Layaway sales are a type of purchase agreement where a retailer reserves an item for a customer until the customer completes all the payments to buy the product. The customer makes a deposit (often a percentage of the item’s total cost) and then pays the balance over time. When the total price has been fully paid, the customer can take possession of the item.
This method is a form of credit but differs from other methods like installment plans or credit card purchases because the retailer retains possession of the merchandise until it is fully paid for. This reduces the risk for the seller, as they can put the item back up for sale if the buyer does not complete the payments, and it also reduces the risk for the buyer, as there is no interest charged on the delayed payments.
Layaway plans can be beneficial for consumers who want to secure an item but can’t afford to pay the full amount upfront. They also help consumers avoid using high-interest credit options, thereby making more expensive items more affordable. However, consumers need to be aware of the terms and conditions, as some layaway plans might involve fees, and deposits might not be fully refundable if the customer changes their mind.
While layaway was more common in the past, it has seen a resurgence in popularity during tough economic times or for high-demand items that risk selling out quickly.
Example of Layaway Sales
Imagine a customer, John, visits a local electronics store and spots a new television that he really wants. The television costs $1,000, but John doesn’t have the funds to pay the full amount upfront, and he doesn’t want to use a high-interest credit card to make the purchase.
Instead, he opts to use the store’s layaway plan. The plan requires a 20% deposit and the balance to be paid off within three months. John pays $200 (20% of $1,000) upfront, and the store sets the television aside in their storage.
John then makes payments over the next three months. He pays $300 in the first month, $300 in the second month, and the remaining $200 in the third month. After his final payment, John has now paid the full price of $1,000, and he can take the television home.
This way, the layaway plan has enabled John to purchase the television without paying the entire amount at once and without taking on high-interest credit card debt. The store also benefited from the layaway sale by securing a sale they might not have made otherwise.
Note that this is a simplified example and actual layaway plans may vary by retailer and might include fees or other conditions. Consumers should always read and understand the terms of a layaway plan before committing to it.