Here’s Why Owning a Timeshare Is Not Worth It
Owning a piece of a vacation home seems ideal, doesn’t it? Most people would love to own a second home for vacations, but they can’t afford one. But what if they can afford a much smaller part of a vacation home? A place to call home and spend time again and again. And you might consider purchasing a timeshare to make this desire an actuality.
Hit pause on that idea for a moment. While on vacation, people often ask themselves, “Should I buy a timeshare?” Or, “Are timeshares worth it?” Before answering those questions, it is crucial to first understand what a timeshare is.
Timeshares are a pricy form of shared ownership or use for vacation properties. They can be an appealing alternative for those seeking a second home. However, there are multiple factors why you should never buy a timeshare. This article will examine the costs of timeshares and the accompanying pitfalls of such ownership to ascertain whether or not purchasing one is a savvy financial decision.
What Is a Timeshare?
First off, here’s a quick definition. A timeshare is a vacation home you purchase the right to use for a set period of time – generally for one week to a year over a set period of years (sometimes five, but typically much longer – as much as 20 to 99 years). It could be any home style, but it is usually a condominium or apartment. The vacation property can be the same hotel room at a single resort in the same place, or it might allow you to select a variety of units at a family of resorts, such as a Disney resort, across several countries.
When you purchase a one-week timeshare, the common perception is you’re saving money by prepaying for an annual vacation. Hypothetically, this is a good sounding idea. Nevertheless, timeshare ownership rarely works out the way purchasers anticipate.
What Are the Different Types of Timeshares?
As timeshares have developed over the last 50 years, different timeshare types have evolved, each with their own advantages, benefits and restrictions. Most models, however, can be placed in one of two categories: shared deeded ownership and shared lease ownership.
Shared Deeded Ownership
A shared deeded timeshare divides property ownership between you and the other owners of the timeshare. It grants you sole use of a vacation property for a minimum of one week per year in either a “fixed” or “floating week” arrangement. Because you have a deed, you co-own the property forever until you decide to transfer ownership via a sale or hand it down to your heirs as an inheritance.
Shared Lease Ownership Interest
In a shared lease or non-deeded timeshare, you don’t have any ownership in the property. Instead, you have a right to use the vacation property via a time-limited lease. The owner grants you the privilege to use their property exclusively for at least a week annually, for a specific period of time, which sometimes can exceed 20 years. Once the agreement ends, so does your right to use the property.
Types of Timeshare Right-To-Use Models
In the several decades since the timeshare concept came to be, what it means and how people use it has evolved. Before we can delve into that, a brief history is in order.
The idea of a timeshare was created in the 1960s. The inventive promoting idea was essentially, “Why rent the hotel room when it’s less expensive to own a piece of the hotel?”
Instead of owning a vacation home, which for most people is out of reach financially, timeshare investors would participate in a “fractional ownership” investment, where they could own a vacation property for one week a year. They could return to the property at the same time every year for a small amount of what they would pay for purchasing and maintaining their own vacation home.
Immediately appealing, timeshares also encountered problems, especially for owners who felt limited by having to return to the same place at the same time every year. They desired some flexibility.
And why the same place each time? Wouldn’t a timeshare be more attractive if you had the choice of multiple vacation properties and resorts to visit?
To meet demand, timeshares had to progress to meet a broad range of travel concerns and budgets.
Fixed Week Timeshares
The fixed week timeshare is the initial timeshare, it guarantees you a certain week at a specific location (and sometimes even a specific unit) every year. It’s less flexible but ideal for people who like routines and reliability. No need to plan your vacation every year or vie for the best week. Though, who doesn’t want some variety in their vacation?
Floating Week Timeshare
The floating week timeshare was a response to the people who disliked the inflexibility of the original fixed week approach. It lets you select your week at any point during a season or even the whole year. The floating week plan enables you to be more flexible in planning your vacation time and to experience the place at different times of the year. A drawback is that many resorts have a high demand season – you can get squeezed out of those weeks if you don’t formulate a plan far enough ahead.
Points System Timeshare
Flexibility and variation in timeshares truly increased with the emergence of timeshare exchange companies and the point system timeshare. In this structure, timeshare owners still have an interest in a specific unit at their “home resort,” but also have the means to travel to any destination in the club’s network.
