How to lay-by your next holiday

Are you thinking about going on a holiday when restrictions are lifted? It’s possible to lay-by a holiday, which can make the cost more manageable. We take a look at the pros and cons plus what you should consider.

Australians are among the world’s great travellers, second only to the Brits for our love of global jet-setting, according to a 2019 study by Agoda. It  found that close to 90% of Aussies have travelled internationally, with 59% having been to up to 10 countries.

After the drama of 2020, we could all use a vacation, and while border closures have put global travel on pause, that hasn’t stopped us thinking ahead. Research by Qantas found that 98% of the airline’s frequent flyers are already planning their next trip once restrictions are lifted.

With international travel potentially off the table until 2021, there is plenty of time to arrange your next vacation. And there is a way to pay for the trip that doesn’t involve racking up credit card debt or draining precious savings.

Using lay-by to pay for your holiday

Lay-by may not be the first option that comes to mind when paying for a holiday, but it can have a lot going for it. After an initial down payment, the cost is whittled away through a series of regular instalments, with the balance cleared before the departure date. So you can take off without worries about a mountain of credit card debt waiting to be repaid on your return.

Plenty of travel companies offer lay-by, however it pays to read the fine print. The terms and conditions vary widely, and in some cases you could end up paying more than necessary.

STA Travel, for example, lets holiday-makers lay-by flights and even tours operated by Contiki, GAdventures and Busabout. You’ll need to pay an upfront deposit – starting from $99 for overseas flights, and no interest is charged.

Before rushing off to hand over your deposit for a dream holiday, crunch the numbers to see how long it will take you to comfortably pay off the balance. With STA Travel, the trip needs to be fully paid off at least 10 weeks before the departure date. If you can’t pay the full amount in the given timeframe, you could lose your deposit.

Check the cost of missed instalments

It’s also important to check what happens if you miss any of the regular payments as the rules may vary between providers.

Let’s take a look at PLAY Travel as an example. It is a new service offered by the company behind ‘buy now/pay later’ app Afterpay in conjunction with LayAway Travel.

The PLAY model works slightly differently from Afterpay in that holidaymakers pay for the trip in instalments before travelling. There is no interest charge, and payments can be made weekly or fortnightly over two to 12 months. This means the closest you can book to departure date is three months in advance.

If an instalment is missed, a $7 administration fee applies. Miss more than three payments, and you could face a price increase. If you miss more than five payments in total (it doesn’t have to be consecutively), your account may be suspended and your holiday may be cancelled in which case an additional $165 cancellation fee will apply. This highlights the need to be sure you can keep up with the repayment schedule.

You could end up paying more

Perhaps the biggest downside of paying for a holiday through lay-by is the retailer’s mark-up. This is a common feature across the industry, and it’s a cost that can really add up. Booking through a third party provider may also mean you miss out on ‘spot specials’ offered by airlines.

As a guide, Pay Later Travel lets you book flights with a down payment of 10-15% followed by set weekly payments, though the balance can be paid off ahead of schedule if you’re feeling flush.

In terms of the cost, on return flights for two adults from Sydney to London booked in June 2020 with a departure date of early February 2021, the weekly instalment would be $104 through Pay Later Travel for seats on board Qatar Airlines. According to Pay Later Travel this would add up to a total of $3,004.42. However, if you were to book the same tickets directly through the Qatar Airlines website, the cost would be $2,580.52 – a saving of $423.90.

Booking directly with an airline can mean landing a better deal with other carriers too. Two adults booking economy class return flights with Qantas from Sydney to Bali in February 2021 could pay $66.15 per week with Pay Later Travel, for a total cost of $1,911.08 (assumes booking made in late June 2020). Booking directly through the Qantas website could see you pay as little as $1,179 – $732.08 less than the lay-by option. The hitch is that you need the funds available to make the direct bookings.

Locking in the cost

Using lay-by may mean you miss out on the lowest possible price for fares or accommodation. The upside is that it lets you lock in the cost, protecting your holiday budget from possible price hikes. This is especially important when it comes to international flights because airfares are generally not consistently priced throughout the year.

A study by SkyScanner found that advance booking is the key to saving money on flights. In general, booking 22 weeks ahead is the sweet spot to get the best deals on international airfares. Yet one in five Australians book their international flights less than two months out, which coincides with when airfares take an upward turn.

Growing a pool of holiday savings remains a simple way to keep a lid on the cost of your next vacation. If you’re planning to head overseas in early 2021, it pays to get cracking with a savings plan to grab the lowest fares on international flights.

If you’re not confident about sticking with a savings regime, using lay-by to pay for a trip can make it easier to manage the expense. Just be sure to weigh up the total cost and read the terms and conditions to understand how much you could lose if the trip has to be cancelled. Remember too, as soon as you lay any money down – even a small upfront deposit, be sure to consider travel insurance.

Cover image source: Dmitry Rukhlenko/Shutterstock.com.

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About Nicola Field

Nicola Field is a personal finance writer with nearly two decades of industry experience. A former chartered accountant with a Master of Education degree, Nicola has contributed to several popular magazines including the Australian Women’s Weekly, Money and Real Living. She has authored several best-selling family-focused finance books including Baby or Bust (Wiley) and Investing in Your Child’s Future (Wiley).