4 Reasons Timeshares Are a Scam

In a recent episode, Last Week Tonight host John Oliver tore into the industry machinations behind timeshares. His sartorial knife hit deep as he highlighted how ridiculous the sales cycle can become, airing a clip of a major executive claiming that their timeshares “save lives.”

Spoiler alert: they do not. But watch the video anyway, because it’s worth it.

Timeshares are one of those things people love to hate. Lots of bad press, but enough positive aspects and flashy hype that people keep coming back wanting more. But is timeshare ownership really as bad as it seems?

Well, if you like money, then yes. Let’s take it a step further than Oliver and break down why.

#1 – They Are Seriously Overpriced

Go search for a one-week vacation package online. Seriously. Do it now. 

Or don’t. We can tell you now that you’ll find any number of attractive options in tropical locations for roughly two to three grand for one person. 

In the meantime, the average one-week timeshare costs more than $24,000. That figure doesn’t include transportation, food, and 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 tell you that they offer an investment. After all, if you can lock in rates today and guarantee yourself leisure in the future, then the return gets calculated in dollars saved plus quality leisure time. 

That’s the 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. Recent years have seen those who inherited timeshares selling them for less than the initial purchase price. 

Unless you’re in the timeshare game yourself. 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 (the rounded average cost of a timeshare) 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. Speaking of which…

#3 – Timeshares Are Notoriously Inflexible

Let’s pretend the comfort of having access to a well-maintained vacation property holds enough value to keep your attention and justify an inarguably stupid price tag. After all, who doesn’t love a carefree getaway? 

You might care quite a bit when you find out 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.

But let’s say you signed on for a timeshare and realized later 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. That’s about $1,000 a year on average. That’s half a vacation you pay for the privilege of having the option of vacationing in a specific place. And that’s why people are literally selling their timeshares for $1 online instead of keeping them. 

#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.

But 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 tremendously 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, Oliver does a great job of distilling the nausea in his episode.

But you can dismiss that as typical sales behavior for the most part. 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 fashion. 

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 62% of timeshare owners make less than $100,000 a year. Given the average cost of a timeshare, that means they’re paying roughly a quarter of their income for a vacation they may or may not take.

These numbers are not exact, of course. But the picture they paint speaks volumes about the integrity of the space.

Why Are Timeshares Still a “Thing”?

A truly alarming number of Americans own timeshares – a horrifying 7.1% of adults. The Better Business Bureau warned them against it. The Federal Trade Commission has offered their own warnings. But Americans keep buying them. 

Due diligence is ultimately your responsibility, of course. If you regret your purchase, there aren’t 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: you can check out anytime you like, but you can never leave.

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This is an updated version of an article from 2020. © 2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.