Dave Ramsey on Timeshares

[salmoneous]

Dave is one of those guys who can start with the right idea, and then botch it up by taking it to extremes. Here's his column today on timeshares:

Dear Dave,

I was wondering why you think time shares are a bad idea? Also, what do you do if you've already signed up for the free trip and tour?

Travis in Spokane, Wash.

Dear Travis,

Don't buy it! You get no value for your dollar, and you're also not building any equity in the thing. Equity implies that you could turn around, sell it and make money off the deal. The reason you can't make any money off time shares is that there's virtually no market for them. Nobody in their right mind wants to buy one.

Once you get stuck with a time share, it's like being lost in a black hole. You never get to use it enough to justify the cost, plus you've got things like maintenance fees and the possibility of borrowing the money and paying interest on something you'll hardly ever use. For what you'd shell out for a time share, you could go to Europe every summer for the rest of your life!

Time shares are a really bad deal, Travis.

Dave

 

[Lisa loves Pooh]

As much as we'd like to time share--I always find something better to do wtih the money and we aren't limited to a set locale (even via trade there are limitations).

Very interesting.

Not sure about Europe every summer--but I can certainly see what he is implying.

 

[disneymom3]

I love the "nobobdy in their right mind wants to buy one" Either he hasn't been to the DVC board or he thinks we have a lot of nuts around here!!

 

[Lisa loves Pooh]

I don't think he is blinded by Disney--note he didn't say spend every summer in Europe at a 5-star hotel....he just said you could go.


I also don't think he cares if it is Disney or motel 6--it is not an investment and even Disney says you if you are value resort kind of people---it is not the purchase for you.

 

[CarolA]

Once again Dave has responded with his

"While knowing only 1 required detail in 10, I know enough to advise someone" This is what makes Dave dangerous. It's his way or no way.

Now, lets say Fairfield approached Dave and gave him a kickback... how much you want to bet his new line would be "locking in your vacation now with cash is protection against inflation etc..."

 

[Chicago526]

I agree with Dave. I've had the DVC pitch, and for what we'd pay in taxes and maintenance fees each year, we could just book a moderate and go on our own! Sure, you own points and your hotel room/villa is "free", but you're still buying food and park passes, air fare to get down there, maybe a car rental too. Then add in your yearly dues and taxes, and you're right back where you started. I don't see how the points save you any money in the long run.

DVC is one of the better deals for time shares. I do like the flexibility of points, not being locked in to one week or one resort, ability to bank/borrow points year to year, being able to use the points on DCL,at DLR, Vero Beach, and you can trade with other time share programs for non-Disney trips. But it's still a time share at the end of the day. You won't make any money (although DVC does at least maintain it's value, if you have to sell, you usually get close to your purchase price), and what it "saves" you is marginal at best.

I'm not saying people who've bought into DVC are "fools" or "stupid" or anything like that, if you're happy with your purchase and get good use out of it, more power to you! It's not a bad deal, just not a great one.

 

[littlestar]

Dave, obviously, doesn't know everything.

Some of the smart tuggers (timeshare users group) would differ on his opinion. But, you've got to learn how to maximize the value of your timeshare. A lot of people bought resale and know how to make their timeshare work for them compared to paying cash rates for high end resorts/timeshares.

A lot of smart timesharers don't share their secrets on how they travel economically and stay at really great resorts for super prices. Like I say, Dave doesn't know everything.

I know somebody that bought a great timeshare for practically nothing resale. His maintenance fee is $350 a year. When he trades it through II, he gets a bonus week from Interval. So he gets two vacations out of that one week. Plus, he has access to II's great "Getaway" weeks - which includes some great Vacation Club properties (sometimes Marriotts come up) for way cheaper than renting.

Last year this is what he got for the money:

$350 - resort dues
$ 84 - II membership
$129 - trade fee through II
$299 - AC (bonus week) (used at Marriott Grande Vista two bedroom)
$ 95 - Extra fee for trading into DVC's Old Key West 1 Bedroom

Total $957.00

This got him 1 week at Disney's Old Key West in a 1 bedroom and a two bedroom at Marriott's Grande Vista (using the AC). That comes out to $478.50 per week. I'm sorry, but you can't do that paying cash.

