Timeshares: The Real Math

Last week I was vacationing in Los Cabos with my girlfriend, her brother and his fiance.  When we arrived, we were offered $100 to attend a timeshare presentation.  Of course we declined because we were on vacation.  But when they increased the bounty to $800 the next morning, we caved (considering we paid $900 for a 2-bedroom hotel room for a week, can you blame us?).  A former Microsoft Business Analyst with a psychology degree, I was extremely interested to hear the sales pitch.

First of all, I want to note this our hotel was absolutely beautiful.  Our 2-bedroom was huge, had a full kitchen, and was luxuriously decorated.  The pool was three layers with a swim-up bar and restaurant, facing the ocean; at night it lit up with gas torches.  Based on the other hotels we saw in the area, nothing came close.

The salesman was an American who moved to Mexico, fell in love, and settled down.  He ‘conveniently’ had photos of his wife and family in the binder he carried with him.  Emotions weren’t going to work on us, so he dove into his funny math.  Basically, he tried to say that we could buy a guaranteed vacation for the rest of our lives today, and not have to worry about what happens in the future.  A strange pitch to make during an economic recession.  He tried to illustrate the benefits of his offer using the amounts we told him we spend on vacation a year, but that didn’t make sense since his amount would only include a hotel room for 1 week every two years, and our totals included all travel expenses (e.g. airfare and food) and worked out to 4-5 weeks of vacation a year total.

After breakfast, we were taken to a room where about 10 other groups were individually going through the same presentation.  If someone made a purchase, they rang a bell and opened a bottle of champagne.  The salesman told us 8/10 had purchased yesterday, but we only heard one bell go off.

Finally, after 1.5 hours of being presented with misleading math, we were told the price.  If we bought during our stay, we could have the timeshare for ‘only’ $12,000.  This number looks great when you think about how much you’ll spend on vacation during the rest of your lifetime.  But their financing was almost 20% and spread over 7 years, so the actual cost was beyond $20,000.  They also have a quarterly maintanence fee of $115; if this stays the same (it will go up) and you use your timeshare for 40 years, the cost is an additional $18,400.  Therefore, the total cost over 40 years is $38,960 and not $12,000.  This is for a 1-bedroom for 1 week every 2 years, and so if you live 40 years, you actually end up paying $1,948 per stay, or $278 per night.  All this timeshare does is lock you into vacationing at the same place for the rest of your life, and at a high rate – why would I want to lock in a cost per stay of $2,000 for a 1-bedroom when I paid $900 for my current stay in a 2-bedroom?  Of course they say it’s possible to trade your timeshare for other locations, but that comes with additional fees and many catches.

Plus, it got worse.  The property was still under construction in the back, which was halted (the salesman said it would start again next year but bankruptcy looked near).  Also, this was the cost of their most economical 1-bedroom.  If you wanted an ocean or pool view, you’d need to buy more points.  Imagine you return as an owner a year later only to be in a small room on the ground floor in the back facing a construction site; when you ask to move to the front, they’ll say you need to pay another $12,000.  The hotel was also falling apart – by the end of our week stay, many things in our room had broken, and workers were constantly fixing up the property.  And another thing that was weird: we didn’t meet one timeshare owner during our 7-night stay.

Be smart, people.  It makes me so sad that people fall for this.  Never buy something under pressure, never trust someone else’s math, and never feel sorry for the salesman.  We were very lucky to walk away with the $800 and not a mountain of wasted debt.


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