The Truth About Timeshares
from daveramsey.com on 27 May 2009
Myth: I can get a great deal on a timeshare and go for vacation every year! Plus, I can always sell it if I get tired of it.
Truth: Timeshares are one of the biggest scams on the market today. Once you are stuck in one, you are stuck in a black hole.
The first word that should come to your head when you hear the word timeshares should be RUN! Run far, far away! If you run fast enough, you can eventually escape that annoying, high-pressure salesperson!
Think about this for a minute. Why in the world would you pay thousands and thousands of your hard-earned dollars for a place with minimal square-footage that you might get the chance to visit for one week each year? Add to that the fact that you have absolutely no equity in the place. And you have to pay extra ongoing "maintenance fees." And selling it is near impossible. And it's basically just an expensive, ongoing headache. And, and, and!
Sounds completely ridiculous, doesn't it? That's because it is!
Why All the Buzz?
Timeshares are one of the top sellers in the travel and hospitality industry. Thousands are available and millions of people "own" them. But that doesn't mean timeshares are a good idea. An article on MarketWatch.com tells us that timeshares are generally marketed and sold to people who really can't afford them. So if you think you can afford it, you can't. Even if you really think you can, your money is better off in a cookie jar.
The average cost of a timeshare in the U.S. is $14,500. If you put that money in a mutual fund averaging 12% over 10 years, you would have almost $48,000. Pretty good.
In 20 years, you would have over $178,000. Even better.
In 40 years, you would have over $1.7 million! That's a lot of free money! Hope you like the vacation house!
Throwing money at a timeshare is not an investment and will not generate money for you. An investment implies that you can eventually sell it and make money. With timeshares, you're just pre-paying your hotel bill for the next 20 years whether or not you use it.
Getting Out of the Deal
If you've already taken the plunge and paid your Stupid Tax, here's how to get out of it. Call the place you bought it from as a potential customer and find out what a similar unit is selling for. They will probably tell you that they can't give you that information. Just be strong and tell them you want to know what options you have available so that you can either sell it back or sell it to someone else.
Contact the executive director of sales if you are getting trouble from any of the sales managers. Tell the director you'll sell it for half of what the going rate is and pay double the commission.
If you can't sell it back to the company you bought the timeshare from, don't go to a list service that tells you they can sell it for you. You'll have to pay them a fee that's just not worth it.
You're definitely going to lose money on this. Timeshares go down in value worse than a car. But it's better to cut your losses than to continue to lose any more money.
Is it worth it to go to a "great presentation" just to score a free dinner at a nice restaurant? No way! For the money you put into a crummy timeshare, you could go to Europe every summer for the rest of your life and never have a problem.
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