This is a method of purchase where the buyer buys the merchandise on a form of credit where the seller retains the merchandise as its own collateral while the buyer makes payments on it to the point that the seller is satisfied that the merchandise is paid for and releases the merchandise to the buyer. The agreement to use lay-away sales terms is often done in situations where the seller has a proven honest reputation and the buyer has unproved credit or some other factor affects the reliability of the buyer. It is generally accepted that the buyer can back out of a lay-away agreement at any time and demand a refund of money or trade goods deposited for the purchase of the merchandise. Some sellers will assess a small charge for this, usually not exceeding 10%, of the total purchase price of the items that were deposited on lay-away, although even this is rare and often unjustified. Once an item is placed on lay away (meaning that a buyer has given a deposit and agreed to pay the balance in a specified time frame) they seller has no right to sell the item to another party, even if the other party offers to buy the item at a higher price. It is this reason that the savvy shopper may want to keep the lay away option in mind. If you happen to find a desirable item available at a good price (like a sale price) but you do not have enough money to buy it outright, you can lock in the price by placing the item on lay-away. This is very similar to "buying on margin", a purchasing tool frequently used by stockbrokers and traders.

For example; you know that there a certain law will probably pass the legislature banning a certain brand of hollowpoint ammo and that ammo is currently available at the local Wal-Mart. You do not have the money to buy the ten cases they have in stock, but you do have enough money for one case. You use your money as a deposit to put all ten cases on lay-away, with the understanding that you have to pay them all off within thirty days or the store will refund your money and put them on sale again. The law passes and gunshops around the country triple their price on that type of ammo. You make it known to your friends and contacts that you have the ammo available for only twice the original price. Not only have you delayed the effects of the price hike for yourself by placing the items on lay-away, you have gained control of a significant amount of the item for only a fraction of its cost. You also have the opportunity to broker the sale of the ammo you control for the lay-away period. Smaller (and shrewder) gun dealers will try to prevent this from happening by rationing or limiting what you can put on lay away at certain times. One way to avoid managers of larger stores getting wise to this is to not totally clean the shelves of the item you are "margining". Some salespeople will encourage the use of lay-away as a method of "locking in" sale prices or pre-inflation prices for certain items.

This method of purchase is almost always available through retail sellers. As mentioned before, a major rule of business law is that the lay-away contract locks in the sale price and the price of the item cannot be raised by the seller once a price has been agreed upon and a deposit paid for the item. Sellers often encourage lay-away purchases because they assure profits over time and help to rotate merchandise. The buyer without a strong credit rating can buy costly items that he or she is not usually able to purchase all at once or on straight credit. It is also possible to place items on lay away while you try to secure credit for the rest of what you must pay to get possession of the item. The buyer always has the right to withdraw from the agreement and demand a refund of deposited monies, although it may be unreasonable to expect that items traded in toward the deposit can be returned.

An example would be two brothers who each decide to buy used Ruger Mini-14s at a local pawnshop. Neither of them has the $340 asking price so they decide to purchase the guns on lay-away. The older brother gives a .22 pistol as his deposit in lieu of a $40 minimum deposit. The younger brother just pays a $40 cash deposit for his rifle. Both brothers agree to pay the remaining $300 in full within 90 days or the guns will be put back up for sale and the brothers will be refunded their deposits, minus a $5 handling and restocking fee (some states set this at a maximum of $10). Several weeks later, the brothersí uncle dies and they inherit a collection of AR15s. The pawnbroker has the older brotherís pistol for sale for $70. Deciding that they no longer want the Mini-14s, the brothers approach the pawnbroker for a refund of their deposits. The pawnbroker gives a $35 cash refund to each brother. The brother who gave a .22 pistol as his deposit does not have the right to demand his pistol back but does have the right to demand the cash value of the pistol that was applied toward the deposit. The older brother may then have the right to buy back the pistol for the $40 if it was stipulated in the contract and the gun is still available to be bought back. It is usually bad form to back out of a business deal once you have committed to purchase something and it is reasonable for the would-be seller to expect to recover something if the merchandise was made unavailable to another customer while a non-buyer had it tied up in a deal that he later canceled.