Covered in this guide..
What is Buy Now Pay Later?
Buy Now Pay Later allows consumers to purchase and obtain goods and services instore or online immediately, then pay for the purchase over time. It’s a relatively new concept in New Zealand, with the first providers launching in early 2017. Buy Now Pay Later differs from familiar concepts such as traditional laybuy, where the item is held by the store until it’s paid in full. With Buy Now Pay Later, the consumer takes the item away after leaving a small deposit, then pays the remainder of the original price over a set period of time, with no interest.
About 3000 New Zealand retailers now offer the service, where a deposit as little as five dollars will see goods picked up or delivered to your door, to be paid off over six to eight weeks.
Four companies - Afterpay, Oxipay, PartPay and Laybuy - are the most well-known providers making their mark on the New Zealand market.
What are the costs?
While an attractive feature of Buy Now Pay Later is no interest charges, there will be penalty fees for late payments and a few other fees to be aware of. Although each provider will have a different fee structure, common fees might include establishment and redraw fees, administration or bookkeeping fees, payment processing fees, missed payment fees and account closure fees.
Some providers, for example PartPay, Afterpay and Oxipay, advertise they do not charge any fees as long as consumers pay on time. If a buyer fails to make payments on time, default fees will be charged.
Retailers who sign up to use Buy Now Pay Later systems are required to pay a percentage of the sale to the payment company.
How do I use Buy Now Pay Later?
Buy Now Pay Later arrangements are offered for clothes, technology, homewares and many other products, allowing the consumer to take an item home immediately, or have it delivered, then pay it off over time.
Often the provider will have a system to keep the consumer on track with payments. For example, PartPay emails consumers three days before the payment is due and sends text messages. If a payment does not go through the first time, PartPay sends a last-chance text to the consumer before adding a late payment charge of eight dollars if the person fails to make the payment.
Unsurprisingly, when applying to use a Buy Now Pay Later system to pay for an item, you will need to undergo credit and identification checks. The strength of your credit history will determine the amount of money the company will be prepared to part with, therefore the value of the item they will allow you to purchase.
How is Buy Now Pay Later Different to Layby or Hire Purchase?
Buy Now Pay Later Rules
- You can take away the goods as soon as you make the first payment.
- You have legally bought the goods once you make the first payment. You cannot cancel the sale.
- You are locking yourself into weekly or fortnightly payments. If you miss a payment, penalty fees will apply.
- If the goods are faulty, you may return the goods for repair, replacement or receive a refund for your payments to date.
Traditonal Laybuy Rules
- You only receive the goods after your last payment.
- You can cancel the sale at any time before the final payment and receive a cash refund.
- Payments can be flexible, depending on the retailer. There may be an opportunity for renegotiation, for example spreading payments over a longer period.
- You may return faulty goods for refund, repair or replacement.
Hire Purchase Rules
- You can take away the goods as soon as you’ve filled in the forms, met credit requirements and made a down-payment.
- You might get the finance through the seller or through a separate finance company.
- You will be charged interest, meaning the item will cost more in the end.
- You don’t own the item until you’ve made the final hire purchase payment, meaning the vendor has the right to seize it if you can’t make the payments.