A lay-by is a convenient and inexpensive way of buying goods offered by many stores. In a lay-by you select the items you wish to buy and enter an agreement with the store. You pay an initial deposit and the remainder of the item's cost in regular instalments. In exchange the store will hold the item for you until you have completely paid for it. There are no credit charges involved but there may be a fee charged if you decide to cancel the lay-by.

Most shops will provide lay-by terms and conditions in writing on a lay-by docket or have a sign in the shop stating their terms and conditions. If you breach the terms and conditions by not paying the instalments within the required time, or you change your mind and cancel the lay-by, you may lose your deposit.

Where there are no written terms and conditions, the situation may be more confusing. The buyer is within his/her rights to request a refund of all or some of the monies paid. However, the retailer can justify keeping monies to cover administrative costs, such as storage costs and resale depreciation in the value of the goods.

Retailers are responsible for the storage and condition of lay-by items until the buyer completes the lay- by and collects the goods.

Keep dockets or receipts each time you make a payment as proof of payment.

Cancelling a Lay by – a case study

Jeremy had a pair of shoes on lay-by for three weeks. He decided to cancel the lay-by because he had seen another pair of shoes that he preferred in another store. He approached the shop manager and asked for a complete refund of the money he had paid so far.

The manager told Jeremy that he could only have a part refund because of the fee payable for cancelling the lay-by. Jeremy should have looked at the agreement that clearly indicated a reasonable cancellation fee was payable if he should cancel the lay-by.

As a lay-by is a contract, if you change your mind and decide to cancel that contract, you may be required to pay up to 10% or 20% of the whole price of the goods as an administration/cancellation fee.