Timeshares – Prepaying For Your Vacations May End Up Costly

The job of the timeshare sales person is to make timeshare ownership appear to be the most commonsense and hassle-free way to vacation. But when you actually view a timeshare for what it is – without all the talk of “investing in your family’s future vacations” and exotic travel destinations – what you’re left with is quite a different understanding of what a timeshare really is. When you sign your name to a timeshare contract you are making a lifetime financial commitment that can quickly spiral into becoming a financial liability.

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.

But what is it really? Timeshares are prepaid vacations. You pay for time at the resort in full without ever going. The average upfront cost for a timeshare in 2007 according to ARDA (American Resort Development Association) was $19,000. The purchase typically grants you a lifetime of one week stays. So, if you used it 19 times, the cost per vacation week would end up about $1,000 per vacation week (or roughly $140 per day). Not bad for luxury resort accommodations for up to 4-6 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!

But would you pay $1200 to stay for that week? $1800? Annual maintenance fees must be paid regardless whether the timeshare is utilized or not during the year. So, if you miss a year, tack on $600 to the bill of the last time you went to your timeshare. Also, maintenance fees will increase over time. What may have been $600 a year could be $700, $800, $900 or more years later. The timeshare vacation gets less appealing fast.

When you add this to whatever the upfront price of your timeshare, the costs start to stack up. Then, there is a third mandatory fee. The current downturn in the economy has resulted in timeshare companies turning to timeshare owners to make up for some of the financial losses the industry in the form of special assessment fees. Although these fees have been smaller in the past, the special assessments can occur at any time whenever it is deemed necessary by the timeshare.

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.

Upon final analysis, owning a timeshare does not make financial sense for anyone who does not consistently use it. Based on empirical evidence of the raising timeshare rental market, that is true for most people. The final cost is simply too high.

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