Cycle to work scheme payments?

Gavin78

I've been looking at the cycle to work scheme and looked at a few posts on forums around the internet but none for 2019.


I've looked at the payment options for it and it's roughly £31.25 a month for 4 years for a £500 bike with a £35 final fee to keep the bike or I think it was about £36 a month for 12 months with a £125 fee at the end



The total cost over that 4 years is around £1500 which they claim is the best option.


Is it just me or am I reading it wrong that I thought it was supposed to be interest free yet over the 4 years its 3x the amount of the bike?


Doesn't seem a fair deal to me even though they say over the 4 years you save 25% presumably the sacrifice on tax?

CarolynRach

Hi,
So yeah, you make the savings on the tax - up to 42% depending on your tax bracket. This site sums it up quite well.
CycleScheme has a calculator that will work it out for you.

vacheron

Are you sure the plan is over 4 years? That is a lot for a Cycle to work scheme, normally they are just over 1 year.

Over 1 year, a reduction of your take home pay by £31.25 would equate to a £500 bike over 1 year (£41.50 per month) as the tax would be added back in.

Mr_Singleton

I’ve said many a time I believe this scheme to be a scam... they tell you (repeatedly) about the supposed benefits but are rather quite about the drawbacks.

Aretnap

Are you sure that the payments they're quoting for the 4 year option have to be made for 4 years (ie 48 monthly payments)?

Usually the extended loan works along the lines of... you pay the value of the bike (0ut of pre-tax salary) over 1 year (ie 12 monthly payments). Then you extend the loan for another 3 years - but the monthly payments drop to zero (or pennies). This is so that when you make the fair market value payment at the end of the loan period you are paying the fair market value of a 4 year old bike rather than a 1 year old bike.

(The reason why they're set up like this is because of a historical game of cat and mouse between HMRC and the people who organise the schemes. In the distant past HMRC insisted on a fair market value payment if you wanted to keep the bike at the end of the loan scheme, but didn't specify what fair market value was - so most people paid a fiver, declared that to be FMV and pocketed the whole of tax saving they'd made. Around 2011 HMRC decided to clamp down and decreed that FMV of a 1 year old bike was 25% of the purchase price... which negated most of the tax savings and made the scheme much less attractive. However the organisers of the schemes quickly realised that if they extended the loan period they could delay you having to make the FMV payment until the value of the bike really had dwindled to a fiver, or at least to a minimal amount. So essentially the extra 3 years are a piece of legal fiction designed to get round the tax rules - not an obligation to pay three times the actual value of the bike).

sheslookinhot

This scheme is no scam.

vacheron

sheslookinhot wrote: »

This scheme is no scam.

It certainly isn't a "scam", but after HMRC cracked down on the residual value calculations a few years ago, it is nowhere near as beneficial a deal as the scheme websites would still have you believe (especially on more expensive bikes) unless you jump through some of the convoluted "lease extension" loophole schemes to reduce the bikes residual value.

Where it is useful is if you require a large amount of clothing, shoes, tools and other safety gear and accessories as these have no residual amount and can be purchased under the scheme. However there are a few exclusions, turbo trainers and car racks being a couple which spring to mind.


I looked at it very carefully when our company launched their scheme and was even on the committee which introduced it. Our parent company also has a consumer credit licence, so we are able to purchase bikes up to £2,500.

.... however after doing the calcs and applying a little MSE thinking it was far cheaper for me to buy outside the scheme.

If however you were a relative novice planning to go to a "Halfords" or large chain type bike shop and pay almost sticker price anyway (and especially if you wanted to pay monthly) then the cycle to work scheme would certainly be useful.

Mr_Singleton

vacheron wrote: »

It certainly isn't a "scam" .

It IS a scam insofar as 99.9% of people don't known what they're getting themselves into. It should be renamed "Rent a bike to work"

vacheron

Mr_Singleton wrote: »

It IS a scam insofar as 99.9% of people don't known what they're getting themselves into. It should be renamed "Rent a bike to work"

Not sure where you are coming from on this? The scheme is called "Cycle to work" not "Instantly obtain full legal title to a bicycle".

And while the scheme did not suit my particular situation, I can say with certainty that 100% of the 23 people who signed up to the scheme at our workplace knew what they were "getting themselves into" and many of those are are willingly and happily "getting themselves into" it again with enthusiasm this year.

So I would like to know where your 99,9% figure has come from as there would need to be 22,977 misguided people just to offset the 23 non-misguided people in just our small company!

Aretnap

vacheron wrote: »

It certainly isn't a "scam", but after HMRC cracked down on the residual value calculations a few years ago, it is nowhere near as beneficial a deal as the scheme websites would still have you believe (especially on more expensive bikes) unless you jump through some of the convoluted "lease extension" loophole schemes to reduce the bikes residual value.

They're not particularly convoluted, at least not from the perspective of the consumer. At the end of the 12 month period I signed a one page form extending the lease, paid the small two figure sum that HMRC deemed the bike would be worth after 5 years (can't remember what the exact amount was, but it was a small fraction of the amount I'd saved in tax, especially as I was a higher rate taxpayer at the time), kept the bike and never heard from them again. I still have the bike, although nowadays it's been more or less relegated to pub-bike.


Possibly I could have saved more money by scouring the internet for a bargain basement price on last year's model, and this being a money saving site perhaps I should hang my head in shame for not doing that, but there were various reasons why I didn't want to do it's - it's not for everyone.


Certainly I wasn't in any way scammed, so I suppose I must also be one of the lucky 0.1%.

Mr_Singleton

Aretnap wrote: »

At the end of the 12 month period I signed a one page form extending the lease, paid the small two figure sum that HMRC deemed the bike would be worth after 5 years. kept the bike and never heard from them again.

Excellent you stayed at the same company for 5 years while renting your bike. For many people that won’t be the case.

Aretnap wrote: »

Possibly I could have saved more money by scouring the internet for a bargain basement price on last year's model, and this being a money saving site perhaps I should hang my head in shame for not doing that.

Plenty of same year bikes on sale at rates equal or better than the savings from the rentabike to work scheme according to Evans Cycles.

Talking of Evans Cycles..... last year they went bust. Guess what turned out to be Evans biggest asset according to the Administrators? Yup, all the cycles they owned via their “Cycle to work” scheme. If Mr Ashley hadn’t stepped in then all the rent payments would have been ignored and people would have had to buy the cycles from the administrator or hand them back. Don’t forget the Adminstrator has the right to deduct the value direct from salary.

“Cycle to work” is fantastic as I’ve said numerous times in the past for people who are credit blacklisted or can’t budget. Anyone else is far better buying the bike outright in the sales preferably on a 0% credit card.