The Concept of Lay-By vs Hire Purchase

The entire concept of Lay-By was a new concept that I discovered when I came to Australia.

I was queueing and paying for a blouse at the cashier when the lady before me paid a small amount (less than $20) and left all her clothes (more than 5 pieces) with the cashier. I was wondering....why did she leave her clothes with the sales girl? Why is it she needs to pay only a small amount?

I cheekily asked the sales girl why the lady left all her clothes and did not take them away after paying for it. It was then the sales girl explained the concept of Lay-By to me.

When I came home, I googled and the concept of Lay-By (according to the Australian Competition and Consumer Commission) is as follows:

A 'lay-by' is essentially a contract between you and a retailer where you pay for goods over a period of time rather than upfront. In most lay-by agreements, you pay an initial deposit, followed by regular repayments. The goods are held by the retailer until you have paid the full price of the goods.


In Singapore, we have the concept of "Hire Purchase". Here, consumers are allowed to take the goods home and pay for it over a period of time. The famous "Courts" is a good example of a retailer that relies on hire purchase to sell their products.

I was left wondering and thinking about the 2 different concepts...their similarities and differences. More importantly, why is it Hire Purchase is prevalent in Singapore whilst Lay-By is prevalent in Australia? Is this culturally-driven? Logically, it makes more sense to consumers to prefer Hire Purchase....since U get to take home the goods almost immediately and enjoy it!

Here's what I have pondered and derived:

1) First and foremost, both concepts are developed by retailers to encourage spending. It makes it a lot easier for people to buy on impulse and buy more. The concept tends to be appeal to a particular group of people, i.e. those who live for today and not for tomorrow. For Chinese who with strong values towards savings (live for tomorrow), this concept may be less appealing.

2) Over the weekend, the departmental stores were starting to sell toys for Christmas season and customers are encouraged to Lay-By. I was wondering....isn't it a bit too early to sell Christmas toys in July when Christmas is only in December. Also, wouldn't the toys be out of fashion by end of the year? Lay-By works in Australia because the employees do not have 13th month bonus. So, to encourage spending, retailers are bringing in the goods and getting consumers to start buying and paying bit by bit till Christmas arrives.

3) Lay-By works well for small consumer goods...such as toys and clothing. Consumers can defer the gratification from it until they have saved enough for it.....yet allowing for impulse buying...which is what retailers want. The concept also works for these small items as they have no resale value and hence, the goods are held until it is fully paid.

That's all I have for now on this concept. U are most welcome to post your comments or thoughts about this concept.