Total Cost of Ownership
The concept of total cost of ownership is hardly a new one and you may be familiar with the idea, such as the total cost of ownership of your car, but it’s important to understand all the components of TCO when it comes to your timeshare. After you understand the total cost, you’ll find that it will help you determine how much to pay for a timeshare and, ultimately, whether or not you actually want to buy a timeshare.
The main components to TCO for a timeshare are:
- Opportunity cost
- Annual or maintenance fees
- Usage fees
- Exchange fees
- Exchange club membership fees
Opportunity cost refers to the second best alternative for your money. For example, if you pay $5,000 for a timeshare, that’s $5,000 you don’t have sitting in an investment account earning a return on your money. Your opportunity cost is the income you would’ve earned from that investment.
Annual or maintenance fees are those fees you pay to the timeshare for the upkeep of your room.
Usage fees are those fees you pay when you use your timeshare.
Exchange fees are those fees you pay when you exchange your timeshare at the exchange company’s spacebank. We assume that you’ll do this every other year (or none at all) in the example below.
Exchange club membership fees are the fees you pay for the ability to exchange your time any year you’d like.
Total cost of ownership:
- $800 - 10% of $8,000 purchase price of the timeshare.
- $200 - annual and maintenance fees.
- $100 - usage fees.
- $80 - exchange club membership.
- $60 - exchange fees, every two years.
Total cost: $1,240
How does this drive the purchase price? It has to do with the opportunity cost. As you can see, that’s the biggest driver of the price (your annual/maintenance fees may be higher than $200 a year!), so you should use this metric to drive your purchasing decision.