Cyclescheme, educate me on payments please

My work uses cyclescheme so assuming you’re looking at the same website as I’ve seen you should just be able to click on something like ‘advanced info’ and it gives you the breakdown of gross and net costs. Was bang on when I bought a bike through them in November 2021. For info my bike was £2k and I think it cost me around £120 a month from my take home (lower rate taxpayer). I did pay a buy it later fee at the end too which I think was around £100, but again that had been listed under the advanced info bit.

It comes out of your payslip pre tax so it depends on what level of tax you pay. The calculator should give a pretty accurate estimate of you put your details in iirc

You also need to figure in any end of lease payment that may be due. Last time I did it as a standard rate tax payer it worked out cheaper but not amazingly so but as an interest free way of spreading the payments with a small discount it was worth it.

Cycle solutions bike to work scheme seems to offer an 'extended purchase' agreement which means that after the 12 months of payments they still own the bike and you rent it for a further 6 years at no extra cost. Something like that anyway. That's what I was told by a representative of the company.

Yeah if I want to own it after 12 months it seems there's a £350 charge, which then means I save £190 on purchase price. Whilst it's £190 it's not exactly a lot.
If I own it after 4 years but pay over 12 months, the £350 drops to £118.

It's less appealing than I first thought

In response to your first question, Yes.

In response to this:

If I own it after 4 years but pay over 12 months, the £350 drops to £118.

I'm surprised. I think I've done about 5 C2Ws and don't think I ever paid more than a penny to own it outright...

I'm sure the formatting will be a mess:
Age of cycle Acceptable disposal value percentage
Original price of the cycle Original price £500+
1 year 25%
18 months 21%
2 years 17%
3 years 12%
4 years 7%
5 years 2%
6 years and over Negligible

From
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21667a

So near enough 8%. Guess you were right. I must have extended it 5 years...

It’s less appealing than I first thought

It works best for two groups; higher rate taxpayers (who can make a substantial saving), and people who struggle to get credit (usually based on earnings) - these are quite often low earners. If you're in the middle, it's not a brilliant way of saving money; you're probably better off in the sales in that sense.

Don’t forget about finance costs. Often not transparently stated but our scheme near 10%. So it’s purchase price plus finance cost that comes out your gross. Only really clear on the formal ageeement. But should be obvious when gross deduction is stated as more than your purchase price.
At 10% that’s quite a chunk of added cost negating a lot of what a basic rate tax payer would save.

With residuals to pay at end I don’t see me doing one again. Marginal gains.

You what bri?

Not heard of that before, unless you mean a surcharge from dealers if you buy a sale bike?

No I mean finance. We use the Halfords scheme whatever it’s called. The charge to the employee gross is voucher value plus finance cost.

£2000 bike and voucher. Gross deductions £121.11 x 18 months = £2180
Ie £180 of finance cost or 9% over the period.
This is from my agreement from 2-3 years back.

Most employers want a simple off the shelf solution so i suspect don’t query or challenge the interest rate. As it’s not often obvious I suspect many employees not even aware.

I can’t recall much info on the initial quote stages but pretty obvious to anyone that a £2k bike costing £2180 gross means finance cost been added.

In wonder how many basic rate payers end up paying more than the initial purchase price without ever realising.

Suggest you check your numbers carefully before committing.

Thanks all. It's not really doing it for me, so no further need to check more closely

If the bike shop or supplier adds an admin fee , that would need come within your voucher I’d assume?

Our scheme limit is £2k for non e-bike so I wouldnt be allowed a £2180 bike or spending £2k plus a shop admin fee.

That’s my understanding anyway.

It’s not a very transparent process.

As might be of interest to others too, the wording in the agreement explaining the £2180 gross reduction says
“(The £2180) which is made up of the purchase cost of the items plus the amount it will cost my employer to fund this purchase.”

Doesn’t say interest or finance cost but that’s the reality of what the £180 cost is.

I've never spotted a finance charge before, must find my (old) paperwork and look.

For weeksy's deal, assume it was 1440 as that's then a round number. And ignore the finance charge and final payment bit.

