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What Is a Timeshare and How Does It Work?

At some point or another, you’ve probably heard about the dreaded “presentation.” You know the one. You and your family just checked into your hotel for spring break, and some smooth-talking salesperson approaches you about a fancy room upgrade. The next thing you know, you’re sitting through a three-hour timeshare presentation while snacking on stale pretzels and signing your name on the dotted line of a brand-new timeshare contract. Ouch. If that hasn’t happened to you, chances are, it’s happened to someone you know.

Did you know the timeshare industry is anticipated to be a $17.3 billion-dollar industry this year?1 There’s a lot at stake, and they really want your money! 

So, what is a timeshare anyway? We’ll break down everything you need to know so you can still enjoy your hard-earned money and vacation time—without the high-pressure sales tactics.

What Is a Timeshare?

A timeshare is a vacation property arrangement that lets you share the property cost with other “owners” in order to guarantee time at the property. Some agreements last a lifetime, while others last a certain number of years. Either way, becoming a timeshare owner isn’t all it’s cracked up to be. And just so you know, being a timeshare owner doesn’t actually mean you own anything . . . except an obligation.

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Timeshare ownership boils down to one big, expensive headache. That headache comes in the form of yearly maintenance fees, incidental costs, interest and making sure you book those vacation dates before someone else does.

Ask most timeshare owners out there, and they’ll tell you to run for the hills. Timeshares (while shiny and new at first) turn into a real thorn in your side. But more on that later. Let’s get down to the nitty-gritty . . .

How Do Timeshares Work?

Once you sign on the dotted line for your new timeshare in Boca Raton, you’re the proud owner of a lifetime (or many decades) of vacationing with the same resort . . . year after year after year. But how a timeshare works really depends on the contract you signed. If you’ve been thinking that owning a timeshare is a lot like owning real estate, think again. It’s really more like renting an Airbnb for a lifetime and being stuck with the crazy expensive fees and damages . . . every single year.

There are really just two things to consider about timeshares: the type of contract and the type of ownership—or who owns the property and how it works for you to visit your timeshare. 

First, let’s look at who owns the timeshare property in your contract. Do you own the deed or does someone else? 

Shared Deeded Contracts

Shared deeded contracts divide the ownership of the property between everyone involved in the timeshare (aka you share the deed, just like the name). Each “owner” is usually tied to a specific week or set of weeks when they can use the property. So, since there are 52 weeks in a year, the timeshare company could technically sell that one unit to 52 different owners. This type of ownership usually doesn’t expire and can be sold (good luck!), willed, or given to others. 

Even though shared deeded means you get an actual deed to an actual piece of property, it’s not exactly like normal real estate, where you own the entire property. Even still, you (and all the other deed owners) have to pay property taxes. That’s a lot of money for just a few weeks of use!

Shared Leased

Shared leased typically has the same arrangement as shared deeded, except the deed for the property remains with the resort where the property is located. And leased means leased, so you don’t get a deed since you’re only leasing the use of a specific property. It’s as if you were renting the same hotel room at the same resort for 20–99 years! The shared leased option also has a set time limit before the lease expires. In this example, the lease is 20 years, but some contracts are for a lifetime.

So, now that you’re locked into a contract, let’s talk about how you go about actually using your property.  

Types of Timeshares

“Vacation ownership” is another way people in the business explain how you get to use the property on your designated week or weeks. 

Fixed Week Option

With a fixed week option, you’ll select a specific week of the year to vacation on the property. If your neighbors have ever announced, “We go to the lake house every year the week after Memorial Day!” they might have a fixed week timeshare.

Of course, if you want to try a different week of the year, you’re up a creek without a paddle. Changing your allocated week could take an act of Congress (or at least a hefty upgrade fee). That’s a major downside.

Floating Week Option

The floating week option allows you to choose your week—within certain limits, of course. The offer would be something like, “You can book any week between January 2 through May 4 . . . except for the two weeks before and after Easter.” 

Keep in mind, each reservation also has to be made during a specific window of time. You might be encouraged to call right after the new year to reserve your summer vacation week at the resort. “Remember: First come, first served!” If you miss the window, or if others who are in on the same timeshare book the better times quicker, you could get stuck with some random week in the dead of winter. That’s just tough! 

Points System

A points system is another way you can get timeshare access nowadays, also known as a “timeshare exchange program.” It basically works like this: Your timeshare is worth a certain number of points, and you can use those points (along with the occasional additional fees) to access other resorts in the same timeshare system. Yep, you don’t have to go to the exact same spot every year. Sounds great, right? Well, it isn’t that simple.

You have to be careful. A mountain cabin timeshare in Tennessee doesn’t exactly cost the same amount of points as a Walt Disney World Resort timeshare. You’ll have to cough up extra dough for something like that. And, you’re still in competition for those locations with others who are working the points system too—good luck scoring a spot!

