Timeshares, also known as shared vacation ownership plans, have become increasingly popular over the years. They offer the enticing prospect of a vacation condo without the hefty costs and maintenance responsibilities that come with full ownership. However, the initial cost of a timeshare can be somewhat misleading, as it doesn’t account for the numerous additional expenses that accrue over time. These include financing charges, annual maintenance fees, yearly fee increases, periodic assessments, and incidental costs such as laundry, parking, and other resort fees. In this article, we will review timeshare costs: A 20-year overview and breakdown of timeshare ownership expenses.
The Initial Investment in a Timeshare
When deciding whether or not to buy a timeshare, it’s important to consider the initial investment. The amount you pay upfront for a timeshare, also known as the purchase price, is the initial cost that secures your ownership. In this analysis, we’re using a hypothetical upfront cost of $24,500 with developer financing.
This figure is just an example and the actual price can vary greatly depending on the location, size, and brand of the timeshare. The initial outlay and commitment primarily covers the cost of the timeshare itself, which includes your right to use a specific unit at a specific time each year. It’s important to note that this cost is typically a one-time fee paid at the beginning of the timeshare agreement. It is important to understand that there are additional financial obligations associated with timeshare ownership beyond the initial investment.
Financing the Timeshare
Many timeshare owners opt to finance their investment, breaking down the large upfront cost into monthly payments. Let’s assume that this timeshare is financed over a 10-year period or 120 months at an interest rate of 17.9%. Using an online loan calculator, the monthly payments under these terms come out to approximately $403.56.
Over the course of 10 years, the total repayment amount will be $48,427.20. This means that the cost of financing the timeshare will add an additional $23,927.20 to the initial purchase price.
Annual Maintenance Fees and Increases
Annual maintenance fees are a fundamental aspect of owning a timeshare. These fees are designed to cover the expenses related to the upkeep of the property and the provision of various services.
Managed services can include things like landscaping, cleaning, repairs, and security, among others. In our analysis, we’ll begin with a base annual maintenance fee of $1,100. This figure, however, is not fixed and is subject to change over time.
Again, it’s important to note that these maintenance fees are not static. They typically increase over time due to inflation and rising costs of services and property upkeep. In our scenario, we’re assuming a 5% annual increase in the maintenance fee. This means that each year, the maintenance fee will increase by 5% compared to the previous year. For instance, if the maintenance fee is $1,100 in the first year, it will be $1,155 in the second year ($1,100 + 5% of $1,100), $1,213 in the third year, and so on.
Total Cost Analysis: Geometric Growth of Timeshare Maintenance Fees Over 20 Years
To calculate the total amount paid in maintenance fees over a certain period, we can use the formula for the sum of a geometric series. In this case, the series is the sequence of maintenance fees over 20 years, with each year’s fee being 5% higher than the previous year’s. Using this formula, we find that the total amount paid in maintenance fees over 20 years is approximately $44,484.
This calculation underscores the significant financial commitment that comes with timeshare ownership. It’s not just the initial investment that matters, but also the ongoing costs, such as these ever-increasing maintenance fees. Therefore, potential timeshare buyers should factor in these escalating costs when considering whether a timeshare is a good investment for them.
Assessments are additional charges that timeshare owners occasionally face. They cover unexpected costs that aren’t included in the standard maintenance fees. For this analysis, we’re assuming an average assessment of $1,000 every 6 years. Over the course of 20 years, this would amount to an additional $3,333.33, bringing the total sum of assessments over two decades.
Incidental Costs of Timeshare Vacations
Incidental costs are often overlooked when considering the total cost of timeshare ownership. These can include laundry services, parking fees, and other extra resort fee-related charges. While these costs can vary greatly depending on the resort and the usage of the timeshare, for the purpose of this analysis, let’s assume an average annual cost of $500. Over 20 years, this would add an additional $10,000 to the total cost of ownership.
The Total Cost of Timeshare Ownership Over 20 Years
When we add all these elements together, we get the total cost of timeshare ownership over a 20-year period:
– Initial Cost (financed): $48,427.20
– Maintenance Fees: $44,484
– Assessments: $3,333.33
– Incidental Costs: $10,000
This results in a grand total of approximately $106,244.53
Long Term Financial Viewpoint
Timeshares can be an attractive option due to their relatively low upfront start cost and the promise of vacations. However, it’s also important to consider the long-term financial implications. In this case, a $24,500 timeshare ends up costing nearly four and a half times its initial price over 20 years when financing, maintenance fees, annual increases, assessments, and incidental costs are taken into account. The cost of usage, therefore, becomes a significant factor to consider.
The allure of a vacation membership can often overshadow the reality of the financial commitment involved. It’s important to remember that the cost of a timeshare extends far beyond the initial purchase price. The ongoing financial obligations can add up significantly over time, especially when incidental costs such as laundry, parking, and other resort fees are factored in.
The Perpetual Obligations of Timeshare Ownership
Most timeshares do not have an end date and can last for your lifetime and sometimes even beyond that. You are required to pay maintenance fees for as long as you own the timeshare, even if you are unable to travel due to sickness or disability, as this is stated in virtually every timeshare agreement.
Similarly, in some circumstances, your timeshare interest can become a part of your estate upon your death and may pass onto your heirs, something your heirs may not want and serving as a liability that your heirs might not be equipped to handle. Even more alarming, timeshare interests are often very difficult, if not impossible, to resell meaning that once you have purchased it, you may not be able to readily escape the financial consequences of that purchase.
Finally, potential timeshare buyers should conduct thorough research and consider all costs associated with ownership before making a decision. The true cost of a timeshare is not just the upfront price, but the cumulative cost over time, including the cost of usage. It’s essential to weigh these costs against the benefits to ensure that a timeshare is a worthwhile investment for you.
Disclosure: This article is for information purposes only and is not intended as legal advice.
Led by timeshare attorneys J. Andrew Meyer and Michael D. Finn with over 75 years of combined legal experience. The Finn Law Group is a consumer protection firm that specializes in timeshare law. If you should need to speak with an attorney, please reach out to our office to schedule a free consultation over the phone or for an in office appointment. Call 727-214-0700. See more on our Twitter page.