Thinking of Buying a Timeshare? Here's Why It's One of the Worst Decisions You Can Make

Timeshare salespeople can be very persuasive. Case in point, the timeshare industry did $10.5 billion in sales in 2022, according to the American Resort Development Association (ARDA). So even if you go into a presentation with every intention of saying no, you could find yourself changing your mind.

After all, you'll get a nice place to vacation every year. And if you decline the offer enough times, those salespeople will probably cut you a sizable discount. Tempting as it may be, buying a timeshare is almost certainly a decision you'll regret later.

How timeshares work

Before getting into why timeshares aren't worth buying, we'll cover how they work. This can vary depending on the timeshare company, but here's the general idea:

• A timeshare is a shared vacation home with various owners. Each owner can use it at a different time during the year.
• When you buy a timeshare, you get one stay per year. This is normally for one week, which may or may not be the same week every year.
• You pay upfront to purchase the timeshare (you can also finance this). In addition, you're responsible for maintenance fees and property taxes every year.
• Most timeshare contracts last either indefinitely or for a lengthy period of time, such as 20 years.

Timeshare companies offer people gifts to get them in the door. If you get an offer for a discounted stay at a hotel, a free breakfast, or tickets to a show, chances are you'll have to sit through a timeshare presentation. The salespeople can be pushy, and they're known for using underhanded tactics.

If you're looking for a cheaper alternative to a vacation home, or if you want to save on the cost of a hotel stay, a timeshare may seem like a good deal. Here's why it's not.

It's expensive, and costs can increase every year

Timeshares sold for an average of $23,940 in 2022, according to the ARDA. And if you think that will eventually balance out with all those free vacations, don't forget about the annual maintenance fees. Those cost an average of $1,170, and they often increase faster than inflation.

You're prepaying quite a bit of money to have a vacation home for one week per year. Keep in mind that there are other, better ways to get free accommodations. For example, it's possible to use travel credit cards to book free hotel stays -- I've saved thousands of dollars this way.

You're stuck going to the same place

You might love the area where you're vacationing. But are you sure you want to go there every year for the next 20 years or more? I doubt many people can confidently say yes.

Travel habits change as you get older. The destinations you love at 30 may not appeal to you as much in your 40s or 50s. And if, like almost everyone, you have limited vacation time, you might eventually want to visit somewhere new and not go to Orlando for the eighth time in a row.

You don't need to visit your timeshare every year, but you need to pay the maintenance fees whether you visit or not. Some timeshares at least give you the option of trading your time for a stay at another property. But there's not always availability at other popular destinations, and there could be an additional exchange fee.

It's hard to get out of your timeshare contract

As many timeshare owners have learned, contracts are easy to get into, but hard to get out of. You could try to sell your timeshare. At that point, you'll learn that the salesperson wasn't being so honest about how timeshares are a fantastic investment opportunity.

It's hard to resell a timeshare. There's not a lot of demand on the secondary market. While it's possible to sell yours, don't expect to get anywhere near what you paid upfront and in yearly maintenance fees.

The other option is to ask the timeshare company to take it back. However, timeshare companies don't always accept this arrangement, even though you're giving it back for free. They'd rather keep charging you the annual maintenance fees.

There are much better places to put your money

From a financial perspective, a timeshare doesn't make much sense. It's not going to grow in value, and it won't generate income. Let's say that you were thinking of buying a $25,000 timeshare. Here are a couple of better ways you could use that much money:

• Invest it in the stock market: The stock market has historically returned an average of about 10% per year. If you invest $25,000 through a stock broker and get a 10% annual return, you'd end up with $168,188 after 20 years.
• Put it toward a house: Buying a home is almost always a better decision than buying a timeshare. You can have a place to live the whole year, not just one week. With $25,000, you could make a 10% down payment on a $250,000 home.

Don't be fooled by a flashy sales presentation. A timeshare isn't a good investment by any stretch of the imagination, and it doesn't even mean you'll be able to vacation for free -- you're still on the hook for those yearly maintenance fees. You'll be better off financially if you use your money for savings, investing, or the down payment on a mortgage loan, and just pay for a hotel room or vacation rental on your trips.