With travel returning to normal and my family continuing to grow, I am tempted to buy another week from my timeshare developer. But I am very concerned about the long-term cost, which includes financing and maintenance fees. What can you tell me about the true cost of buying a timeshare in today's market?
Timeshares have never been cheap, but even in a market tainted by the pandemic, developer prices continue to go up. If you choose to finance a new purchase through the developer or sign up for a new credit card to pay the down payment, you may end up paying twice the original amount over the 10-year loan.
The average price for a new timeshare week (or equivalent points) is $23,000, according to the industry's trade association. However, many brand-name companies are selling "average" points packages for $50,000 or more, according to recent presentations attended by the author. First-day discounts reduce those prices close to the industry average, but the savings may be illusory, since timeshare values depreciate from the moment you buy them.
Interest Rates Double the Price of a Timeshare
Assuming you buy a "discounted" developer timeshare for $25,000, you will still have to pay a 10 percent down payment. Developers always offer a credit card, typically through Barclays Bank, to pay the down payment. Developers also allow buyers to pay off the entire remaining loan within 30 or 60 days, at no interest.
The interest rate on the remaining timeshare loan usually runs around 14 percent, payable monthly over 10 years, for buyers with credit scores above 600, and 14.7 percent for buyers with lessor FICO scores. The interest rate on the down payment Barclay card is higher, sometimes in the range of 20 percent or more, depending on your credit score.
Maintenance Fees Can be Crippling Costs of Timeshare Ownership
While interest fees rise, inexorably, resort maintenance fees can also be expected to jump 3-5 percent a year at most resorts. Fees can go even higher at high-end luxury resorts or older resorts with major renovation projects. These fees can be enormous for the average buyer and crippling for older owners on fixed incomes.
For example, at Marriott's Maui Ocean Club - Lahaina Villas, owners pay maintenance fees of $2,903 for one fixed-week, 2-bedroom oceanfront unit. (This timeshare is listed for resale on RedWeek for $34,000.)
At Wyndham's signature Bonnet Creek Resort in Orlando near Disney World, owners pay $2,600 in maintenance fees for a one-bedroom unit. That Lake Buena Vista timeshare is also listed for resale on RedWeek for $2,900. In a couple of years, the maintenance fees at Bonnet Creek may exceed its resale values.
Here's a third example of the striking imbalance between maintenance fees and resale prices at major resorts. At Hyatt's Pinon Pointe resort in Sedona, Arizona, owners pay $1,026 in maintenance fees for a one-bedroom unit. The resale price on RedWeek is $2,900.
Marriott Revenue Reports Show How System Works
At a May 2021 investment conference, Marriott Vacations Worldwide, #2 in the timeshare universe to Wyndham Destinations, explained how the developer financing system works:
According to Marriott, a $30K purchase of a new timeshare should generate $60K in revenue after five years. This includes:
- $30K from the 2021 timeshare purchase
- $20K from an additional timeshare purchase (upgrades)
- $6K from financing revenue (on purchase loans)
- $4K from management fees, maintenance fees, rentals, etc.
Best Money-Saving Options for Buying a Timeshare
For potential timeshare buyers who want to save as much as possible, the question remains: what's the best way to finance a purchase?
Here are most of the options, according to timeshare real estate professionals we interviewed:
- Pay cash if you've got it.
- If not, use a Home Equity Loan to buy the timeshare. HELOC interest rates are at historically single-digit low rates.
- Pay your 10 percent down payment with a personal credit card that gives you mileage or hotel points, but only if you can pay off the balance within 30 days. If not, interest rates on the card will eat you alive and you will lose the value of the travel points you're acquiring.
- If you choose to buy directly from a developer, because it's convenient during an on-site sales presentation, make sure you can pay off the loan, at any time, with no prepayment penalties. In fact, many buyers don't follow through, so they get stuck paying higher monthly fees — indefinitely.
Don't let that happen to you. Be an informed buyer. Get the timeshare you want, negotiate the best price, then work out the financing (if needed) to best suit your work, family, and lifestyle.
Better yet: investigate buying on the resale market - either from one of the major brands or a legacy resort - in all of the major vacation destinations, at extremely reduced prices. RedWeek is expert in posting these resale opportunities, which represent a win for buyer and seller.
