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  • FIRST POST
    • Gavin78
    • By Gavin78 22nd Sep 19, 12:38 PM
    • 238Posts
    • 55Thanks
    Gavin78
    Cycle to work scheme payments?
    • #1
    • 22nd Sep 19, 12:38 PM
    Cycle to work scheme payments? 22nd Sep 19 at 12:38 PM
    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?
Page 1
    • CarolynRach
    • By CarolynRach 23rd Sep 19, 9:42 AM
    • 189 Posts
    • 395 Thanks
    CarolynRach
    • #2
    • 23rd Sep 19, 9:42 AM
    • #2
    • 23rd Sep 19, 9:42 AM
    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
    • By vacheron 23rd Sep 19, 12:30 PM
    • 1,047 Posts
    • 1,013 Thanks
    vacheron
    • #3
    • 23rd Sep 19, 12:30 PM
    • #3
    • 23rd Sep 19, 12:30 PM
    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.
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
    • Mr_Singleton
    • By Mr_Singleton 6th Oct 19, 6:59 PM
    • 1,568 Posts
    • 2,484 Thanks
    Mr_Singleton
    • #4
    • 6th Oct 19, 6:59 PM
    • #4
    • 6th Oct 19, 6:59 PM
    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
    • By Aretnap 7th Oct 19, 11:08 AM
    • 3,490 Posts
    • 3,107 Thanks
    Aretnap
    • #5
    • 7th Oct 19, 11:08 AM
    • #5
    • 7th Oct 19, 11:08 AM
    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
    • By sheslookinhot 10th Oct 19, 10:52 PM
    • 1,219 Posts
    • 809 Thanks
    sheslookinhot
    • #6
    • 10th Oct 19, 10:52 PM
    • #6
    • 10th Oct 19, 10:52 PM
    This scheme is no scam.
    Mortgage Free
    Planning for Retirement
    • vacheron
    • By vacheron 11th Oct 19, 8:40 AM
    • 1,047 Posts
    • 1,013 Thanks
    vacheron
    • #7
    • 11th Oct 19, 8:40 AM
    • #7
    • 11th Oct 19, 8:40 AM
    This scheme is no scam.
    Originally posted by sheslookinhot
    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.
    Last edited by vacheron; 11-10-2019 at 8:43 AM.
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
    • Mr_Singleton
    • By Mr_Singleton 11th Oct 19, 10:43 AM
    • 1,568 Posts
    • 2,484 Thanks
    Mr_Singleton
    • #8
    • 11th Oct 19, 10:43 AM
    • #8
    • 11th Oct 19, 10:43 AM
    It certainly isn't a "scam" .
    Originally posted by vacheron
    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
    • By vacheron 11th Oct 19, 11:10 AM
    • 1,047 Posts
    • 1,013 Thanks
    vacheron
    • #9
    • 11th Oct 19, 11:10 AM
    • #9
    • 11th Oct 19, 11:10 AM
    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"
    Originally posted by Mr_Singleton
    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!
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
    • Aretnap
    • By Aretnap 11th Oct 19, 7:00 PM
    • 3,490 Posts
    • 3,107 Thanks
    Aretnap
    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.
    Originally posted by vacheron
    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
    • By Mr_Singleton 13th Oct 19, 10:34 AM
    • 1,568 Posts
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    Mr_Singleton
    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.
    Originally posted by Aretnap
    Excellent you stayed at the same company for 5 years while renting your bike. For many people that won’t be the case.

    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.
    Originally posted by Aretnap
    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.
    • Aretnap
    • By Aretnap 13th Oct 19, 5:56 PM
    • 3,490 Posts
    • 3,107 Thanks
    Aretnap
    Excellent you stayed at the same company for 5 years while renting your bike. For many people that won’t be the case.
    Originally posted by Mr_Singleton
    I didn't actually - I left the company not long after the original 12 month hire period was up. Nobody asked for more money or for the bike back. I suppose technically I had to pay the outstanding payment for the extended hire scheme in cash rather than through salary sacrifice - however as the outstanding payments at that point were zero this wasn't something that caused too many problems.

    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.
    And there's no reason why you can't get an even bigger saving on them by getting them from Evans through the cycle to work scheme. There is nothing in the scheme that says it can only be used on bikes bought at full price; indeed the one that Evans runs says explicitly in its FAQs that bikes which are on sale or on special offer are eligible for it.

    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.
    Where did the administrators say that? According to the Administrators report, the biggest asset was "stock" at just shy of £8 million, as you would expect from a company with a warehouse full of expensive bikes. There was of course money outstanding from companies which were making use of Evans' in-house scheme, most of which has now been repaid, some of which has been written off. Bicycles owned by Evans itself (presumably leased to Evans' own employees) don't even feature in the report.

    Yes your employer going bust and the administrators playing hardball is one area where the fact that you don't actually own the bike is a disadvantage (in virtually all other cases your employer doesn't want your bike and, unless you work for a second hand bike shop, would have no use for it, so they're hardly going to refuse to let you take ownership at the end of the scheme). However it's not a huge risk - most companies don't go bust, especially not in any 12 month period - and in my case the risk of my employer going bust was negligible, for various reasons.

    Also, to be honest, if the best horror story of things going wrong that you can offer is "some people nearly had to pay for their bikes twice, but in the end they didn't", well forgive me if I'm not particularly terrified.
    • King_Nothing
    • By King_Nothing 14th Oct 19, 9:01 AM
    • 809 Posts
    • 1,076 Thanks
    King_Nothing
    I don't think your sums are correct. When I did it a few years ago, I paid a repayment each month for a year that totalled more or less what I borrowed, then at the end I could either buy ownership of the bike immediately for a higher fee, or continue to "rent" it for another couple of years (with no extra payments per month) for a much smaller fee, and pay nothing at the end to "take ownership", you don't pay the same repayment for the whole 3 or 4 years.
    • PasturesNew
    • By PasturesNew 14th Oct 19, 9:04 AM
    • 67,410 Posts
    • 394,991 Thanks
    PasturesNew
    Personally I'd rather spend £100-200 on a bike and know it was completely mine from day 1 - and not have to worry about keeping my job + worry of theft of a pricey bike, etc.

    This seems to me to just benefit "professional cyclists" on high incomes.

    Even £100-200 on a bike, to me, would be "a considerable life fortune that could be spent on a little holiday and a 2nd hand £50 bike instead".
    • Takmon
    • By Takmon 22nd Oct 19, 11:52 PM
    • 907 Posts
    • 926 Thanks
    Takmon
    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!
    Originally posted by vacheron
    Are you really sure 100% of people know exactly what the scheme involved?. When I have spoken to people about the scheme a lot of them are surprised when I told them that they are renting the bike and they could not be offered ownership at the end or the term.
    Most people thought you were guaranteed the bike at the end (because that is what has always happened) but the terms and conditions say otherwise.
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