Layby means you pay instalments and get the item once it's paid off. Buy now, pay later means you get the item straight away then pay it off. Layby rules and rights don’t apply to buy now pay later sales.
Before you buy on layby
Layby is a way to buy goods when you can’t afford to pay for them straight away.
A layby sale is when:
- you pay for something in instalments
- the retailer keeps the item until you’ve paid for it (or an agreed part of it), and
- the item costs less than $15,000.
Any sale that matches this description is a layby sale, even if the seller calls it by another name, e.g., part-payment.
You can't be charged interest if you buy something on layby.
Your rights when you buy on layby
If you buy on layby, the Fair Trading Act (FTA) provides you with certain protections and rules that traders must follow. You have the right to:
- pay no more than the original set price of the product
- have your products kept safely by the trader until you have fully paid them off, unless you don’t make payments
- a written copy of the layby contract before you buy
- a free statement of your account at any time
- cancel the sale at any time before the final payment and get a refund — minus a reasonable cancellation fee.
The layby contract must be dated, legible and easy to understand. The front page must:
- describe the products
- summarise your right to cancel and show any cancellation fee
- include the retailer’s contact details
- state the total price to pay.
You can also ask for a free statement of your layby account at any time, which the retailer must provide within five working days. The statement must include:
- the purchase price
- total amount paid so far
- the balance owing and when this should be paid
- any cancellation fees.
If the retailer doesn’t give you your contract or a free statement on request, you can cancel, and they cannot charge you a cancellation fee.
Contracts and sales agreements
Cancelling a layby
You can cancel for any reason before the last payment. Tell the retailer. After cancelling, the retailer must immediately give you a full refund of the amount paid already. They can charge a reasonable cancellation fee. Retailers can recover the cancellation fee as a debt if you don't pay it.
Your right to a refund is protected by the Fair Trading Act. The retailer can't ask you to accept a credit note instead.
Example — Cancellation fee too high
Max buys an entertainment system on layby for $10,000. His wife is horrified when he tells her. Max cancels the next morning and the retailer charges him a $100 cancellation fee. Max offers to pay $20, which he thinks is reasonable for the 10 minutes of staff time he used setting up the layby. If the retailer disagrees, they need to justify that the $100 fee is reasonable.
Free confidential advice(external link) — MoneyTalks
Buy now, pay later sales
Schemes like Zip, AfterPay and LayBuy can help smooth out your spending, so long as you don't buy more than you can afford.
But it is a form of short-term debt. With no interest to pay, it can be a better alternative to high-interest options like credit cards or loans.
Like all debt, there are risks, including:
- spending more than you expect, especially if you find it hard to resist temptation when shopping
- no longer being able to afford payments if your life changes, e.g., job loss or rent increase
- extra costs in the form of late fees if you miss payments — making your item more expensive — which may also affect your credit rating.
Before agreeing to buy now, pay later, ask yourself if you are good at:
- tracking your spending, and
- keeping up to date with payments.
If you are using buy now, pay later to purchase everyday necessities like food and petrol, you can talk to a community budgeting advisor. You can also find budgeting advice and tools on the Sorted website:
Budgeting tips(external link) — Sorted
Rules and rights
Buy now, pay later sales are different from traditional laybys — and layby rules and rights don't apply.
Buy now, pay later rules
| You get the goods as soon as you make the first payment. |
| You may not be able to cancel the sale once you make the first payment. |
| Payments are locked in, usually weekly or fortnightly and may be automatically deducted from your account. If you miss a payment, default and late fees may be charged. |
| You can return faulty goods and get a repair, replacement or refund on your payments to date. Faulty and unsafe products |
Layby rules
| You get the goods after your last payment. |
| You can cancel the sale any time before the final payment and get a refund. |
| Payments can be flexible — if the retailer agrees. You can ask to spread payments out over a longer period. |
| Return faulty goods and get a refund, repair or replacement. |
If things go wrong
If you can't afford your layby payments
Talk to the retailer as soon as possible. You could either:
- cancel the layby sale
- ask to make smaller payments over a longer time period.
Laybys don't make products cheaper. You pay the same price, just spread out over time.
If the retailer sells your items to someone else
If a retailer sells your layby items, or fails to set them aside, you can ask for a replacement or a full refund at the original price — even if new stock costs more or is on sale at a lower price.
If the retailer goes out of business
You can pay the balance and get your items if they are still available and you haven't missed a payment in the last three months.
If the items are not available, you have priority over other unsecured creditors to get your money back. You must register your claim with the receiver.
Other issues or faulty products
Once you have received your items, the process for dealing with issues is the same as for anything else you buy.