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.

Right to a written statement

You are entitled to a written statement within seven days of asking, if you:

ask in writing
enclose 25c
don't ask more often than every 30 days.

Usually, sellers will tell you how much you owe if you call in at the shop.

Details of statement

the price of the goods
how much is still owing
the total amount you have paid
the current value of the goods to the seller
any loss in value (if you are cancelling the layby)
the selling costs (if you are cancelling the layby)
your refund if you are cancelling the layby.

Cancelling a layby

When can the buyer cancel a layby

You can cancel a layby if you have not finished paying for it. In this case you can let the seller know by calling at the shop, or writing a letter. You do not have to give a reason for cancelling.

If the goods are lost or damaged while on layby, you can cancel the layby or ask the seller to either compensate you for damage to the goods, or reach an agreement with you that the goods will be replaced.

Can the seller cancel a layby?

Yes, but only if you do not keep to the agreed terms.

For instance, if you do not make payments as agreed or do not pay off the layby in the time given.

You must be told the layby is being cancelled ( the seller can do this by phone, in person or by sending a notification to the address you gave them).

You may be able to get a refund.

If you ask, the seller must give you a free written statement within seven days of cancelling

Once the seller has informed you that the layby is cancelled, they must wait a reasonable time before returning the goods to stock.

In some circumstances the seller may offer you more time to complete the layby rather than cancel it. If you accept this offer, make sure you are clear about the time extension.

Refunding layby payments

If you cancel a layby you are entitled to a cash refund of the money paid so far, but the seller may have the right to keep some of your money to cover:

Selling costs - eg, the cost of storing goods, and staff time taken to write receipts. The amount charged must be reasonable and include only the actual costs of your layby.
Loss of value - any loss in retail value because the goods are no longer in season, or a newer model is available.

In most cases, the seller can not claim loss of value if you cancel within one month of beginning a layby.

Some stores have a set amount or percentage that they will withhold if the layby is cancelled. It may be called an administration fee rather than 'selling costs', but it refers to the same thing. The seller must be able to justify the fee by showing that it is based on the actual selling costs of your particular layby.

You have the right to a cash refund. You do not have to accept a credit note or buy other goods instead, even if shop signs or layby dockets say 'no cash refunds on cancelled laybys.'

Amount of refund

The amount of your refund depends on:

whether there has been a loss in value
how much you have paid.

Example of no loss in value:

You layby a tape deck costing $200 with a deposit of $50. You have three months to pay at $25 per fortnight. You have made three payments totalling $75 when you decide to cancel the deal. The tape deck is still the current model so there is no loss in value, and the seller deducts only selling costs from your refund.

This is the calculation:

Deposit + payments - Selling Costs = Refund

$125 ($50 plus $75) - $7 = $118

Example of a loss in value:

In May you put a $250 winter coat on layby with a $50 deposit, and make one payment of $60. You cancel the layby in September. All clothing shops are now stocking summer goods and coats have been put in an end-of-season sale.

These coats are marked down by $75 -this is the loss in value. If the seller charges you $5 selling costs and $75 loss in value, you will get only a $30 refund. In this case, you may decide it is better to continue with your layby.

This is the calculation:

Deposit + payments minus Selling Costs + Loss in Value = Refund

($50 + $60 )$110 - ( $5 + $75)$80 = $30

An even bigger loss in value

If the coat had been marked down by $125, you would end up owing the shop $20. This can happen when goods are heavily marked down.

In this case the calculation would be:

Total Payment - Selling Costs + Loss in Value = you owe shop

$110 - $130 ($5 + $125) = $20

Example showing no loss in value even when goods are on sale

You put a dinner set costing $120 on layby and cancel after paying a total of $80. In the meantime, the seller has put all dinner sets in a 'specials' sale because they no longer wish to stock chinaware. There is no loss in value because the goods are not seasonal or fashion goods, and other shops are selling similar dinner sets at the usual price. You should be charged selling costs only.

What if I have paid only a deposit when I cancel?

If the seller works out that the selling costs and loss in value are more than the deposit, they can keep the deposit. But they cannot ask you for any more money.

What if the seller hasn't held the goods?

If the seller has sold the goods, or has not kept them on layby for you, you can demand to be given replacement goods. If this isn't possible, you can demand a refund of all your money. You can also claim any increase in price you may have to pay at another shop to obtain similar goods.

Store closes down before layby paid off

Sometimes sellers close their business because they have gone into receivership, or 'gone bust'. If you are up-to-date with your payments you have the right to pay for and collect your layby. If the seller has not got enough goods to give you your layby, they will owe you money. To find out how you con get your layby or money, write to the 'receiver' of the company.

Faulty goods

If you find the goods bought on layby are faulty, you may have the right to:

a refund, or
a replacement, or
a repair, depending on how serious the fault is.

If you collect the goods and they are already damaged you can choose to cancel the layby.

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