Members are given a certain number of points as a form of tender they can redeem at any property, each with their individual rates. These rates are shaped by the demand of the specific destination, resort, unit size, week(s), and number of days a member wants to travel. Points are so configurable that members can use them for several vacations a year under a single ownership contract.
What Are the Advantages of Buying a Timeshare?
For the right buyer, a timeshare can look inviting on the surface. These properties have a few tangible benefits over other types of vacation properties.
Convenient Travel
If you travel to the same favorite destination year after year, a timeshare can make your trips a breeze. Planning becomes a no-brainer, as you won’t have to go through the headache of booking or worry that the hotel room you want will be sold out. For travelers who enjoy the routine of heading to the same destination and lodgings each year, timeshares can seem like a big win.
Added Space
If you’re used to traveling to hotel rooms, you might feel the extra space in your timeshare will be well worth the cost. These properties are often larger than hotel rooms, making them ideal for anyone who travels with a large crowd of friends or kids.
Amenities
Unlike your standard hotel room or vacation rental, timeshares have many on-site amenities. Many boast pools, restaurants, bars, golf courses, spas, and other nice upsides.
Additional “Benefits”
It’s worth mentioning that timeshare reps will lay claim about the additional benefits of a timeshare, though many of these benefits are no different than many other vacation experiences.
For instance, timeshare reps love to flaunt that you’ll have access to locations all over the world with the timeshare’s trade program. However, you would already have that option by booking a vacation rental on your own.
They also like to note that you can utilize point-based systems for flexible scheduling, enabling you to take a vacation whenever you prefer. This, of course, is something you could do with just as much virtuosity by reserving your own hotel room on your own schedule.
As you listen to the timeshare rep’s pitch, remember these kinds of “benefits” are not unique to timeshare ownership.
What Are the Disadvantages of Buying a Timeshare?
On the flip side, timeshares have a slew of disadvantages. Here are a few things to consider when making a decision.
Scheduling Headaches
With some timeshare management companies, it’s challenging to book the week you want. Most vacationers are hoping to spend the summer months on the beach or winter on the ski slopes. The competition can be fierce. In these instances, trading for a desired schedule can be daunting.
High Costs
The costs of owning a timeshare can add up quickly. In addition to your cash outlay (or loan payment), and your annual maintenance fees and other miscellaneous fees, you may also have to remit “one-time” fees for property upgrades or damage after major weather events.
If you opted for a personal loan through the timeshare company, you’ll also have to factor the high interest rates into your costs.
Depreciation
Like a car, most timeshares begin to depreciate the second you sign on the dotted line. It’s rare for a timeshare to maintain or grow in value.
Difficulty Renting or Reselling
If you’re assuming that you can recover the cost of your timeshare, think again. Few people want to buy on the secondary market, which makes it problematic to resell.
Even renting can be difficult. Many companies don’t allow this at all, and others will charge fees or commissions for the “privilege.”
Paying for Disuse
Do you plan on eschewing your usual vacation to head for a new locale? You’ll still be responsible for your regular payments and fees. In short, you’re paying for two vacations every year you don’t use your timeshare and end up going somewhere else.
Lifetime Ownership
Are you sure you want a timeshare for a decade or more? What happens when you have kids, change jobs, or grow older? It can be hard to have long-term foresight when purchasing a timeshare that you’ll own for years or even a lifetime.
Management Issues
Buying something for a long duration or even a lifetime sounds great in theory, but what happens if the timeshare management company goes out of business. Make sure you read the fine print.
How Much Will a Timeshare Cost You?
According to the American Resort Development Association, the average timeshare is a hefty $24,140.
Keep in mind that costs can fluctuate a great deal. Factors like location, unit size, deed, and contract time period will impact the price tag. Certain timeshare or vacation club companies will command even more. Popular companies like Disney Vacation Club or premium brands like Ritz Carlton Club might charge thousands above this average selling price.
Don’t forget that you’ll also have other expenses. Timeshares may incur interest rates and property taxes, for example.
Some of the costliest fees to consider are the maintenance fees. Your timeshare company will charge annual timeshare fees to pay for things like landscaping, repairs, and property maintenance.
