Layaway is a type of agreement that can be made between a retailer and a consumer. The consumer pays a deposit to reserve an item, which is held until the consumer pays in full. The item itself is said to be “on layaway.” Typically, the customer has a set period of time in which he or she must pay in full for the item. If the customer fails to pay, the item is returned to stock for a small fee and the consumer's money is refunded.
It used to be quite common to purchase things on layaway, primarily because consumers were not readily offered lines of credit. When someone wanted to purchase a big ticket item, therefore, they would have had to complete the purchase in a layaway style if they could not afford the cost up front. The rise of credit cards and store credit has made this type of agreement somewhat more uncommon, but some companies do still offer it.
There are several advantages to purchasing something on layaway when the full price is not feasible up front. The first is that the item is held for the customer, so he or she knows that it will be available later. By buying items this way, consumers make a promise to buy the product, while the retailer agrees not to sell it to someone else in the meantime. The second is that a layaway plan typically has minimal or no fees, often making it less expensive than carrying a balance on a credit card.
In some regions of the world, layaway is called lay-by, or lay-away. The basic concept remains the same, however. Typically, the deposit represents a percentage of the total price, and a schedule of payments is usually worked out. If the consumer thinks that he or she will have difficulty making the payments, a new payment plan may be negotiable.
Not all stores offer layaway. It does require additional storage space, and this is not always possible in a small business. In addition, it also requires certain administrative duties, since someone needs to keep track of the payments and objects on layaway in the store. The rise in availability of lines of credit has also led stores to encourage the use of credit cards by their customers. Some stores also offer lines of credit through store credit cards, and they may provide rewards for customers who apply for and use store credit.