Thursday, July 16, 2020

Read Between the Lines!

Buying a timeshare is just a bad deal all around.  Why can't anyone say this out loud?  Oh, right, the timeshare people advertise on their site.  Act shocked.

There are deals, there are bad deals, and there are really, really rotten deals.   Really, really rotten deals include private student loans (particularly for worthless degrees), payday loans, rent-to-own furniture, buy-here-pay-here used cars, car leases, co-signing loans, and timeshares.

Why do I say these are rotten deals? Because they cause a lot of pain for the people who sign up for them.  The guy who buys a $1000 sofa for $4000 from the "rent to own" place cannot afford that kind of loss.  The clueless college graduate is like deer-in-the-headlights when he realizes he can't get a job with his Master's degree in religion, but he still owes fifty grand.  Payday loans end up bankrupting the borrower, but only after they've "stacked" multiple loans one on top of the other.  Car leases?  You don't know how much it costs, until you try to turn-in the car (and not re-lease another).   Buy-here-pay-here used cars?   You end up making payments on a car that went to the junkyard years ago.

But timeshares are a particularly evil kind of beast.   They use high-pressure sales tactics to ensnare middle-class people.   For the low, low price of $25,000 or so, they can sell you a "week" at a resort, but of course, maintenance fees are extra - and can be raised and will be raised, every year.   If you decide to sell your timeshare, you will be shocked to discover that no one wants to buy it.  You are stuck with a "tar baby" (and no, that is not a racist reference!  Maybe Uncle Remus was a racist meme, but that story has nothing to do with race).  You will be "stuck" with the time share, and "stuck" with endless maintenance fees the rest of your life.  Not only that, but these nice folks will even come after your children, implying (illegally) that they now own the timeshare and they have to pay forever and ever, amen.

(The timeshare salesmen will tell you that you are "investing in your vacation" or "investing in your family time" which may be true, but your kids will grow up, go to college, graduate, get married and start their own families - in a very short period of time.  If you have an 8-year old, a mere decade from now, you will never see him again except at Christmas.   Meanwhile, timeshare fees go up, and up, and up, and there is no way out of paying them.  If you want to vacation with the kids, great.  Rent a timeshare - for those few precious years they are kids.  Then move on.)

So I had to laugh at how timid the author of this online "financial" piece was about timeshare financing.   The article was nominally about using a personal loan to finance a timeshare sale.   If you read between the lines the author is screaming "this is a shitty deal, run away, run away!" but no doubt their editor realized that Marriott and Hilton, two legitimate hotel chains, also sell timeshares, and that their ad revenue would plummet if they told the truth about this deal.

Imagine if a division of McDonald's sold hamburgers with ground glass in them, and some food critic's only comment was, "Maybe you should think carefully before ordering the ground glass hamburger - some people have trouble digesting ground glass fragments, and they can get stuck in your throat upon occasion."   You'd revolt at the banality of it all.  Ground glass?  That could kill you as sure as poison!  And no, the fact that some Indian fakirs claim to ingest it, doesn't change matters any.   It is a bad personal decision from all angles.

But again, the folks selling these bad deals also advertise on these sites.   So the best the author can say is to "watch out"  and check the loan documents carefully, instead of screaming at the top of his lungs, "run away! Don't buy a timeshare, ever!  And never sign a loan at 16% interest or put it on a credit card at 20% interest!  RUN AWAY!  RUN AWAY!"  Instead, all they offer are bland, inoffensive comments about unattractive interest rates.

So, what is the best way to finance a timeshare purchase?  NOT PURCHASING A TIMESHARE, PERIOD.   There are no "savings" in buying a timeshare, no discounts, no tax deductions (legally) and no advantage.  You want to go stay at a timeshare?  You can rent one, on VRBO or AirBnB for about what the yearly maintenance fee costs, maybe less.  If you don't like it, you are not "stuck" with it.

Note that you should NEVER rent a timeshare from the timeshare company, as they will likely force you to attend an hours-long "seminar" about how great timeshares are.  No matter how strong your will, after hour four, when you are dehydrated and have low blood sugar, you may end up signing the documents - only to regret it later.

