Modern timeshare has had various ownership structures each becoming more complex as time passes. Historically you could purchase a fixed week, which means that you own the right to use the timeshare during the same week each year. As time moved on you could purchase a floating week, which generally gave you the right to use the property during a predetermined period of time. Time moved on once more and it’s now normal for most timeshare to operate on a point system. These are often referred to as “vacation clubs.” With these, you purchase a specific number of points that can be redeemed at a variety of destinations. Some plans let you “bank” unused points or even borrow from the following year.
Initial purchase cost varies by:
- Apartment or unit size
- Location
- Brand
The number of points required to holiday is dependent on several factors such as:
- Location
- Time of year (e.g., December versus August at a ski resort)
- Quality of resort
- Size of unit
Words of caution
When you are standing in a beautiful apartment overlooking a perfect beach and sparkling blue water, it is easy to succumb to the sales pitch. Remember, timeshare salespeople are in the business of selling, it’s how they earn their money. Just because they tell you that you are getting a great deal, doesn’t mean that you really are. Before you buy, take some time to research the property and talk to other timeshare owners. Don’t make your decision in haste, and never let the salespeople rush you. The fact you’ve been told what you are offered is a one day only offer is all false, turn up the day after wishing to buy and miraculously the offer that was available yesterday suddenly reappears.
Exchanging may not be easy
Points-based systems come with no guarantees. Just because the salesperson tells you it’s easy to exchange your points for another week, resort or destination, doesn’t mean it really will be easy. If you own points based in say a Spanish resort, you could hardly expect the same points value to get you to say Florida, it wouldn’t. It’s also important to remember that everybody wants to travel to the same places and in the same weeks that you do. The desirability factor aside, Exchanging will result in additional fees, speaking of which.
Fees and Charges
With entry level costs rising, most new timeshare purchases require finance. Monthly loan repayments, which come with a staggeringly high interest, need to be factored in. The annual maintenance fee will also set you back a not inconsiderable sum each year. Also, if the property needs a new roof or a new sewage pipe, or the like the developer has the right to impose a “one-time” assessment fee”.
An example of this was the one off tax charge levied by the Spanish developer, Diversified Resorts. Our report may be read here.
Most exchange companies also charge an annual fee, together with a booking fee.
Management
While a lifetime of holidays sounds great, will the management company that sold you the timeshare be around three decades from now? If you are considering a timeshare in a foreign country, you must also understand the laws and know what the result will be if the timeshare management company closes.
An example may be the Spanish developments carried out by Wimpey Builders, once all the timeshares were sold, management passed to an independent management company, Wimpen. In turn, Wimpen is now part of the much larger Ona Grup.
Diamond Resorts swallowed by Hilton is yet another example.
Enjoyment
Another major consideration is your health. That apartment on the ski slopes may look great today, but five years from now when you are caring for a new baby or are in pain from a herniated disk, your days on the slopes may well be over, but the bills for the timeshare will continue. Consider that your desire to hop on a plane may also wane as fuel costs rise and airport security becomes more onerous. Evidence of this is the booming “staycation” market in the UK. Certainly some of this may be attributed to the Covid 19 pandemic but not all by any means.
Factors such as age, finance, income and state of health are also potential flies in the ointment of timeshare ownership.
What a Timeshare Is Not
A timeshare is not an investment. Investments are designed to appreciate in value, generate income, or do both. A timeshare is unlikely to do either, despite what sales people say. The huge volume of resale timeshares on the market is testament to this, the appeal of buying into new resorts versus old and tired, and the marketing muscle of the firms selling new timeshares all work against the idea that you will make a profit reselling your “used” timeshare. Thus, selling for a profit is an uphill battle, if selling is even possible at all.
In reality there is no new or used, the same apartment you manage to offload simply becomes part of the resort inventory, ready to be sold to the next poor victim. The minute a brand new resort opens its doors and the first guests arrive, arguably it joins the “used” market.
The very nature of the sales process should be a hint about the reality of the issue. Have you ever heard of an ISA or equity purchase or any other investment that offered you a free weekend or some other incentive just for giving the product a try? A timeshare is not an investment, it’s a holiday. It’s also an illiquid asset that is guaranteed to lose value over time. Ultimately, timeshares are like new cars, if you buy one, do so because you love the idea of owning it, not because you expect to make a profit. Generally new cars depreciate the minute you drive off the dealer forecourt, fortunately not nearly as much as timeshare does, it depreciates to near zero even before the ink is dry on the purchase contract.
If you do take the plunge, remember that you are buying a repeatable holiday, that’s all. Just as spending £3,000 on a trip to a tropical beach is not an investment; neither is spending thousands plus on buying in. Unlike a one off holiday, timeshare also involves annual maintenance. Factor in that additional cost fees over the years.
Look Before You Leap
Like any major purchase, the decision to buy into a timeshare requires careful consideration. It involves a large amount of money up front, whether in cash or crippling interest rate finance, also factor in considerable recurring costs. You should ask plenty of questions and take your time making a decision. The value of a timeshare is in its use as a holiday product, not as an investment.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk