Are Timeshares Worth Buying? Show Me The Money!
When you financially strip down timeshares, they certainly are not as attractive or as sexy at first blush. If you take away all the trappings like the exotic locales, the seemingly low cost per vacation and the over-friendly salespeople, you potentially take on a growing financial burden that may last your entire life. Even if you are considering a resale timeshare for a low upfront fee, be sure to figure out how much it may cost you in the future.
The idea of a timeshare sounds fantastic. You can purchase one week of use of a condo unit at a luxury resort that normally would be completely unaffordable if you were to buy the unit outright. Although there is typically a high front-end fee to purchase a timeshare, a good timeshare salesperson can go through the finances and magically convince you how you’d actually save money in the long run. The annual maintenance fee sounds reasonable in order to keep the unit in tip-top shape.
In reality, timeshares are merely a means of paying for a vacation in advance. By paying the upfront cost averaging $19,000 in 2007 (according to ARDA, the American Resort Development Association), you are permitted to vacation at the resort every year for a week’s time indefinitely. Broken down among many years, each week of vacation reduces the “per week” rate such that if you came for 19 years, each week would cost only $1,000 for resort lodging for four to six people.
But will you use it 19 times? If you end up using it once or twice, that $19,000 seems awfully steep for a week or two of decent vacation. What could you have gotten for $19,000 on one vacation? You’d have servants, 24-hour care, a butler, a limo driver, a personal chef…you get the idea.
Now, there are timeshare resale “deals” where the upfront costs are very low compared to $19,000. So, what if there were no upfront cost? There are still annual maintenance fees. The average for a one-bedroom in 2007 was approximately $600 per year. Still, any vacationer would pay $600 for a week for the family or friends to go to an upscale resort right? It would be less than a $90 a day total for 4-6 people!
Although $600 a year might sound like a good deal, what if that amount doubled or tripled? Maintenance fees must be paid annually whether you go to the resort that year or not. So, by missing a few years, the cost per vacation week increases by $600 for every year missed. The $600 could easily be higher as maintenance fees continuously rise. The timeshare bargain before now seems like a long way away.
While some owners may still pay $1,200 to $1,800 for a great vacation with great family & friends every two to three years, adding these totals to the prorated upfront cost ($19,000) would cause any owner significant concern. Yet, there is one final fee that is often overlooked — the special assessment. This fee can be instituted almost at will by the timeshare developers onto unsuspecting timeshare owners.
An alternative would be to rent timeshares when you want to vacation. Developers are renting their unused timeshare inventory, often for less than what owners pay in maintenance fees. The timeshare rental industry is booming because of the lack of use by owners. By renting units, the developers earn an additional income stream on top of the maintenance fees and special assessments paid by owners who never used their timeshares that year.
Timeshare ownership will only make fiscal sense if you plan to use your unit every year without exception. If a substantial amount is paid upfront, then the plan on using it consistently over many, many years for you to break even.