC, but that isn’t in the scope of this article.
- Actually answer the question – for the sake of argument, we can run the numbers. I will include a scenario in which the lump sum purchase price of a DVC contract is instead invested in a market fund yielding 7% annually.
Results
Scenario 1: The Cash Buyer
In this scenario, the Smith family decides to pay for each vacation out of pocket. They are sure that they will be returning to Disney yearly, but they don’t understand DVC and have heard bad things about timeshare programs. Additionally, their annual income has increased yearly so they figure they won’t mind using cashflow each year to pay for vacations. Here is what their accumulated costs will look like over time:
| Duration | 5 years | 10 years | 20 years | 35 years |
| Total Cost | $29,800 | $64,600 | $151,700 | $341,600 |
No surprises here, the costs of deluxe accommodations at Disney World really add up. This provides an excellent justification for the Smith family to look into other options.
Scenario 2: The DVC Point Renter
What if, instead of buying rooms directly from Disney, the Smith family rents points each year from other DVC owners? They have determined that they can save money while still not committing to a DVC purchase. There are some downsides with going this route: the purchase is likely nonrefundable and many desirable rooms will need to be booked at 11 months out. This means that you need to be confident in your ability to plan trips ahead of time and not need to make any changes. Here are the numbers for this scenario:
| Duration | 5 years | 10 years | 20 years | 35 years |
| Total Cost | $13,600 | $29,500 | $69,300 | $156,000 |
This is a 55% savings over buying the rooms directly from Disney, which is looking like a great option compared to scenario 1. Can we do better with DVC?
Scenario 3/4: The DVC Member
After running the numbers, the Smiths realize that paying cash every year for a deluxe room at Disney is going to cost them a fortune. Instead, they decide that they are going to buy into DVC. After all, they wouldn’t rent a house year after year forever. Eventually it makes more sense to buy the house – that way you end up with something to show for the money you are spending each year. That is what they are prepared to do with DVC. Here is the breakdown for both a direct purchase and a resale purchase:
| Duration | 5 years | 10 years | 20 years | 35 years |
| Total Cost (Direct) | $11,400 | $14,300 | $25,500 | $75,000 |
| Total Cost (Resale) | $5,200 | $8,200 | $11,600 | $69,000 |
Note that each dollar figure represents a formula that takes the total costs (purchase price, closing costs, annual dues) and subtracts the contract value (minus a 9% commission that would be paid upon selling) for each given time duration. Here is the equation:
(purchase price + closing costs + (annual dues x duration)) – (selling price – 9% commission)
Where annual dues are inflation adjusted yearly, and selling price is determined by the method mentioned in “The Numbers” section above. So each number represents the cost of using the contract for the duration listed and then selling it on the resale market.
Scenario 5: The Investor
In this scenario, Mr. Smith wants to make sure he is getting the most for his money. He has the cash ready to purchase a DVC contract, but at the last minute he devises a different plan. He will invest that money instead and use cash for each vacation. The hope is that the growth on the initial investment will outpace the accruing costs of their yearly vacations.
Below is a numerical breakdown. The assumption is that the entire cost of the DVC direct contract was invested at year one. That money continues to grow while the Smiths pay Disney yearly for their resort stays. The number that you see represents the “net cost”, which is a running total of room costs less the value of the investment account.
| Duration | 5 years | 10 years | 20 years | 35 years |
| Total (Net) Cost | $22,488 | $44,787 | $89,782 | $129,070 |
As you can see, the high costs of paying cash for Disney every year are not completely offset by the growth of the initial investment. However, it is noteworthy that the net cost does begin to grow more slowly as we approach the 20+ year timeframe. This reflects the compound interest effect of the initial investment.
Conclusions
Plotting scenarios 2-5 on the same graph gives some insight as to how all of these options compare to each other. Scenario 1 was not plotted, as it is by far the most expensive option and would be way off of the graph’s y-axis.
Where DVC Wins
DVC remains the best option through the entirety of the 35 years. The difference between direct and resale is relatively minimal – this is because the annual dues and contract resale values are identical throughout the ownership period. Only the initial purchase price difference separates the two. The results are pretty clear, and it is not close: If you will be taking WDW vacations for the foreseeable future, DVC is the cheapest way to do it.
Where Point Rental Wins
Renting points is a great option for someone who is less sure about their long-term commitment to Disney vacations. In the case of Animal Kingdom Lodge, you will spend about half as much as what Disney will charge you directly. Even with this 50% off savings, however, you will still spend much more than you might as a DVC member if you take enough trips.
This option really only pays off in the 0-5 year timeframe. If you are someone who expects to be done taking Disney trips within the next 5 years, DVC is not likely for you.
Where Investing Wins
There is certainly something to be said for the family that chooses scenario 5. If the graph continued past 35 years, the blue line would completely flatten out and then start to decline. On a long enough timescale, it would actually hit zero. This is because the value of the investment will eventually grow to be larger than the costs incurred from purchasing Disney hotel rooms directly. Additionally, this would happen much sooner if we assume that one can earn 10% on investments annually. Depending on your choice of investment, you might be better off investing the lump sum up front and pay out of pocket for your vacations.
Final Thoughts to Consider
You may disagree with the assumptions made in this article. Do you expect DVC contracts to hold their value better or worse than I do? Do you expect annual inflation to be higher or lower than 3%? Can you reliably earn 10-12% each year on your investments? These differences would certainly impact which option ends up making the most financial sense. I tried to make assumptions based on available historical data, but results may vary.
There are also non-financial considerations. Some people like the thought of being a “member” or “owner” at Disney. Some are in it for the exclusive benefits and discounts. On the other hand, some might prefer the flexibility of being able to vacation elsewhere and not feeling locked into Disney.
Whatever you choose to do, we hope this breakdown can help you make sense of the long term financial benefits of DVC!
