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Timeshares A Really Bad Idea

 


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So you're thinking about buying a timeshare? Think again.

Did you know that you can almost never sell your timeshare for what you paid for it? You'll be lucky to recoup 50 cents on the dollar. Why is that? Well, it's because for the vast majority of people, timeshares don't make any sense. People don't go out looking to buy a timeshare. . . they have to be lured into it with promises of free vacations and gifts. That marketing costs money. In fact, more than 50% of a the price of an average timeshare is attributable to marketing and sales costs.

So let's look at the true cost of buying a timeshare, shall we? Assume the timeshare we're interested in (or rather, that's being pushed on us), is one week for $30,000. Most people would need to finance that. With an interest rate of 7% and a loan duration of 60 months, that could be another $6-7 thousand dollars.

We'll also need to pay maintenance fees each and every year (even if we don't use the week) to keep the resort looking good. Maintenance fees are often $300-$500/year and they can, and almost certainly will, be increased over time (you can vote against them, but you have little control). The resort can also levy “special assessment" fees if it's deemed necessary to make additional improvements to the resort.

Then there's property taxes on our timeshare. Again, this is something that's largely out of your control. In Maui, for example, there's a timeshare right now that costs $500/year in property taxes alone.

We could be looking at a total cost of close to $60,000 for a single week. That's $3,000/year for 20 years! You can stay in some awfully nice hotels for that kind of money.

Many timeshare hucksters no longer try to convince you that timeshares make financial sense. Instead they'll say something like you're “investing in a lifestyle". Or you're buying a lifetime of vacations for your family. They're just putting lipstick on a pig. You don't need to go into debt to have some nebulous timeshare “lifestyle. " Just use some common sense. Save as much as you can each year and put it in a high-yield, FDIC-insured savings account (or CD) earmarked for vacations. Rather than spending $3,000/year, you'll actually be earning interest on your money. You'll end up with more money to vacation with and the ultimate flexibility of being able to stay anywhere you like.

There are many different twists on the basic timeshare concept. At some resorts you'll buy the “right to use" the week instead of actually owning it. That means that after 10 or 20 years, you end up with absolutely nothing (not even 50 cents on the dollar!) and the resort can resell it to the next sucker. . . I mean buyer. Or sometimes you'll be sold points instead of an actual unit. They'll tell you it's more flexible because you can use your points at any of the participating resorts. And that's true, but it's about as easy as using airline points. The most flexible option is always cash in hand.

Some timeshare companies will focus on the “exchange" potential. The idea is, you can exchange your unit with owners at other resorts and that gives you additional flexibility. The problem is, unless you own an exceptionally good week (a Hawaii or Orlando timeshare, for example), it's unlikely your week will have much “trading power. "

Even if you've stayed at a timeshare resort and absolutely love it, there's still no reason to buy. You can rent units directly from the owners or from the resort itself with no obligation. The resort might “invite" you to a sales presentation while you're there, but there's never any obligation to attend them. Many owners are eager to rent their units since they want to get their annual maintenance fee covered (which means you can find some exceptional deals).

Still unconvinced? Think the deal you're being pitched is really good? If there's nothing I can do to dissuade you (from making a huge blunder), then at least buy it on the resale market. You'll get the unit for half price or better (some people will give you their timeshare for free because they just don't want to pay the yearly fees any longer; be very careful with those). Sometimes it's a new resort and there won't be an active resale market yet. Just wait a while; there will be.

So, in summary: just don't do it. Don't buy a timeshare. Even if you think you've found a great deal, why risk it? Save your money and have the ultimate flexibility of vacationing any time and anywhere you want.

Instead of buying a timeshare, consider timeshare rentals from existing owners. You can get all the benefits of staying at a timeshare with none of the drawbacks.

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