Let’s talk about timeshares for a minute. I know you’ve heard of them before, and you’ve likely been pitched by a salesperson while on vacation at some point or another. But I think we should talk about it before you purchase one.
My parents own a timeshare. It’s right outside of Disney World, but the company has plenty of other locations that they can trade for, as well. They get to use it for 7 days and 6 nights each year, plus they can pay extra to book more vacations per year at any of the available locations. Sounds great, right?
It Sounds Great on Paper, But Timeshares Don’t Usually Live Up to Expectations
The hidden problems with timeshares are abundant. Well, that is, if you’re buying them new. There are expensive yearly maintenance fees, problems with being able to trade with other timeshare owners to get to use other locations, timeshares are almost impossible to resell, and (this is a big one here, so pay attention) timeshares are NOT a financial investment.
Timeshares Are Not a Financial Investment
With a financial investment, you’re expected to see a return on your money. Investments appreciate in value, generate income, or both. It is highly unlikely that a timeshare will do either of those things, despite what a salesperson might say. The average cost of timeshares sold by developers has risen over time, but that does not mean that timeshares have increased in value.
In fact, timeshares almost always lose value. Like a car, it will immediately depreciate once you “drive it off the lot,” or take ownership. Actually, it will likely go down in value worse than a car. Typically, on the resale market, timeshares sell for 10 percent of what the original owner paid, and sometimes less than that.
If you decide to purchase a timeshare, think of it like purchasing a swimming pool: you do it because you love the idea of owning it, not because you expect to make any profit from it.
Timeshares Are Not Liquid
Liquid assets are things that can be converted into cash within a short amount of time, with little or no loss of value. Anyone who has ever owned a timeshare will tell you that this is not the case with them, regardless of location. If you ever do need to sell, it could take a very long time to find a buyer.
On top of that, you likely will never recover your initial investment if you sell, and you’ll definitely never get the yearly maintenance fees back.
You’ll End Up Spending More
All in all, after you add up your initial investment, plus interest if you financed it, and all of the maintenance costs, you’re looking at spending a lot more for 1/52 of a unit (because you get to use it for a week) than just booking hotels would have cost. For example, let’s say you paid $20,000 (the average) for a timeshare, and we’ll make it simple and pretend you didn’t have to finance it.
On top of that, you’re going to pay around $650 a year for maintenance fees, regardless of if you use it or not. After 10 years, you’ve spent $26,500 for 10 weeks of vacation. That’s $2,650 per week or about $442 per night for six nights. After 20 years, you’ve spent $33,000, or $1,650 a week and $275 per night.
If you manage to hang on to it for 30 years, you’re looking at $39,500, or about $1,317 a week and $219 a night. And that’s whether or not you’re still young enough and in good enough health to go on vacation every year.
So, Are Timeshares Worth it?
Well, if you’re looking at purchasing a new timeshare, I’d like to think that, after reading all of this, you probably understand that it’s not a good investment.
And outside of looking for financial investments, for yearly vacations, you’d be better off booking hotels in whichever destination you’d like to visit each year.