Oh, and if he wants to, he could grab an Interval "Getaway" week later in the year and take another great vacation for probably $300 to $500 dollars at a top resort anywhere in the world.

Dave is stuck in the 70's when it comes to timesharing.

P.S. Some people who buy 2 bedroom lockouts actually get "3" vacations a year out of their one timeshare week. They lock it off - 1 one bedroom, a studio, and if it qualifies, a bonus week from II. That's three vacations out of one week.

 

[calypso*a*go-go]

Please don't take this the wrong way...but a lot of people in the "Dave Ramsey Fan Club" are usually trying to reduce debt and get themselves out of a whole lot of trouble. They really shouldn't be considering a timeshare. I'm very happy with our DVC purchase but know it's not for everyone.

 

[CarolA]

And considering you can buy cheap resales for around $1,000 I would LOVE to see how Dave plans to spend "every summer in Europe" for this..... Even Rick Steves buget tours cost more then that!

 

[NMW]

While I can understand that timeshares are not for everyone, for some families they work quite well. Like mine! We were going to Disney every year for 9-10 days staying in a deluxe (BC, POLY, BWI) because we have 3 children and like those resorts. We bought DVC (at BWV) and are THRILLED with our purchase. We don't look at it as an investment though, we look at it as a vacation club for OUR vacations. We now have the resort part of our vacation-the biggest part-paid for for the next 30 some years! All we buy is our tickets, food and airfare. Plus we get a discount on those tickets and can get the meal plan. What's not to like?

Plus, I disagree that no one wants to buy resale timeshares. The first couple resales we liked sold (within 2 days) before we had a chance to buy them! Disney also insures the value of it's resales with ROFR- Right of First Refusal. That means that Disney won't let DVC resales sell for a small amount, they can refuse the sale and take it back. The seller gets paid whatever was agreed upon, but by Disney, not the potential buyer. A LOT of people try to buy resales and offer the asking price and the contract gets ROFR'd by Disney and they have to start again with a new contract. There are over 90,000 DVC members, so Disney must be doing something right.

I also have friends who own Marriot vacation club in Aruba & Myrtle Beach, for a couple years now. They are very happy and have used their weeks to go to Aruba, Maine, Cancun, and Hawaii in just the 2 years they have owned. They don't look at it as an investment either though. They just book their own family vacations with it.

 

[Toby'sFriend]

I am kind of on the middle on this one.
I believe that for the vast majority of people, who aren't super dedicated to vacationing in one place time after time, or who even aren't super dedicated to vacationing every year -- Timeshares can be a disaster. I put myself into that group. When our family vacations, we first sit down and start price shopping, then we decide where to go based on our current desires as well as cost. Being tied to a Timeshare would be strangling for us.

Plus, so many people who buy them simply cannot afford them.

However, in some cases, as with some DVC owners -- the numbers work out fine for them and they get good value for their money.

I really don't look at Timeshares as an investment as many people do however, to me they are more like Pre-paid vacations.

 

[Chicago526]

And considering you can buy cheap resales for around $1,000 I would LOVE to see how Dave plans to spend "every summer in Europe" for this..... Even Rick Steves buget tours cost more then that!

I think Dave was responding to the person asking the question, who was going to a time share pitch. That means the person was going to pay full retail, not get a cheap-o deal on a resale. And if they are Dave fans, they are most likely trying to get out of debt, buying a time share, even if it really is a great deal, is not wise when trying to dig yourself out of a hole.

Dave may have been a little off the mark, but I don't think by much. SOME people are wise and research time shares, picking up a steal on a resale, but I'm willing to bet the majority paid full price.

 

[JoiseyMom]

For some people, he may be correct...but not for everyone. My in-laws have a timeshare, and they use it all the time. They never stay at the "home" base and are always trading weeks. They traded last year, and spent 2 weeks in Hawaii. She used it for us to stay at Summers Bay in Nov 04, and is constantly using it for travel. Plus when she and my fil pass on, my dh and his brother will get to share it. She is always telling us to check it out and see if we want to go somewhere. Generalizations are never good.

