Nearly 10 million American households own timeshares in 2023 and for understandable reasons[1]. The arrangement is promoted as an incredible opportunity, guaranteeing you the ideal vacation every year. However, there are reasons why you shouldn’t buy a timeshare.
In reality, buying a timeshare is usually a costly mistake. A study from the University of Central Florida found that a whopping 85% of timeshare owners regret locking themselves into their contracts[2].
Let’s explore the reasons for that scary statistic to help you understand why you shouldn’t buy a timeshare, no matter what the promoters tell you.
How Do Timeshares Work?
Timeshares are arrangements that give a number of unrelated people access to the same vacation property on separate dates each year. Typically, they provide stays in weekly increments at units in large properties, such as resorts or apartment complexes.
Some contracts make you visit during the same week each year, while others let you take your vacation at any point in a given window. Others provide an annual allotment of points that you can use to book a stay in a menu of locations.
Whatever the terms of your contract, buying a timeshare requires making an upfront deposit that works a lot like a down payment on a house. In fact, financing arrangements similar to mortgages are available.
Unfortunately, whether you finance your purchase or not, you’ll have recurring annual expenses. Maintenance fees, which cover the carrying costs of the property and help the developer make a profit, are usually the most significant.
Why You Shouldn’t Buy a Timeshare: The Drawbacks
Many promoters of timeshares often downplay or gloss over the drawbacks, which is why you shouldn’t buy a timeshare. As a result, numerous timeshare owners only understand the problematic aspects of their contracts after it’s too late.
If you’re considering buying a timeshare, here’s what you need to know about the realities of owning one.
Expensive, Unpredictable Annual Fees
Let’s get the most significant problem with timeshares out of the way upfront. Most people desperately want to escape their timeshares because of their expensive fees, which you must pay each year whether you take your vacation or not.
Often, the fees are simply too high for the arrangement to be worthwhile. At the very least, you’re going to incur annual maintenance costs. These averaged $1,120 in 2021, though they can be higher or lower depending on the property[3].
They might be manageable at first, but they increase yearly and often faster than the inflation rate. As a result, you might find your contract more expensive than you can afford only a few short years after purchasing it.
To make matters worse, timeshare companies can also charge you special assessment fees at their discretion. These can go toward any property-related expense they decide to incur, from repairs to amenity upgrades.
Unfortunately, you shouldn’t buy a timeshare because there’s no way to avoid these charges. When other services get too expensive, you generally have the ability to cancel, but timeshares are notoriously tough to escape.
⚠️ Learn more: If you’re considering exiting your timeshare, there’s some essential information on potential scams you should be aware of.
Inflexible Vacation Experiences
If you’re the type of person who enjoys routines, you might like the idea of a guaranteed vacation in the same spot every year. It would remove all the stress of planning your trip, and you can be sure you’re visiting somewhere you like.
In that case, you might be able to enjoy a timeshare for quite a while, but timeshare contracts are generally perpetual. Even the ones with expiration dates tend to last at least 20 years.
Over such a lengthy period, it’s inevitable that your vacation preferences will change. For example, someone approaching their 60th birthday is unlikely to enjoy the same vacation they desired in their thirties.
During that time, you might have kids, move to a new state, or face any other of a million life events that could make your once-favored vacation spot inconvenient. Even the destination itself could change after so many years.
While some timeshare contracts offer property swaps or point arrangements that allow for some flexibility, these options are far from ideal. This is another reason why you shouldn’t buy a timeshare: you’ll find yourself competing with other timeshare owners for access to your preferred times and locations, with no guarantee of securing your desired slot.
💳 Learn more: Planning international travels or purchases? Here’s a breakdown of top credit cards with no foreign transaction fees.
Timeshares Contracts Are Hard to Escape
As we’ve established, timeshare contracts tend to last a very long time, if not indefinitely, and it’s very challenging to get out of them before they expire. The contracts usually contain a “perpetuity clause” specifically designed to keep you trapped.
Timeshare companies make most of their money during your holding period through annual fees and interest charges on any portion of the purchase price you finance. It’s in their interest to make canceling as hard as possible.
Many argue that you shouldn’t buy a timeshare, and the rise of a lucrative business sector dedicated to helping people exit these contracts is a testament to this. Countless timeshare exit companies exist to help people terminate their agreements, though they’re expensive and often untrustworthy.
If you can’t find a way to cancel your timeshare contract, your best escape route is usually to sell it. Unfortunately, that’s not always possible either. There are far more people looking to dump their timeshares than there are people looking to buy.
Due to that unfavorable imbalance in supply and demand, you’d be lucky to find anyone interested in taking it off your hands. Even if you do, you’ll inevitably take a significant loss on the sale.
📗 Learn More: Timeshare Exit Companies are an option if you need to escape a timeshare contract, but you’ll need to be careful. Scams abound.
Timeshares Aren’t Investments
Timeshare promoters often try to position their contracts as worthwhile investments. They usually argue that timeshares provide long-term cost savings compared to other vacation options. They may also suggest you can make money off them through rental income or price appreciation.
In reality, nothing could be further from the truth. Calling a timeshare an investment is like calling your car an investment. Barring extraordinary circumstances, you won’t make money off either of them. They may be assets on paper, but they sure don’t act like it.
Even if your contract lets you rent out your timeshare instead of using it personally (not all of them do), it won’t be lucrative. The timeshare company usually charges additional fees for renting your room out instead of using it yourself. That makes it challenging to profit at all after factoring in your other annual carrying costs.
