The pros and cons of lay-by

Lay-by can be a cheap and convenient way to budget but you should be aware of the pitfalls.
Learn more



Lay-by can take the sting out of Christmas shopping, but the fine print can sometimes include tricky conditions such as expensive cancellation fees.

Do you remember when your mum bought her dinnerware and perhaps a new couch on lay-by? In these tricky financial times, and with increasingly credit-responsible consumers, old-fashioned lay-by appears to be making a comeback. 

According to Roy Morgan Research, almost 10% of consumers bought something on lay-by in the first three months of 2012 – more than double those who used an interest-free deal in the same period.

Lay-by is offered by all the large department stores as well as many small retailers, with items usually held for eight to 10 weeks. But beware – if you change your mind you may be hit by a cancellation fee of up to 20%. Further, some stores had problems with the Christmas delivery of online and lay-by orders last year.

But as long as you’re aware of the risks and conditions, lay-by can be great for Christmas shopping as it allows you to select your presents before popular gifts are snapped up and avoid the last-minute crowds.

For more information about shopping, see Shopping and legal.

Lay-by vs interest-free

As with an interest-free purchase, you can spread lay-by payments over several weeks or even months. But unlike with interest-free deals, you can only take the product home once it’s been paid off. On the upside, lay-by fees are much lower than those for interest-free and you’ll never be charged interest (as you may be if you don’t abide by the strict payment plan of an interest-free deal.
You’ll usually pay a 10-20% deposit for the goods and a small service fee may apply. As interest-free deals usually require an application and ongoing fees, lay-by can be much cheaper.

But lay-by can become expensive if you change your mind, as the service fee and sometimes also the deposit may not be refundable if you cancel or don’t keep up the payments. However, if you just need a longer period to pay it off, ask the retailer as they’ll often allow you to vary the payment terms.

What’s the catch

There are a number of drawbacks with lay-by. 

  • Service fees ranging from $2-12 are charged by the large department stores. But many smaller retailers don’t charge a service fee.
  • Cancellation charges David Jones, for example, keeps the 20% deposit and the service charge if you cancel your lay-by. 
  • Lay-by is always at the original price for products that might later go on sale. may become an unsecured creditor if a store goes into receivership before you’ve finalised the lay-by, making you last in line to get your money back.

CHOICE verdict

Lay-by can be a good way to budget, especially if there are low set-up fees and you’re making a large purchase or buying lots of Christmas presents. But make sure you check the cancellation fees and only put things on lay-by you’re really sure you want.

CHOICE has found some examples of stores charging a 20% cancellation fee and believes this may not constitute “reasonable cost” in some cases. Obviously, if you cancel the lay-by of a winter coat in August the retailer would have to discount the item in order to resell it, but if the item on lay-by is not seasonal, is reasonably small and readily available, the store’s reasonable cost may not be very high, so it may be worth asking for a reduced fee.

While lay-by is often much better value than an interest-free deal, check whether you can buy the item outright as you may get a better price. Consider using a savings plan and a high-interest account, but make sure you stick with it and aren’t tempted to use the money for something else.





Have you used the following payment methods in the past 12 months?

Lay-by and Interest-free
None of these
  • 56 votes


Sign up to our free

Receive FREE email updates of our latest tests, consumer news and CHOICE marketing promotions.

Your say - Choice voice

Make a Comment

Members – Sign in on the top right to contribute to comments