The various ill-conceived schemes for financing these nightmares illustrate why they are bad deals.  Personal loans from the developer at 16% are no bargain, in an era where mortgage rates are below 4% and you can get a credit card (I did) below 8%.  Putting the purchase price on a "revolving" credit card so you can get flyer miles is an even more idiotic idea - the interest rate on such cards can be 20% or higher.  Taking out a second mortgage or a HELOC is even worse, as you cannot walk away from such a debt without losing your home.  And no, that interest isn't deductible, legally. Only Interest paid on a PMM (Purchase Money Mortgage) is deductible.  You can't mortgage your house for more than the purchase price and deduct the interest.   The fact the IRS rarely audits this, doesn't make it legal, only unlikely you will get caught.

A better approach is to just go on vacation.   You can't turn an expense in your life into a profit.   A vacation is an expense, and you can't "invest" in it, any more than a vacation home can be a profit center.   It could, if you bought when prices were very low and they shot up over time.  But like most personal residences, the cost of maintenance and repairs, insurance and upkeep will negate any capital gains over time, which is why the IRS doesn't tax capital gains on your personal residence (but they will, on your vacation home, if you ever saw any). Buying a week of a vacation home?   All of this becomes even less likely.

What this article illustrates is why people get such shitty financial advice from the media.   The media has an inherent conflict of interest between itself and advertisers.  There are reporters who want to tell you the real deal - as I am sure the author that piece did - but when the editor gets done with it, it is watered-down to the point where it says nothing at all, or in fact is cheer-leading for the timeshare industry.

Long ago, I realized that it would be "nice" to write bland, inoffensive things that did not piss people off.   But I realized that in an effort to try to appease everybody, I would end up saying nothing.  My postings about religion, for example, generate thoughtful comments, but also flames.   My position is, If I haven't pissed you off completely in the last week or two, I am not doing my job.   I am not "right-wing" or "left-wing" or whatever, but who I am.  And often, I get from people that they like one posting but despise another

Good.  If you agreed with everything I said, than nothing is getting accomplished here.  On the other hand, if you disagree with everything I have to say, then go to Fox News or Rachel Maddow or whatever far-left or far-right news source that will validate everything you believe in - or tell you what to believe.

That's the problem in a nutshell.  People can't say what they want to say, for fear of pissing off people, lawsuits, or shedding advertisers.  One reason the Trump faithful (spell check:Turnip) love Trump so much is that he says outlandish things and doesn't give a rat's ass what the media thinks.  No long-winded apologies, no resigning in shame, as Al Franken had to do.  Once you go down the road of damning and shaming, when you are caught with your pants down (figuratively or literally speaking) you have to act contrite.  Trump doesn't have that liability.  He can "grab them by the pussy" and not feel ashamed.   And no, this doesn't make it right, only it explains how he gets away with it.

OK, this is along way from timesharesBut maybe not that far. Same shit, different day.  The left has hobbled itself - not its opponents - with "Political Correctness" and today, you can't, as a leftist, say certain things (which is why I am not a leftist, anymore) or even fail to embrace fully, certain leftist movements that may be questionable.  If you are not setting fire to something, you're part of the problem.

The mainstream media, afraid of offending any particular point-of-view, did the same thing - presenting "both sides" of an issue and letting the viewer decide.  A neat strategy, but one that falls down flat when trying to present "both sides" of issues like the Holocaust.  Sorry, but there is only one side, period, paragraph, end of story.   Yet today, thanks to mealy-mouthed reporting, the "other side" is gaining traction.   Is this really where we want to go?

So yes, a stupid article about timeshare financing may not seem like much in the greater scheme of things, but it is just a piece in the puzzle, a data point in a graph, illustrating how truth gets corrupted, over time.

For all you Russian Trolls out there, let me save you some time - this is not an example of "Evil American Capitalism" at work - well, maybe it is - but the alternative, not being able to say what you want to say for fear of being imprisoned and tortured to death (or poisoned with nuclear waste) is not better, and in fact, far worse.  Maybe the mainstream media has been muzzled to some extent in the US by commercial interests, but eventually, the tide turns, and the media comes around, only when it becomes too evident that odious people and odious content find no support.   Even advertisers have their limit.

Not so, in Putin's Russia.

But then again, folks will dismiss such comments as "finding a Russian behind every tree" which is inaccurate.

Every other tree.   There are just not that many Russians.