 

[uwate]

I bought two contracts in 2003 for $72 and $75 a point. Those same contracts (BCV and BWV) are now going for 83-88 a point. Maybe even a bit more, I havent kept up with it all as much as I should. Thats a 13-20% increase in value under three years, plus I have gone on 5 or 6 trips to Disney and I rented a bunch of points to pay for 2005 dues.

With a certain amount of entrepreneurial spirit, DVC is the best prepaid vacation deal I have ever come across. If I was willing to part with more of my points and vacation less, say 1x a year, I could actually be cash flow positive on this and sell after 5-10 years end for a profit.

As far as I am concerned, I hope more people listen to Dave Ramsey. I remember when Ebay had alot better deals than it does today. Seems like if there is a good thing going, too many people pile in and it becomes alot less desirable.

 

[dsanner106]

I do believe Dave attended one of these things in 1978, and never looked back. I bought a timeshare on resale and use it about every other year, trading when I don't. I also buy 4 or 5 extra vacations a year , last year ranging from 99.00 to 259.00 for a week in a 1-3 bedroom condo in some very nice locales. My family of 5 can stay offsite, less than 3 miles from disney in a 3 bedroom condo for a week for less than one nights stay in a deluxe or 2 nights in a moderate that would hold our 5 members. We have 4 times the sq footage, a kitchen, and can be in our room in half the time it would take to ride the bus back to our onsite unit. Don't get me wrong, we still stay onsite occasionally for the feel, but as far as the value of our timeshare goes, we receive MANY times it's worth every year. You have to not look at this as a real estate investment, but as a vacation savings club , basically. Just as people pay for months on their room at disney to pay it in advance, I achieve the same thing with my one time 250.00 maintanance fee payment and don't have to worry again.

Drew

 

[Caskbill]

I agree with Dave. I've had the DVC pitch, and for what we'd pay in taxes and maintenance fees each year, we could just book a moderate and go on our own! Sure, you own points and your hotel room/villa is "free", but you're still buying food and park passes, air fare to get down there, maybe a car rental too. Then add in your yearly dues and taxes, and you're right back where you started. I don't see how the points save you any money in the long run.

DVC is one of the better deals for time shares. I do like the flexibility of points, not being locked in to one week or one resort, ability to bank/borrow points year to year, being able to use the points on DCL,at DLR, Vero Beach, and you can trade with other time share programs for non-Disney trips. But it's still a time share at the end of the day. You won't make any money (although DVC does at least maintain it's value, if you have to sell, you usually get close to your purchase price), and what it "saves" you is marginal at best.

I'm not saying people who've bought into DVC are "fools" or "stupid" or anything like that, if you're happy with your purchase and get good use out of it, more power to you! It's not a bad deal, just not a great one.

While you may have taken the sales tour, it's apparent you don't fully understand the DVC system as you have made a number of incorrect statements.

We purchased for $57/point, and could sell today for about $80.

We can get a Studio, weeknights, at the Boardwalk Villas in March for 11-points/night. At roughly dues of $4.25/point, that comes to $46.75/night, including all taxes. A Studio villa includes kitchenette, and sitting area, besides the Bed.

Across at the hotel side of the Boardwalk, I can get a Boardwalk Inn regular hotel room at a rack rate of $305/night, or about $340 with tax. Even if you find good discounts, you're going to be well into the $200+ range per night.

If Dues go up 4% every year, then in 10 years that same villa will be $69.20/night. But if the Boardwalk Inn room goes up 4% every year, in 10 years it will be a rack rate of $503/night, including taxes. (So the DVC villa will increase by $22.45/night, and the hotel room will increase by $163/night.

The single biggest advantage to DVC (and other timeshares) is the lock against inflation.