How Much Do Timeshares Cost?

When it comes to figuring out timeshare costs, there are quite a few things to factor in. Not only are there different types of purchase agreements, but there are also exchange fees, annual fees, maintenance fees and more. Here’s a breakdown.

What’s Included in Timeshare Costs?

Turns out, purchasing a timeshare involves a boatload of costs. First, you’ll have the upfront purchase price that averages over $24,140.2 If you don’t have that money saved already, you’ll probably be looking for a loan (which you shouldn’t do anyway).

If you can’t front the cash for that timeshare, the sales folks will talk you into financing with a personal loan. And on average, those interest rates will land somewhere around 8.73% over the course of two years.3

And if you don’t go the personal loan route, your new friends at the timeshare company will come to the “rescue” with a convenient way to finance your epic purchase! Since they know you have so few options for financing, they can charge outrageous interest rates.

What tends to sneak up on you after that are the extra fees after your initial purchase. Uncontrollable maintenance fees run an average of $1,120 annually and go up around 2% each year.4 But that’s not always the case! From 2018 to 2021, there was a 12% hike in timeshare maintenance fees—ouch.5,6 With those kinds of numbers, you’d actually be coughing up $1,250 just in maintenance fees by 2024.

And if that’s not enough, throw in HOA dues, exchange fees (when you don’t have enough points for that beach condo), and the “special assessments” for any repairs made to your unit. With all those extras, the total cost can drain your bank account quicker than that Nigerian prince emailing you for money!

Let’s say your initial timeshare purchase is that average price of $24,140 with the yearly maintenance fee of $1,120. Over the next 10 years of using your timeshare, you would be eligible to stay 50 nights (the average timeshare transaction is five nights).7 Check out these numbers:

cost of timeshareWhen you math it all out, you’re paying about $707 a night to go to the same place every year for 10 years! That’s not even considering the maintenance fees going up each year and all those other unforeseen costs we mentioned earlier. Yikes!

Now that you’ve gotten the overview, let’s break the costs down one by one.

Direct Purchase

So, the first cost you need to think about here is the actual initial purchase. We’ll look at two ways to do that, starting with direct purchase.

After you sit in on those long, drawn-out presentations, your talented salesperson will make a pitch you can’t refuse (or at least, it seems that way). They’ll draw up a contract for your timeshare, ask if you’re a cash buyer or if you need to finance, and have you sign your name on the dotted line. Once you sign, you’re the proud owner of one week at your timeshare destination. Cue the confetti canons . . . or maybe not.

Resale Purchase

Not only can you buy a timeshare directly from the resort, but you can purchase from previous timeshare owners as well. That’s right! The current owner of a timeshare might realize they don’t want this thing for 20 years to life, and they’ll try to sell it to you. It’s like they’re selling a piece of real estate . . . only instead of selling property that increases in value, they’re selling an obligation and a chunk of time—a really expensive chunk of time.

Remember, timeshares are really hard to get out of. That’s why many timeshare owners try to resell their timeshares instead. Some of them will even offer it to you for $1 . . . just to break free. But don’t be fooled—this is a huge red flag. Over time, that timeshare will cost you way more than $1. It’s just not worth it.

Annual Dues

You bought the timeshare, and now you’re done spending money, right? Wrong. You’re just getting started.

Just like an HOA has annual dues, timeshare owners have to pay their annual dues too. Annual dues are a melting pot of taxes, maintenance fees and utilities. The dues fluctuate based on your timeshare’s peak seasons, utility prices and more. And here’s the kicker: You have to pay your annual dues whether you use your timeshare or not. (Hooray, ownership!)

We’ve already briefly mentioned the maintenance fees, but they’re such a nuisance, we need to mention them again. Like we said earlier, those maintenance fees are just a part of timeshare ownership. But it’s not just a few nickels here and there—it’s a whopping $1,200 per year . . . depending on how much that good ole maintenance fee goes up. Like we said—they’re a nuisance.

Exchange Fees

Once you’re good and tired of going to the same resort year after year, you might think about a little exchange—your timeshare week in exchange for a week at a resort in a different location. But you can’t just choose any other resort. That would be too easy. You have to choose from a list of resorts or timeshares in the same “family” as your own.

For instance, if you have a timeshare at a Disney resort, you can exchange your timeshare week for a week at another resort in the same family of resorts . . . for a fee of course. And not every timeshare is equal. You’ll have to pay exchange fees to make the trade. Usually, these exchange fees are added onto your timeshare pricing package as a yearly fee—just in case you ever want to use it. That’s right, you have to pay for it either way!

