Cycle to work scheme

Sponge
Sponge Posts: 834
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My employer has just signed up to the scheme and I wondered if anybody had any experience of it?

I'm tempted, but put off by what happens at the end of the loan period.
What happens at the end of the loan period?

Most employers opt to sell you the bike and accessories, and you will pay the fair market value; this is the amount that a buyer would pay to a seller to purchase the bike and equipment. Each bike is assessed separately, but in our experience the market shows values to be around 5% of the original voucher value plus VAT. The fair market value cannot be stated before or during the scheme as this could be considered a benefit in kind as hire-purchase does not warrant any tax-relief.
If the 5% is accurate, then it'd be worth while buying a bike. But if it isn't, then I'd be better off just using my employer's other scheme, which is a simple 12 month interest free loan of up to £500,repaid monthly from my salary.
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Comments

  • Depends how much you're spending. A £300 bike will be worth nothing after a year. A £1000 bike will be worth easily £500 after the same period.

    Regardless of this, I'd use the scheme, and not the loan.
  • Sponge
    Sponge Posts: 834
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    edited 6 August 2009 at 9:20AM
    Depends how much you're spending. A £300 bike will be worth nothing after a year. A £1000 bike will be worth easily £500 after the same period.

    Exactly. So buying a decent bike, i.e. over £500, would be better financed with the 12 month loan as it is bought and paid for and belongs to me at the end. Whereas using the cycle to work scheme would mean the bike is rented over 12 months and then paid for again in order to keep it, potentially costing more than the bike was in the first place!

    Example, a £750 bike would be (net) £37.50 pm for 12 months = £450. Say it's worth £350 after 1 year => £450 + £350 = £800, which is more than the bike cost in the first place. Furthermore, if I got the loan from work I could walk into a shop with cash and probably pick up the £750 for a lot less.

    It all hinges on how employers calculate the market value after 1 year. Which is why I was hoping someone here has some actual experience of using the scheme. I know it'll vary, but it'll give me an idea on whether it's worth the gamble. (Employers aren't allowed to tell you in advance how much they'll want for the bike at the end.)
  • because of the tax break that is offered they are not allowed to tell you up front about buying the bike at the end - it is very unlikley that the final charge will be any more than the 5%+vat

    the fair market value for tax puropses that you will be charged is very different to a 2nd hand value (tax usually lets you depreciate goods at a high rate)

    for thescheme that i have used at the end of the 12 months i had a choice of buying a £1000 bike for about £50 or paying the same ammount for the company to take it and dispose of it..... a no brainer really
  • AirlieBird
    AirlieBird Posts: 1,046 Forumite
    The bike is worthless to the employer at the end of the year so they will sell you it for a nominal sum, usually around 5% of the original price. There's this site which says it's unusual for it to be more than a month's payment.
    Your employer may have the opportunity to sell the bicycle and equipment at the end of the scheme at fair market value. The fair market value cannot be stated before or during the scheme as this could be considered a benefit in kind and would therefore not attract any tax-relief. In our experience it is unusual for fair market value to exceed the amount of one month's salary sacrifice.
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  • Hi Sponge
    It sounds as though you don't yet own a bike of any type. Have you thought about borrowing one from a pal to see how you actually get on with cycling to work on a regular basis before signing up to a scheme or forking out for a swish bike? Mr Cholet cycles to work each day (about 6 miles each way) and he thinks it's great, but miserable weather is not for everyone.
    Be the change you want to see ;)
  • I cycle to work every day, and we have the "cycle to work" scheme.

    I have not used it for the simple reason that I do not think it would save me any money at all.
    Indeed, you can only buy the bicycle from set suppliers, such as Cycle Surgery, etc... This suppliers are not the best value ones at all.
    I could for example not get a bike from Halfords, or from Tchibo (where I got a good quality fold-up bike (with lights and luggage rack!) for less than £150.
    Through the cycle to work scheme, I think you can get a Brompton for £500! Hardly "money saving"!

    Whilst Tchibo do not sell bikes at the moment, I would advise anyone to shop around and not only look at the shops "allowed" under the "cycle to work" scheme. Even if you are under a 40% tax rate!

    Hope it helps.
  • Sponge
    Sponge Posts: 834
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    Thank you all for your replies.

    I do already have a bike, a mountain bike (Whyte 46), that I cycle to work on (when I want a change from running) but want something more road orientated for commuting and a bit of road-work.

    I have a very good relationship with my local bike shop, who also happens to be my nearest Cycle To Work participating dealer. In the past I've been able to negotiate good discounts on all my purchases. So I'll need to have a word with them, see if the potential savings under the scheme are better than anything he can offer me for cash.

    Thanks again.
  • Woby_Tide
    Woby_Tide Posts: 5,344
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    The C2W agreement is normally 3 years, with the loan paid off over 1 year but check the exact terms of your agreement so it's the value after 3 years not 1(though invariably it is still 5% in most cases)

    Also with regards to prices most retailers can't offer more than token discounts on the price of bikes bought under the C2W scheme as they only receive 90% of the sale price acheived in return from C2W(or whoever funds it)

    From our agreement

    Number of Monthly Hire Payments: 12
    Timing of Monthly Hire Payments: The first Monthly Hire Payment will commence in April 2009, and
    will continue on normal salary payment dates thereafter.
    Termination Fee: On termination of this Hire Agreement upon your ceasing
    employment with xxxxxxx you will have to pay a termination fee
    of an amount not exceeding the outstanding Monthly Hire
    Payments.
    Hire Period: 36 months from the date of this Hire Agreement.

    And ffrom the terms

    The Selection will be disposed of at the end of the term of this Hire
    Agreement for a nominal sum, equating to fair market value at that
    time usually £20 (plus VAT) or 3% of the capital value (plus VAT)
    whichever is greater.
  • I cycle to work every day, and we have the "cycle to work" scheme.


    I could for example not get a bike from Halfords, or from Tchibo (where I got a good quality fold-up bike (with lights and luggage rack!) for less than £150.
    Through the cycle to work scheme, I think you can get a Brompton for £500! Hardly "money saving"!



    Hope it helps.

    Our company has cycle2work and you get a voucher to take to Halfords, you choose in values of £50 how much you want to spend. As yet nobody has been charged to keep the bike at the end of the period.
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  • We at Dogs Trust use the Evans ride2work scheme. You pay over 12 months back to the org and after 12 months the org can transfer the bike to you for a nominal fee. (its really has been nominal llike £10) It worked out well for me, cheaper bikes are all well and good (and I've had a few) but for longer distances and when you ride everyday through all weathers it really makes the difference to have something with a bit of quality. I saved about £170 on my bike and pay £21 a month for it pre tax. I could never afford a bike of that price in one go. Previously I've had Halfords and other cheaper bikes, that only lasted 18 and 12 months respectively.

    I guess it all depends on what you want it for. A terms of our agreement is we have to use them for over 50% of travel for work in the year. So if you are a fair weather cyclist then maybe its not really for you.
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