When should I use Layaway vs. saving up for an item?

Question

I'm going to buy a watch for $100,000. The seller says that I can deposit $30,000 by wire-transfer, and then pay the whole thing off in 6 months, and after it is fully paid, I will get the watch. I can afford this, but why should I risk paying him this money, when I can just save this on my own without paying him a dime? Are there any advantages to layaway?

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Nosrac · Accepted Answer

Are there any advantages to layaway?

There are two main advantages.

First, when you pay the initial deposit the seller reserves the item for you at a given price. This is helpful with unique products, like a high-end custom-made watch. If there is only one of those watches in the entire world, then it's nice to know that the seller won't sell it to anyone else while you're getting together the remaining funds and the price you're paying is locked in.

Second, layaway agreements often allow for a payment plan. This is helpful for people who have a hard time saving up money. For many, it's easier to make smaller monthly payments than a large one-time payment.

Of course the cost of layaway is that you're $30,000 short for up to 6 months. This money could be generating a significant amount of interest during a half-year period. You'll need to make sure that reserving the item and locking in the price are worth this cost.

When should I use Layaway vs. saving up for an item?

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