If the American Dream is to own your own home, then owning a timeshare or a vacation home may not be far down the list. Many people dream of having enough money to spend a couple of weeks every summer at the beach or in the mountains.
Owning a timeshare allows you to dip your toes into the vacation home market even if it’s just for one or two weeks during the year, even if you can’t afford the luxury of a second home. Many people are looking for ways to save money on travel, but a timeshare may not be the best way use of your hard earned income to accomplish your vacation dreams.
The savings may not be as great as a hotel
Don’t be fooled into thinking that purchasing a timeshare is an easy way to purchase a piece of your dream vacation home at a fraction of the sticker price. Timeshares are still very pricey even if you’re buying the equivalent of just one or two weeks at a time. In fact, many timeshare programs are run by hotel chains with locations around the country, but owning a timeshare may cost you as much or more than renting a comparable hotel room.
Like chips in a casino, points often hide the true cost of what you’re spending, as it’s hard to equate them with actual dollar values. At one popular timeshare company in the US, you could use your yearly timeshare points to purchase a two week vacation in Hawaii in a one bedroom place for approximately 300, 000 points during the peak season.
To put the above in perspective, I have a friend who receives 89k points/year, and he paid $10k to receive those points. If you financed your timeshare using a ten year loan like he did, you would have purchased those 89, 000 points for about $1, 000 per year plus a ton of interest. That two week hotel stay in Hawaii ultimately could cost you approximately $3, 370 — again, ignoring the interest payments — once you convert your points into a dollar value. Could you have found a nice hotel for two weeks in Hawaii for less?
Timeshares add to your debt
Given how expensive they can be, it should come as no surprise that timeshares can put you into debt very fast. Remember my friend from above? That loan that he took out cost him a whopping $230/month! By the time he finishes paying off his loan for the timeshare, he will have paid $27, 600 (!) for a $10, 000 timeshare purchase. So, technically, a Hawaiian vacation like the one mentioned in the earlier example really costs over $6, 000 if you take into account the interest that he’s paying.
The fees keep coming
Even after you pay off your loan and own your timeshare free and clear, you’ll still have to pay monthly maintenance fees. These fees are very similar to HOA fees, or dues that you have to pay for the upkeep of the property. The maintenance fees for many popular timeshares can be upwards of $45 per month. So that “free” vacation that you’ve finally paid off will continue to cost you hundreds of dollars per year. And like HOA fees, timeshare maintenance fees can increase over time.
Timeshares are hard to resell
Another major downside of timeshares is that there is practically no secondary market for reselling your purchase. Thus, if you have buyer’s remorse or you just need to recover your money, you’ll have a hard time recouping anywhere near what you spent. In many cases, timeshare owners wind up selling their timeshares back to the property management companies at a tiny fraction of the original price.
While saving money on vacations is an admirable, don’t get swept away by the dream of owning your own vacation home. When you purchase a timeshare, you may be buying a small piece of that dream, but purchasing a timeshare is not for everyone, and it’s not a particularly good investment.
If you’ve owned a timeshare, I’d love to hear about your experiences. What’s the best part of timeshare ownership? And the worst? Any lessons that you’d like to share with the rest of us?