A combination of earlier-than-usual retail sales and slim store inventories could make layaway an unusually good deal this year.
For a fee of up to $10, stores including Best Buy, Sears and Kmart permit shoppers to make regular payments on a purchase over several weeks, taking home the items only when they're paid in full. Wal-Mart brought back the service this fall for toys and electronics, after abandoning it in 2006 for everything but jewelry. Toys R Us expanded its year-old program to include more categories. Stores like the extra fees that layaway generates at a time when, market research firm Accenture reports, nearly three-quarters of consumers are carefully controlling their holiday spending. "They're locking in sales," says Deborah Mitchell, executive director for the Center of Brand and Product Management at the University of Wisconsin-Madison.
This year, consumers are locking in deals, too. Usually, layaway users must weigh sticking to their holiday budgets against the chance they will miss great holiday sales later in the season. But retailers are holding sales earlier this fall to clear any excess from early orders made when the consumer spending outlook was still relatively rosy, says Jeff Green, an independent retail analyst. "Prices could actually go up in the last few weeks," he says. Shoppers looking to lock in a good layaway deal should hold out for just a few weeks longer, until late October or early November. That's enough time for retailers to ramp up their "early Black Friday" deals, but not so late that an item on your gift list could be out of stock, he says.
Before you open an account, shop around for the best gift prices, and layaway terms that work best for your budget. Kmart, for example, charges $5 for an eight-week payment plan, and requires an upfront deposit of $20 or 10% of the total purchase, whichever is greater. Toys R Us requires a 20% deposit plus the $5 service fee, but allows more payment flexibility so long as half your balance is paid within 45 days, and paid in full within three months. It's also worth reviewing the layaway contract to see if the store will offer a price adjustment if there's another drop after you pick up your paid-in-full order. Generally, you pay whatever the item price is when you open the account, regardless of later discounts. (That's why, for example, Wal-Mart doesn't allow shoppers to open layaway accounts on Black Friday.)
Be cautious about putting all your purchases on layaway, however. A missed payment or account cancellation will result in extra fees of $10 or more -- and could mean that your gifts end up back on store shelves. Limit layaway to big-ticket items that you can't pay for in full when the credit card bill is due or that would hurt your ability to meet other financial obligations, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling. Then think about availability. If that big-ticket item isn't likely to go out of stock, putting aside money in your savings account is cheaper than paying a layaway fee and easier than juggling one more regular payment, she says.
Shoppers should also be cautious about committing up too much of their budget early in the holiday season, Mitchell says. Make sure that your layaway purchases still leave you some leeway to take advantage of any later sales, and have cash on hand for other holiday expenses. There are, after all, still more than 70 shopping days left until Christmas.