Making money when you sell is an even more dubious prospect, which is one of the reasons why you shouldn’t get a timeshare. Timeshares depreciate rather than increase in value over time. Due to the supply and demand issues mentioned previously, it’s common for people to list their timeshares for as little as a dollar just to escape them.
📗Learn More: Pondering the idea of timeshares? Dive deeper into why they’re not quite the investment many perceive them to be.
Timeshare Financing Is Expensive
While the average timeshare cost $23,940 in 2022[1], making it cheaper than a vacation home, it’s still a substantial amount. This is one of the reasons why you shouldn’t buy a timeshare, especially considering timeshare companies frequently offer financing arrangements, encouraging you to take advantage of them.
Unfortunately, the interest rates on their loans are often significantly higher than other forms of financing, especially if you have bad credit. Typically, they range from 15% to 20% on average.
You could get cheaper financing from a third party, but people often buy timeshares on a whim or at a high-pressure sales event. As a result, they’re typically not coming to the table with a better loan offer.
👉 Let’s Look at a Quick Example to Show How Expensive That Is
Say you purchase a timeshare for $24,000. You put down $5,000 upfront and finance the remaining $19,000 at 17% over ten years. You’d have a $330 monthly payment and incur $20,626 in interest over the life of your loan, almost doubling the cost of your timeshare.
Defaulting on Fees Can Cause Credit Damage
Loan payments, maintenance fees, and special assessment charges are some of the reasons why you shouldn’t buy a timeshare. These financial burdens can accumulate quickly for timeshare owners, and unfortunately, failing to pay them leads to the same consequences as defaulting on other debts.
If you fall behind on what you owe, you’ll often be subject to additional penalties and interest. Missing payments can also damage your credit if your timeshare company decides to report your activities to the credit bureaus.
If you can’t get your account back into good standing, you’ll eventually default, and the company will send your account to collections or try to foreclose on your timeshare. If they didn’t report you for being delinquent previously, they’ll certainly report you for that, and it can cause severe damage to your credit score.
Why You Shouldn’t Buy a Timeshare: The Hype Machine vs. Reality
Timeshare promoters do a remarkable job of convincing people to sign their contracts. Thousands of people buy them every year, even though they’re right up there with boats and payday loans on the list of most notorious money pits.
Promoters usually lure you into one of their presentations with a financial incentive, like a discounted hotel stay or tickets to an event. Once you’re in the door, they ply you with snacks, drinks, and compliments to make you as agreeable as possible.
Then comes the full-court press, in which they use every manipulation tactic in the book to get you to sign up before you leave. They often hold you for you far longer than they’re supposed to, either by pressuring you to stay socially or taking you somewhere you can’t leave without the transportation they provide.
If you get bullied or tricked into buying a timeshare, you’ll quickly realize why you shouldn’t get a timeshare, as the contract can quickly become a financial weight around your neck, dragging down your finances and threatening to ruin your credit. It usually takes significant time, effort, and money to escape them, if it’s even possible.
Ms. Kathie Asaro had an unwanted timeshare that cost $1,300 in annual maintenance fees. When she asked her timeshare company to take it back, they denied her request, referencing her contract’s perpetuity clause and threatening to report her to a credit agency if she didn’t pay her debt.
It took months of negotiating to get out of her contract. She had to tell the company she would never pay the maintenance fee and was willing to eat the credit damage. She pointed out that they’d have to foreclose if they wanted her money, which would mean paying expensive legal fees. Only then did they relent and let her out of their agreement.
Timeshare Lawsuits and Regulations
Timeshare companies are such a significant problem that regulators and lawyers often have to get involved to rein them in. Many of the lawsuits brought against them are for violating consumer protection laws and engaging in deceptive practices.
Ms. Peggy Bendel had a contract with a $1,500 annual maintenance fee that she no longer wanted.
Even though she tried to get out of it within the legally mandated rescission period, during which consumers can cancel freely, her timeshare company dragged the process out for three months. When she hired a law firm to help her, it took them another ten months to get her out and her money back.
Superior Court in New Jersey awarded over $1 million to consumers deceived by FantaSea Resorts[4]. The company admitted to knowingly making false statements and withholding legally required documents until buyers had signed binding contracts.
They also designed the contracts to ensure that timeshare owners would pay more for their vacations than non-owners. One victim was forced into paying $17,000 for five one-week stays that a non-owner could get for just $3,965. Even on a personal level, lawyers are often necessary for dealing with timeshare companies.
How to Vacation Affordably Without a Timeshare
You shouldn’t buy a timeshare, but there are still ways to get the vacations you want without breaking the bank. My favorite way to make traveling more affordable is to use credit card sign-up bonuses.
Many accounts offer lucrative rewards for spending a certain amount with your card during an introductory period. They’re often enough to significantly subsidize or even cover an annual vacation, especially if you’re willing to engage in aggressive credit card churning strategies.
When I signed up for the Chase Sapphire Reserve card, it offered 100,000 points for spending $4,000 within three months. They were worth about $1,500, enough to cover several cheaper trips or one expensive one.
Of course, there are prerequisites to this strategy. At the very least, you need a good enough credit score to qualify for a good account. Ideally, you should also be debt-free, carry an emergency fund, and be good enough at budgeting to stay disciplined while working toward your minimum spending requirement.
To make this strategy easier, submit your card applications when you have big purchases coming. That way, you won’t have to spend more than you would otherwise to secure the sign-up bonus. For example, you might apply right before you pay your annual auto insurance bill.
If you don’t meet the requirements I mentioned, then you shouldn’t buy a timeshare. Instead of investing in such expensive vacations, prioritize paying off your debt, improving your credit, and building up savings. This way, in time, you can fly to a beach of your choice without any financial stress.
