My wife and I went on vacation this past October to Disney World. The family had a great time and I personally was glad to get away from business. We stayed at my parents Orange Lake Resort timeshare, which is just outside of Disney World. In the over 10 years they have owned it, this is the first time I went there. I never agreed with them on their purchase and always thought it was a bad decision. After all they paid $10,000 for it, and today the maintenance is $750/year. The resort itself is very nice, has all of the amenities, and is in a great location. My question is wouldn’t it be cheaper to just stay at a hotel, or better yet rent a unit in the resort for that week? The answer is, unfortunately, yes.
My parents timeshare is one of the older units. You buy a specific week, and can only use it during that same week every year. If you want to go at another time you must “bank it”, and exchange it for another time or location. In the sales pitch they mentioned they are no longer doing week based timeshares. It’s now a point’s based system. You get X amount of points per year when you buy a unit, and can then use it any way you choose. The points could be used instead for many other things: purchase airfare, go to another location, or upgrade to a bigger unit. Heck, like airline miles and credit card points, you can use them in stores like Best Buy or Bed, Bath and Beyond. Great I can buy that toilet seat cover, instead of going on vacation. I’m sure just like credit card points you are getting a fair exchange of points into dollars. If you don’t detect it, I’m being sarcastic. I didn’t run the numbers, but I’m sure the conversion rates are awful. So in the end, they are making timeshares a much more abstract than a hard asset to own, even one week of it. High pressure sales guy please remind me again what’s the purpose of owning a timeshare?
Unfortunately, I think the timeshare market targets the financially inexperienced and lower income brackets. Their sales material make it appear more about the bling and leading the good life, rather than about the investment return. That’s because there IS no return. If you are outlaying money for the future, it should be considered an investment. If it’s not generating income, it’s an expense plain and simple. You MAY get enjoyment out of it, but it’s still not an investment.
It’s been said in poker if you can’t spot the patsy, it’s you. This applies to purchasing a timeshare. The ones benefiting from the transaction are the sales person and the owners of the resort. You, unfortunately, are stuck with a small slice of a unit that has little or no resale value. Here are the issues:
- There is a HUGE reseller market. Often you can pick up units for less than half of what was originally paid for
- Like buying a car, it depreciates once you drive the timeshare off the lot
- It’s rare that a timeshare increases in value
- Timeshares are usually hocked when you are on vacation, and your defenses are down
- Most have high yearly maintenance fees. In my parents case it’s increasing every year faster than the rate of inflation. For the amount that you pay in maintenance fees alone (forget about the initial “investment”), you can stay at a nice hotel.
There are many web sites where you can buy a used timeshare. If you still think buying a timeshare is a good idea, buy one on the secondary market.