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An easier way to get away

More people are financing costly vacations using installment plans

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By Jennifer Waters
MarketWatch
Published:
That dream vacation that seems financially unreachable can now be had through an age-old payment method: layaway.
For as little as $100, you can book and start a payment plan for trips almost anywhere in the world.
"Layaway gives people flexibility and the ability to afford a vacation when everyone is watching their pennies," said Laurie Bowden, vice president of strategic accounts at SearsVacations.com, a division of Sears Holding.
The pay-before-you-buy method has been around since the Depression, another time when credit was tight and jobs were scarce. Retailers have resuscitated the practice since the recession started, as a means to encourage consumer spending. Consumers have used it not only to purchase big-ticket items and vacations, but also as a money-management tool.
"It has allowed more people to commit earlier to a trip and to commit more often," said Marty Seslow, vice president of marketing and sales for Gate1Travel.com. "We are seeing more and more bookings early in the year for trips in September, October and November."
Gate1 has offered a pay-as-you-go plan for many years, Seslow says, but didn't advertise it as a layaway program until its sales took a big hit in 2009. Since then, business has grown in double digits every year, and Gate1 is already tracking bookings 30 percent ahead of last year's record results -- an increase Seslow attributes to layaways.
"It empowers the consumer with a little more choice," he said. About 60 percent of his customers use the plan.
Only a handful of companies offer layaway vacation programs. Gate1 requires a nonrefundable deposit of $100 on most packages, though the payments for cruises and trips to some destinations are considerably higher. Sears Travel looks for 20 percent of the total cost of the trip, while Suzi Davis Travel in the Midwest wants $99 to book the trip. Westside International Travel, on the West Coast, will ask for $100 to $150 per person. Most won't charge you a service fee but may impose a cancellation fee.
The payments generally can be made on any time schedule you want, as long as the final payment is made 30 to 45 days before the trip (sometimes earlier for cruises and international trips). Travelers can book cruises more than a year in advance, but airfares can't be booked more than 11 months in advance. Some companies don't allow airfares on a payment schedule, because the prices can change so quickly.
British Airways launched a layaway vacation package earlier this year that entails a much heftier down payment. For flight-and-hotel and flight-and-car vacation packages between $3,000 and $3,499, a $900 deposit is required at booking. For holidays costing between $3,500 and $3,999, the deposit jumps to $1,050. Full payment is due 10 weeks before departure.
Sears' Bowden said she's seen an uptick in family cruises with layaway plans. "It's not only for the budget-conscious, but it allows families to be flexible for bigger trips," she said.
Average vacation costs vary widely, from about $1,500 per person, according to a 2012 American Express survey, to Gate1's average of about $2,500 per person. That adds up quickly if Grandpa and Grandma are taking the whole family on a cruise. A seven-day Alaska cruise in July through Gate1 costs roughly $1,600 per person, which includes flights from New York to Seattle. That would set a family of six back by about $10,000, or about $833 a month for a year, not including the down payment.
When spending that much money on a vacation as much as a year in advance -- even with the layaway option -- it might be advisable to take out travel insurance. That will cost an extra $100 to $149 per person.
Down payments and due dates will vary based on the destination and on the policies of the transport and hotels..
Story tags » TravelPersonal Finance

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