Why to Avoid Timeshares

For residents of places like the Black Hills, where the first day of spring usually brings a snowstorm, timeshares for resorts in Florida or Mexico have a lot of appeal. They seem like a fun idea for a vacation in the sunshine, as well as a good deal financially. They are neither.

Over the past 30 years, I researched hundreds of timeshare offers. I've never bought one. When you take a close look at the numbers and the restrictions, they simply don't add up to a good value.

One of the biggest problems with timeshares in general is that they can lock you into a specific vacation. Spending a week at that resort in Mexico in February, exploring the local area and relaxing by the pool, might be wonderful for a year or even several years. But eventually you may get tired of going to the same location, doing the same things and seeing the same people. After a while, even a rut person like me might want to do something different.

Some timeshares mitigate this problem by participating in vacation exchanges like RCI and Interval International. These services add on a fee.

You might think that, if you get tired of a timeshare, you can just sublease or sell it. These aren't necessarily easy to do. There may be restrictions on subleasing, which is another good reason to read the fine print before you sign any timeshare contract. Selling is often difficult, and you certainly aren't likely to get back your original purchase price. Meanwhile, you pay annual fees whether you use the timeshare or not.

In figuring the cost of a timeshare, those annual fees are what really get you. The timeshare company tells you up front what the fees are at the time you buy. Yet you have no control over what the fees may be in five or ten years. The only thing you can count on is that they will increase.  

To illustrate these points, I recently investigated a resale site that listed a timeshare in a property in Boston, Mass. It originally sold for $20,000 and had a $1,000 annual fee. I passed on the opportunity because of the high fees. In another example, I once took a serious look at a timeshare in a luxury apartment complex in London. It seemed like a possibility for fulfilling one of my dreams, living part of the year in Europe.

It wasn't. As the salesperson told me, comparing the cost to buy a timeshare versus the cost to stay as a non-member, it would take around 30 years to recoup the purchase price. Then I – or more likely, my heirs – would have 10 more years to stay for "free." Free, that is, except for the annual fees.

The sales rep was quite clear that a membership at this complex wasn't intended as a good financial investment. She described it as an "investment in lifestyle."

When it comes to timeshares, that is the bottom line. If the lifestyle that’s on sale truly fits you, and you believe it will continue to fit for the long term, then it's possible that a timeshare may make sense.

For most people, however, most of the time, my conclusion is that a timeshare is too expensive even if someone gives you one. The annual fees alone will keep it from being a good value. I've never found one that was cheaper than getting a nice hotel or resort for a couple of weeks. Paying for a hotel stay costs less in the long run, and you can enjoy relaxing vacations with no long-term commitment.

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Rick Kahler, CFP, is president of Kahler Financial Group in Rapid City, S.D.
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