Friday, September 7, 2007

What are you paying for your Timeshare Membership?

What is the cost of money?
  • How much bank charge when you take unsecured loan ? ( 18- 28% )!
  • What are the current floating and fixed rate for home loan (secured)? (10.5 - 13%)!
  • What will be the interest rate on unsecured loan to companies like Mahindra & Mahindra for 25 years?
Let's assume you take loan of 2.25Lakh from a bank payable as yearly EMI for 25 years to buy your Club Mahindra membership of Red Studio.
( 2.25Lakh is assumed after deducting value of promotion items)

Reading the charts :

This figure shows you yearly EMI for 2.25 Lakh loan at indicated % interest rate, principle amount left after each year. Another column shows ASF compounded with 5.5% inflation rate.

Next to ASF column, it is ( EMI + ASF)/7 = Average cost of per night accommodation.

Next set of columns shows "Present Value of per night accommodation" that is some thing you have to decide what value you give to Club Mahindra accommodation. I have shown you four calculations. For each next year these have be compounded with inflation rate of 5.5%. I have also marked Break Even Year when your accommodation value is equal to (EMI + ASF).

What to consider while deciding the value of accommodation :

1) You are committing for 25 years of business to CM.
2) A season is wide spread to 16 - 24 weeks, not all week in a season are equally valued.
3) You will be taking long holidays of 3 to 7 days, not one night stay.
4) You may have to plan 2 - 6 month in advance to get your desired dates.
5) Not all resorts are equally good or have commercial value, Average out resorts quality.

This is very simplistic calculation.

Inflation rate may not remain same for 25 years .. ,
Accommodation cost at 4000/- is equivalent to ~100$ per day. With improved infrastructure and high tourist inflow these rates may actually come down in future instead of increasing year by year.

Break even year is where you pay what you get .. you need more year to recover excesses payment of previous years.

I will be interested in knowing your comments on this calculation. If you require similar chart for different sum of money and interest rate please let me know I will try to provide it to you.

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