At a resort, we were offered to buy one week of timeshare. It sounded gimmicky and their pricing was not clear.
The starting ask price was a one time $50k payment and a yearly maintenance fee of about $1k for a 2 bedroom apartment where I could stay for 1 week per year. If I want to change the week or location there would be change fee as well.
We walked away, but I could not understand the pricing and true value that this timeshare offered. Does these value seem fair ?
There are 52 weeks in a year . So if one week's asking price is $50K that implies that the apartment price is 2.6 million Dollars and $1k per year maintenance fee means that the maintenance cost is 52K per year.
It is an overly priced.
You are paying in perpetuity if we assume 5% on 50K = $2.5K for cost of the money and $1k in maintenance ( that will go up over time) so currently it is costing $3.5K for one week that is $500 per night.
And you will get vacation at same place. If you change there will be additional fee that means per night cost can be $600or more.
You will have access to the timeshare 1/52 weeks of the year. Let's make some simplifying (and fun!) assumptions:
Given these, you can own the timeshare outright by buying every week separately. That would cost you 2.6M (!!!) and 52k/year in "maintenance" (!!!). This is a bit extreme for a 2BR. Let's say you research the area and find comparable apartments for sale at 2M with average maintenance cost of 30k/year. That means the base value for a week is 38.5k and 575/year. You are paying their company 11.5k up front and 425k every year to organize up to 51 other tenants. Do you think this service is that valuable? You decide.
That said, timeshares are typically a predatory business. They don't operate on the basis of providing 100x value, charging 105x for it, using 4x to cover expenses and keeping 1x as profit. They operate by charging 50x for 100x of apparent value, which turns out to be 10x actual value, and then the unwary customer ends up paying another 10x in fees to get out of the arrangement, after which the company spends 30x on the slimiest lawyer money can buy to deal with the inevitable lawsuits as they laugh all the way to the bank with the other 20x.
Also, let's say you are the median US age of 38 and have a life expectancy of 79. Let's say you will spend a week in this timeshare for each of your remaining 41 years. You will pay a total of 91k for the privilege, or 2.2k per week. That comes out to $315 per day. You can find a REALLY nice Airbnb for that kind of money - especially if you book early (just a few months early - not 40 years early!) - just a thought.
That $1000/week is $143/night. Then -- for math purposes -- assume that you'll use it for 20 weeks. That's another $50,000/20=$2500/week, for a total of $500/night for one week/year.
Plus interest on the $50K loan, the opportunity cost of what you could have done with that $50K, taxes, maintenance, etc, etc and all the other fees that the property managers can think to tack on, and the difficulty in selling time shares.
Then compare that with the rates for extended stay motels/hotels in that area.
There's no way I'd buy time share.
Though I've stayed at them, I don't know anything about current rates for timeshares.
With that said, ignoring the potential that $50k invested could grow to as well as inflation, etc., if you divide the cost of the timeshare by 50 years and add in the annual maintenance fee of $1k, you'd have $2k per year to spend on a vacation every year for the next 50 years. Looking at it from that perspective, the cost sounds exorbitant to me for a mere one week per year.
The sales department of the timeshare company is trying to convince potential buyers that the site is desirable, that the costs are reasonable, that the benefits are amazing; and if you get tired of going to the same condo for the next 20-50 years it is easy and cheap to trade into another location; and if you ever wanted to sell you are getting such a bargain that it will be easy to sell for a big profit.
The math doesn't hold up; not everybody can trade into a week in Hawaii; and that timeshares have been hard to sell for decades.
I had friends who worked a summer job in the 1980's working for a timeshare company. They knew back then there were customers who felt trapped and couldn't sell; they knew the math didn't work; and that not everybody could trade for a week in Hawaii. They vowed as 18 year olds never to get involved in a timeshare again.
I had coworkers in the 1990's who tried to sell their timeshare and could only sell at a big loss. They also found out that the quoted maintenance costs were too low, and they went up over time, usually once all the weeks were sold.
The problems haven't changed.
