4 Reasons Timeshares Are a Scam

Timeshares are one of those things people love to hate. They receive plenty of bad press, but also come with enough perks and flashy hype that people keep coming back wanting more.

Is timeshare ownership really as bad as it seems?

Well, if you like money, then yes. Let’s take it a step beyond its popular reputation and break down exactly why timeshares are a scam.

#1 – Timeshares Are Seriously Overpriced

Search up one-week vacation packages online and you’ll find any number of attractive options in tropical locations for roughly two to three grand per person.

In comparison, the average one-week timeshare costs more than $24,000. That figure doesn’t include transportation, food, or other expenditures. For that to make any kind of financial sense, you would need to use the full week of vacation for more than 24 years in a row before seeing purported savings.

There is no world in which those numbers add up in favor of the buyer.

#2 – Timeshares Don’t Gain Value

In many cases, timeshare salespeople will tell you that they offer an investment. After all, you can lock in rates today and guarantee yourself leisure in the future. Your return is in the dollars you’ve saved, plus the quality leisure time you get to enjoy.

That’s their argument, at least. In reality, the actual structure of a timeshare is the opposite of an investment. You never gain value. No equity gets accrued. Advocacy groups have claimed that most owners sell their timeshares for 0 to 10% of their initial purchase price.

As debt specialist Bill Fay explained years ago:

“The real winner is the developer when it persuades 52 buyers to plunk down $20,000. That adds up to $1,040,000 for a condo that would probably be worth $250,000 on the open market.

If they’d invested that $20,000…and gotten a 5% return compounded annually, they’d have $32,578 after 10 years.”

In other words, the buyer never wins in the timeshare equation. If you want to invest in something that doubles as a built-in vacation, you’re better off buying a lake house. At least that won’t come with blackout dates. This conveniently leads us to our next point.

#3 – Timeshares Are Notoriously Inflexible

Let’s pretend that the comfort of having access to a well-maintained vacation property holds enough value to justify a ridiculous price tag. After all, who doesn’t love a carefree getaway?

You might care quite a bit when you realize that the access you already paid for isn’t available during the time you’d like. Timeshare agreements allow property owners to blackout dates where the timeshare owner will have to pay a premium to stay at the property during specific time periods. That means spending even more than that $24,000 for a week-long vacation if you want to head out over Memorial Day weekend.

At this point, you’ve signed on for a timeshare and have now realized that it wasn’t economical. You still owe the debt and you still have to pay for things like maintenance – even if you don’t ever use the timeshare. Maintenance fees are about $1,260 a year on average. You’re paying half the cost of a vacation all for the privilege of having the option of vacationing in a specific place. Only 53% of owners personally use their timeshare, so you could be paying all these costs and still not even spend a vacation at your property.

This is why people have literally listed their timeshares for sale for $0 online instead of choosing to keep them. In fact, as many as 85% of people regret purchasing their timeshare.

#4 – Timeshares Are Predatory in Nature

It’s hard to argue that an investment is, in and of itself, predatory. After all, we’re talking about a financial transaction. That’s all this is.

However, it is equally hard to ignore the data behind all of these transactions, which in turn indicate that timeshares are sold in a manner that is extremely predatory.

The entire sales pitch gets structured as a grind. The sales reps ask their targets to sit through a marathon-style presentation designed to get to ‘yes’ as a result of exhaustion. If you have never had the privilege of suffering through one of these presentations, we’ll save you the trouble: don’t. If you need an approximation of how awful they can be, John Oliver does a great job of distilling the nausea in a past episode of Last Week Tonight With John Oliver.

For the most part, you can dismiss that as typical sales behavior. Those hocking timeshares use the same tactics outlined in college textbooks and self-help books across the world. They do not uniquely try to act in a predatory manner.

The results of their efforts, however, illustrate why timeshares distinctly hurt those who can afford it least. The American Resort Development Association itself reports that 47% of timeshare owners make less than $100,000 a year, and that the median income of timeshare owners was $106,000. Given the average cost of a timeshare, that means they’re paying roughly a quarter of their household income for a vacation they may or may not take.

These numbers are not exact, of course. However, the picture they paint speaks volumes about the integrity of the timeshare industry.

Why Are Timeshares Still a ‘Thing’?

A truly alarming number of Americans own timeshares – about 10 million US  households. The Better Business Bureau has warned them against it. The Federal Trade Commission has offered their own warnings, going so far as to label timeshares as a ‘scam’. Unfortunately, Americans still keep buying them.

Due diligence is ultimately your own responsibility. If you regret your purchase, you may not be left with many options. Most will cost you a lot in different layers of fees.

The Eagles might not have been thinking about timeshares when they stepped up to the mic, but they certainly nailed the prevailing sentiment: when it comes to timeshares, you can check out anytime you like, but you can never leave

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[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can view at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. Real Estate Investing 101
2. Earning Green by Investing Green
3. The Start Up/Small Business Advisor

This article was originally published on May 22, 2023. This article was most recently updated by the Financial Poise Editors.]

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