Paying Cash vs. Financing DVC: Which Is Smarter?
You've decided to buy DVC resale, but now face another decision: pay cash or finance? Both approaches have merit depending on your financial situation and goals. Let's analyze the tradeoffs.
The Case for Paying Cash
No Interest Costs
The most obvious benefit—every dollar goes toward ownership, not interest. On a $20,000 purchase financed at 13% for 10 years, you'd pay roughly $9,000 in interest. Cash eliminates this entirely.
Lower Ongoing Costs
Without monthly loan payments, your only recurring cost is annual maintenance fees. This simplifies budgeting and reduces financial stress.
Immediate Full Ownership
No lien on your membership means you can sell anytime without paying off a loan first.
Peace of Mind
No debt means no risk of default, collection actions, or losing your membership if finances get tight.
The Case for Financing
Preserve Liquidity
Keeping $20,000 in savings provides financial flexibility and emergency funds. A paid-off DVC contract doesn't help if you need cash unexpectedly.
Investment Opportunity Cost
If you can earn 10%+ annually investing your cash, financing at 12-13% might cost only slightly more while keeping your capital working.
Access Ownership Sooner
Financing lets you start enjoying DVC vacations now rather than waiting years to save up.
Inflation Hedge
Fixed loan payments become relatively cheaper as inflation increases over time. You're repaying with "cheaper" future dollars.
Running the Numbers
Scenario: $18,000 DVC Purchase
Cash Purchase:
- Total cost: $18,000
- Monthly payment: $0 (maintenance fees only)
- Opportunity cost: Potential investment returns lost
Financed at 13%, 10 years:
- Monthly payment: ~$275
- Total paid: ~$33,000
- Interest cost: ~$15,000
- Cash preserved: $18,000 for other uses
Questions to Ask Yourself
- Do I have an emergency fund separate from this cash?
- What would I do with the money if I didn't buy DVC?
- Can I comfortably afford monthly payments plus maintenance fees?
- How risk-averse am I about debt?
- What's my timeline for using DVC?
Middle Ground Options
Large Down Payment
Put 50% down, finance the rest. You reduce interest costs while preserving some liquidity.
Short-Term Financing
Finance for 3-5 years with higher payments but less total interest. Good if you expect income increases.
Finance Now, Pay Off Early
Start with financing, make extra payments as able. Many DVC loans have no prepayment penalty.
The Bottom Line
If you have the cash and no better use for it, paying outright makes mathematical sense. If you prefer keeping cash reserves or can invest at returns exceeding your loan rate, financing can work. There's no universally "right" answer—only what fits your financial picture and comfort level.
