05 May Learn why purchasing a timeshare may not be the best decision
Timeshare sales agents are known for their convincing tactics. For example, in 2022, the timeshare industry generated a substantial $10.5 billion in sales, as reported by the American Resort Development Association (ARDA). Despite entering a sales presentation with a firm decision to decline, the appealing promises might sway you towards reconsidering your stance. The allure of having a luxurious vacation destination each year can be enticing. If you persistently reject the offer, the sales agents might eventually offer you a significant discount. However, succumbing to the temptation of purchasing a timeshare will likely lead to regrets in the future.
Understanding how Timeshares work
Before delving into the reasons why purchasing timeshares is not a wise decision, let’s first understand how they operate. The concept of timeshares can differ from one company to another, but the basic principle remains the same:
– A timeshare involves ownership of a vacation property shared among multiple individuals. Each owner is allocated a specific time period during the year to use the property
– When you acquire a timeshare, you are entitled to stay at the property for a certain duration annually, typically for a week that may or may not fall on the same week each year
– Upon purchasing a timeshare, you are required to make an upfront payment (which can also be financed). Furthermore, you are obligated to cover maintenance fees and property taxes on an annual basis
– Most timeshare agreements are either indefinite or extend over a prolonged period like 20 years.
Timeshare companies often lure potential buyers by offering attractive incentives, such as discounted hotel stays, complimentary breakfasts, or free show tickets. However, these perks usually come with a catch – attending a timeshare presentation. The sales representatives can be aggressive in their tactics and resort to deceptive strategies to make a sale. While timeshares may appear to be a cost-effective alternative to owning a vacation property or reducing hotel expenses, there are several drawbacks that outweigh the benefits.
Timeshare comes with a hefty price tag, and the expenses tend to escalate with each passing year
In 2022, the average selling price for timeshares was $23,940, as reported by the ARDA. However, don’t be quick to assume that this cost will be offset by the free vacations that come with it. Let’s not forget about the annual maintenance fees, averaging $1,170, which tend to rise faster than inflation. Essentially, you are paying a significant amount in advance for just one week of vacation home usage per year.
Keep in mind that there are alternative and more efficient ways to secure free accommodations. For instance, utilizing travel credit cards to book complimentary hotel stays can lead to substantial savings. I have personally saved thousands of dollars through this method.
Feeling like you’re stuck in a rut, returning to the same vacation spot year after year?
While you may have a deep affection for the area you’re visiting, do you really want to keep going there for the next couple of decades? It’s unlikely that many people could definitively answer yes to that question. As you age, your travel preferences evolve. The places you adored in your 30s might not hold the same allure in your 40s or 50s. And with limited vacation time, the desire to explore new destinations can become stronger, making the thought of going to Orlando for the eighth consecutive year less appealing. Having a timeshare means you’re on the hook for maintenance fees whether you use it or not. Some timeshares offer the possibility of exchanging your time for a stay at another property, providing a bit of flexibility. However, availability at other sought-after destinations may be limited, and there could be additional fees involved in the exchange process. Remember, you’re not obligated to visit your timeshare every year, but you are obligated to keep up with the maintenance costs. It may be time to break the cycle and seek out fresh and exciting vacation spots to explore.
Exiting a timeshare contract can be quite a challenging task.
Many timeshare owners have experienced the struggle of trying to end their contracts. While signing up for a timeshare may seem simple, it’s a different story when it comes to getting out of it. One option is to attempt to sell your timeshare, only to realize that the promises made by the salesperson were not entirely truthful. Reselling a timeshare is a difficult task, as there is a limited demand in the secondary market. Even if you manage to sell it, the resale value is likely to be significantly lower than what you initially paid, including yearly maintenance fees.
Another option is to contact the timeshare company and request to return the timeshare. However, many timeshare companies are reluctant to accept such requests, even if you are offering to give it back for free. They would prefer to continue charging you annual maintenance fees rather than taking the timeshare back.
There are more beneficial ways to invest your money
From a financial perspective, purchasing a timeshare is not a wise choice. It will not appreciate in value and will not generate any income. For instance, if you were considering spending $25,000 on a timeshare, here are a few alternatives that might be more advantageous:
1. Invest in the stock market: Historically, the stock market has provided an average annual return of about 10%. By investing $25,000 with a stock broker and achieving a 10% yearly return, you could potentially have $168,188 after 20 years.
2. Put it towards a house: Investing in a home is often a superior option compared to buying a timeshare. With a home, you have a place to reside in throughout the entire year, not just for a week. With $25,000, you could make a 10% down payment on a $250,000 house.
Do not be swayed by enticing sales pitches. A timeshare is not a prudent investment in any scenario, and it does not guarantee complimentary vacations – you will still have to cover annual maintenance fees. It would be more financially beneficial to utilize your funds for savings, investments, or a down payment on a mortgage,
and simply pay for hotel accommodations or vacation rentals during your travels.