Yes, I left out the initial purchase. At $57/point, spread out over the 49 years of the program when I purchased, that's minor, coming out to about $1.16/point. Of course you can't do it that way, as you have to calculate the 'value' of the dollar. But many have done extensive financial analysis, with spreadsheets, showing a considerable savings.

And in our case, if we sold today, I'd even make a profit of approximately 40%, on the sale, so the $1.16/point doesn't even apply.

Your statement that you could book a Moderate for the same as the maintenance fees on a DVC unit, when comparing apples to apples, is totally inaccurate.

 

[SleepyatDVC]

The question was from someone who had signed up for a promotional trip from a deveoloper, not someone doing their homework and going the cheaper resale route. Dave's response sounded like a general answer for a general question.

In general timeshares are not a good use of money and never an "investment." Yes, people can get great value for their money if they know the system, which is a small percentage of the people who own timeshares. This is all assuming that they CAN afford the initial outlay, on-going maintenance, costs of travel and actually have the time to use the timeshare. If any of the answers were no, then timeshares are not ideal for their situation and really can be a financial burden.

I LOVE my DVC. But anyone who thinks that it saves me any money is dead wrong. I actually spend more money on my trips then before, add to that fact I also go more frequently now. But since I love to go to WDW and I can afford the extra expenses, I wouldn't give up my DVC even if it isn't the smartest financial committment.

However, if my financial situation ever starts to worsen, a timeshare, even DVC, will become a financial burden. Luckily DVC is one of the few that can be sold without a LARGE financial loss. Most timeshares will not hold their value - like a car, it depreciates the second you sign on the dotted line.

I think that Dave is trying to emphasize that timeshares are not in any way real estate investments. It is an expense not a savings that will keep on costing every year. So you need to make sure you are able and willing to keep paying every year to keep and use it.

 

[simpilotswife]

Someone on TUG mentioned that boats are to Dave Ramsey what timeshares are to him. Apparently Dave is a real boating enthusiast so I wonder what his answer would be if they were asking about buying a boat.

As for timeshares, DVC is not the best deal out there but it is the best deal if you want to stay onsite in a mod or higher at least every other year.

Additionally there are some resale timeshares out there that are great deals if you know what to buy and how to use them. There are many people who buy very inexpensive timeshares with low maintenance fees just so that they can avail themselves of the RCI and II system.

 

[CarolA]

Dear Dave,

I was wondering why you think time shares are a bad idea? Also, what do you do if you've already signed up for the free trip and tour?

Travis in Spokane, Wash.

Dear Travis,

Don't buy it! You get no value for your dollar, and you're also not building any equity in the thing. Equity implies that you could turn around, sell it and make money off the deal. The reason you can't make any money off time shares is that there's virtually no market for them. Nobody in their right mind wants to buy one.

Once you get stuck with a time share, it's like being lost in a black hole. You never get to use it enough to justify the cost, plus you've got things like maintenance fees and the possibility of borrowing the money and paying interest on something you'll hardly ever use. For what you'd shell out for a time share, you could go to Europe every summer for the rest of your life!

Time shares are a really bad deal, Travis.

Dave

People keep saying the person who wrote Dave had already signed up. I don't see that in his post.

Dave does not mention resales or anything.. Dave is ABSOLUTE in his response. Dave's "advice" is worth what you pay for it.

 

[Anewman]

I agree with Dave. I've had the DVC pitch, and for what we'd pay in taxes and maintenance fees each year, we could just book a moderate and go on our own! Sure, you own points and your hotel room/villa is "free", but you're still buying food and park passes, air fare to get down there, maybe a car rental too. Then add in your yearly dues and taxes, and you're right back where you started.

1. Taxes are included in the YEARLY maintenance fees, they are not 2 separate expenses.
2. 200 points run about $800 in Maintenance fees this year, and can get you 2 full weeks in a studio and much more if you stay only weeknights. $800 at that moderate you mentioned would not even get you a full week.
3. When you go on your own, dont you still need to buy FOOD, park passes and air fare?


I do not know this person "DAVE", but does he always make blanket statements like this with LIMITED KNOWLEDGE of the subject?