How to Get Out of a Timeshare

So, now that you know exactly what costs go into buying a timeshare, let’s talk about how to get out of one. If you were sweet-talked into purchasing a timeshare and are feeling the weight of buyer’s remorse, you aren’t stuck. It’s  not easy to free yourself, but you can do it. Here’s what you need to know.

Right to Cancel

Right to cancel, also known as recission laws, can come in handy when you’re trying to get out of a timeshare. Recission laws are different in each state, though, so you’ll want to read up on the state where your timeshare is located before you count on it as a surefire plan of action.

Let’s say you bought a timeshare in Tennessee. A day or two later, you realize you made a huge mistake. With right to cancel, you have 10 to 15 days to cancel your contract (in the state of Tennessee), depending on if you inspected the property.8

You can deliver or mail a cancellation letter to cancel the contract any time within that recission period. The timeshare owner has to give you a full refund within 30 days of receiving your notice.

Again, make sure you know the rules for the state you’re dealing with. And move quickly!  

Timeshare Deed-Back Program

If your state’s right to cancel laws aren’t as roomy as Tennessee’s, it’s easy to miss the recission window. But don’t worry, all hope isn’t lost. You can try smooth talking the timeshare company into taking the deed back.

Maybe it’ll work—maybe it won’t. But it never hurts to ask. The best thing to do is check your contract and see if it mentions anything about a deed-back program. If so, you’re headed for smooth waters!

If not, Dave Ramsey suggests offering the deed back to the resort’s sales manager with an extra monetary incentive. It’ll sting your wallet for now but will still cost you far less than what you’d pay after years and years of being price gouged by your timeshare.

Sell the Timeshare

If you missed the recission window and the timeshare company won’t take the deed back, you can try to sell it.

There’s a lot that goes into selling a timeshare, but it always starts with taking a close look at your contract. Depending on how you purchased the timeshare (cash or finance) will determine how easy it will be to resell. And remember, if you financed your timeshare, you can’t resell it until your loan is paid in full. Get a good real estate agent if you go that route. Or if you decide to use a timeshare listing company, make sure they’re reputable.

Use a Timeshare Exit Company

A timeshare exit company exists to help you, well, get out of your timeshare. But not all companies are actually helpful. Some will try to sell you more. Others will promise you above and beyond what they can actually do, and still others will try to take your money and run. Using a reputable timeshare exit company could help you get out of this financial burden—just do your research first.

Are Timeshares Worth It?

Absolutely not. Sure, owning a timeshare might seem like fun in the moment, but in the end, it’s just not worth it. Why? Here’s a quick rundown:

1. You have no investment value.

Unlike buying real estate, timeshares don’t actually earn you money. Instead of owning a piece of property, you own a small chunk of time you can use that property.

2. They’re very difficult to get out of.

Like we’ve said before, getting out of a timeshare is harder than getting out of going to grandma’s house for Christmas. There are so many hoops to jump through, and those hoops will cost you time and money.

3. The annual fees just aren’t worth it.

Timeshares are high-maintenance. You’d think buying a week of vacation somewhere would be cheap, but timeshares are just the opposite. From dues to fees to more fees, you’ll end up paying way more than you bargained for.

Timeshare Alternatives: A Paid-For Vacation!

Getting a timeshare is basically like prepaying your hotel bill for the next 20–99 years. Yikes. There are a ton of cheaper options out there that won’t leave you (or your family) stuck paying expensive timeshare fees. Go for one of the timeshare alternatives out there. For starters, you can find a cheap flight and book a stay at an Airbnb or Vrbo anywhere in the world. You’ll still make fun memories—without the hassle of a timeshare contract.

Or if you’re wanting to splurge on a trip, take all of that hard-earned cash you would’ve spent on a terrible timeshare “investment” and start a sinking fund for your vacation. This just means saving a big chunk of change over time by setting aside a smaller amount each month. When you do that, you can go anywhere you’d like. Without debt or fees or dues—or a 99-year contract.

Remember those numbers we ran through earlier? What if you found a vacation spot for five nights that cost $707 (the same amount as your timeshare’s nightly rate)? That’s $3,535 for five nights. If you set a date for this time next year, all you’d have to do is set aside about $295 for 12 months. Bam! That’s a paid-for vacation . . . to somewhere you’ve never been before.

Ready to get started? Well, you’ll need a budget. Check out EveryDollar. It’s a free budgeting app that makes it easy to set up sinking funds for your next family vacation. It’ll help you save up to pay cash for the trip and track your spending while you’re there. When you’re intentional with your money, you can have the vacation of your dreams—without being tied to a timeshare. Don’t let a timeshare ruin your finances (or your vacation plans). Save up cash and pay for the vacation of your dreams . . . no contract required.  

Budget for Your Vacation

Skip the headache of timeshare scams. Save up to pay cash for that vacation with your free EveryDollar budget!

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Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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