Layby is a popular way to buy goods when you are unable to pay for them straight away. Your goods are kept at the shop while you pay for them, so no interest is added to the price.

This makes layby cheaper than hire purchase. (Hire purchase is a way of paying by regular payments. You take the goods home straight away. However interest is usually added to the price of the goods.)

What is a layby?
When you use layby, the seller agrees to hold the goods for you. You agree to pay for them in instalments, and you both agree how long it will take. When you make the last payment you can collect the goods.

eg, you see a jersey you want but you don't have enough money to pay for it. You ask the seller to hold the jersey for you. You pay a deposit. Then you pay the rest of the total price in weekly payments over two months.

The seller must hold the goods for you unless you do not make payments as agreed. The price of goods held on layby cannot be increased if new stock comes in at a higher price. Also, if the goods go on sale during the time you have the goods on layby you are not entitled to the goods at the reduced price.

Any sale that matches this description is a layby sale even if the seller calls the sale by another name - eg, 'part-payment'.

Layby Sales Act
Layby sales are covered by the Layby Sales Act 1971.

The Act does not cover:

  • sales where the total price to be paid is over $7,500
  • the sale of motor vehicles by a licensed motor vehicle dealer
  • agreements for part-payment of services.

Terms and conditions of layby sale
You and the seller agree on the terms. The terms include the number of payments, and the date you must finish making the payments. This is a contract even though the terms are not always in writing.

You will probably have to pay a deposit. The amount is:

  • agreed on by you and the seller
  • usually 10-20% of the total price.

If the goods are too large to be stored at the shop, the seller may charge a storage fee. You must be asked if you agree to this when you begin the layby. This is usually the only extra cost you will have to pay.

Paying off the layby
You and the seller agree on how long you have to pay. One to three months is common. You can ask for longer, but the shop does not have to agree.

You can agree to pay by:

  • regular payments - eg, $15 a week for ten weeks
  • payments of any amount so long as the full price is paid within the agreed time
  • one payment of the full price at the end of the time.

It's a good idea to ask the seller for a layby receipt or docket that clearly shows:

  • your name, address and contact phone numbers
  • the name, address and phone number of the shop
  • each item you purchased, listed separately along with the price
  • the terms of the layby.