On average, you’ll pay around $1,000 in annual maintenance fees. Having said that, these fees rise each year, often faster than inflation, meaning that you could be shelling out $1,480 per year in maintenance fees by your tenth year of ownership. The only way to avoid these fees is to get out of a timeshare.
Are Timeshares Worth It?
All things considered, timeshares are pricey properties that you don’t own outright. For most vacationers, the answer will be an emphatic “no.”
As a Financial Investment?
So, the average price of buying into a timeshare is a whopping $24,140. You’d think for that much money you’d get something worthwhile in return (besides one week a year away from it all), right?
Well, here’s the scoop. The timeshare has no real value to you because you don’t own anything in the usual sense. You “own” the means to vacation in a spot for one week, but the property isn’t actually yours. It’s not like your regular residence, which likely has some equity built into it, making it a sound investment.
In fact, a timeshare goes down in value the moment you sign the contract. This is not an investment strategy (though some vacationers might argue they’re an investment in enjoyment, though a costly one).
If it’s within your price range, a better investment would be a vacation property you own outright. They appreciate in value, are easy to rent or sell, and allow for structural modification. You can also stay in them anytime!
As a Money Saving Plan?
There are sounder ways to save on annual trips than a timeshare. A timeshare rep might tell you that purchasing a timeshare will cost less than a lifetime of vacations, but this is rarely the case.
Compared to hotels, the savings clearly aren’t there. Vacationing in hotels means you won’t have to spring for a huge initial down payment that you’ll never recoup. You won’t pay maintenance fees, membership charges, the cost of non-use when you skip a year (and maybe pay for a different vacation) or exchange fees if you want to swap dates or locations.
Can You Sell Your Timeshare?
Bear in mind, this property is worth nothing to you, other than a secured place for your vacation, which makes timeshares near impossible to sell. Frankly, eBay is full of timeshares on sale for as little as one dollar! A one dollar return on a $24,140 purchase. Something doesn’t add up.
It’s all because you’re trying to sell something that comes with a lot of obstacles. So, when the timeshare salesperson tries to assure you that you’re buying a little piece of this property, remember they’re opportunistically skipping the fact that you’ll most likely be stuck with it for life or will need professional help (and money) to get out of your agreement.
What About Renting Your Timeshare?
What if you want to forgo your week at the timeshare this year and try renting it out instead? Good luck. Many companies simply don’t allow it. And if they do, there are regulations and constraints in place. You’ll pay a fee and the company might charge a commission from you.
Why? Because they’re your competition. They definitely don’t want someone renting your timeshare. They want someone purchasing a different timeshare from them.
Also, you’ll have to pay a cleaning fee once your guest has vacationed. And you might be charged a fee if the guest causes damage to the property.
What About Those Timeshare Loan Interest Rates?
Most people just don’t plunk down $24,140 (maybe more, maybe less, but substantial) in cash. And the salespeople know that, so they’re at-the-ready to assist you getting into debt to make a sale. So considerate, right? (Er, no.)
They might endorse a short-term personal loan. They’ll come with a high interest rate with a term of about two years. Or they might work for a company that offers longer term financing, but those are typically even higher.
As a Vacation Tool?
Let’s set the discussion of finances to one side and analyze a timeshare’s value as a vacation tool.
Most people would be better off staying at a hotel or vacation rental for their trips, and this even is true for people who head to the same destination year after year. Steering clear of timeshares gives you more freedom when choosing your vacation dates and the area you’d like to stay.
Resort hotels and vacation rentals can offer all of the same benefits and amenities as a timeshare. Even travelers looking for longer accommodations can often find them with the total freedom to select any rental property or hotel room at their destination.
Timeshares Don’t Add Up
While timeshares may seem like a great option for vacations, it is important to understand their impact on your finances and the challenges involved in owning one. The common myths around timeshares, such as being good investments, often don’t hold up to the realities of high costs, inflexibility, and poor resale value (or more). The process of canceling a timeshare can be complicated and requires professional intervention to avoid further financial stress.
If it’s too late to avoid a timeshare purchase, you may already know how little value these properties have. That’s where we come in.
Our team at TimeShareBeGone has helped thousands of clients cancel their timeshare. To learn more, schedule a free consultation by calling 800-223-1770 or fill out our online form.