1440 / 12 months for example would be 120 per month repayment. But that comes out of you pay before tax, so assuming you're a higher rate payer (and that weeksy junior is not yet a tax deductable!!) if you earned that £120 you'd have given Jeremy **** 40% of it - so £48 quid.

So by using it for the bike, that's only £72 that you'd have ended up with that you're missing out on. 12 x £72 = £864, you've got a £1440 bike on IFC over 12 months for £864

Then you might need to pay a further charge after 4 or 5 years of another £100 odd to own it outright, but even then, you've got £450 more in your pocket.

Might be 'less appealing' than you first thought but still a good deal.

What are you thinking of, and don't forget it should be at least partially used for cycling to work, so we'll need photos of you riding it down your stairs in your pyjamas as evidence of your commute 😉

Well, for the last bike I got through Cyclescheme I paid the monthly price as stated before purchase, and at the end of the 12 months agreed to keep the bike for x amount of years and paid no more. Saved over £1000

So by using it for the bike, that’s only £72 that you’d have ended up with that you’re missing out on. 12 x £72 = £864, you’ve got a £1440 bike on IFC over 12 months for £864

Yeah that has merit. I need to look into the end of term charges when on the works laptop in the morning.

It was as much a bit of a whim as a massive desire so not really sure it's something I'd even still go ahead with.

I've saved a chunk on the couple of bikes I've bought this way, around a third + final fee that has been another months payment both times.

I know you've already made a decision to not bother but for anybody searching in the future, I'd advise thinking long and hard about the chances of leaving the employment in the next 12 months. I've just done so and can attest that losing £800 out of my final pay hurt a lot and meant I had to beg the bank of mum n dad to cover my bills.

bri-72
Full Member
No I mean finance. We use the Halfords scheme whatever it’s called. The charge to the employee gross is voucher value plus finance cost.

I’m on my fourth C2W bike and I’ve never been charged finance. I’ve never even heard of that either and I check the paperwork carefully. My current bike is through the Halfords scheme but purchased from Dolan. There is not a finance surcharge on top.

I agree with Frank. This finance charge thing sounds like a sack of crap. Perhaps it's because Bri's company won't pay the C2W company the cost up front, and then chucks the cost on the employee, which sounds wayyyyy out of order.

And just in case anyone wants exact figures, my last one cost me £136 per month outta my wage for a £3k voucher.

Which I think is £1642 unless my arithmetic is wrong. Ie 54.5% of sticker.

It might be something the employer opts to do, some maybe waive the financing cost rather than pass onto employee. I work in public sector and hence maybe finance cost has to be passed on rather than public purse. Anyway, moral of story check the numbers and read the small print. Bit of a minefield.

No finance charge for me last year. £1500 bike for approx £850. And I opted to pay it all out of one month's salary and just use my savings to make up the difference in my current account... I'd just have used £1500 from my to pay for if I was buying it the normal way, so what's the difference? And, as it happened, I put my notice in just after, so that ended up saving me a bunch of hassle there. IIRC, there was a tiny extra charge (£10-20?) for keeping it in 5/6/7 years time.

It was never going to be ridden to work, that job had a 17 mile motorway commute!
I do ride to my current work, but a cheap second hand BSO with a motor in the rear hub, not my nice C2W Big Al 😉

Deffo no finance on ours, but when you go to the little circle i it shows text that implies finance CAN be added by your employer. Happily not in this case.

I also found the 1 year 4 year option which takes it right down in price to £929.57 and just £69 a month

That's not bad, but remember to take the final one-off purchase price into account as well.

So, and I know this wasn't the question, and is potentially a can of worms.

There tends to be a backlash against credit and I agree when it's used to buy things people can't afford and consequently get into debt. But equally, if I've got a choice of dipping into savings, or getting interest free credit then of course I'll do the loan.

Here you have an interest free loan AND a 30% discount, if it's something you're going to buy (as opposed to 'it's cheap so I'll buy it') then I'd rip their arm off. I'd probably do it for a 5% discount - having said I'd take the IFC anyway!

The proviso is as Bunnyhop noted, which is why you do need to be pretty confident you'll be there in 12 or 18mo time and/or know how you'd cover it if you had to.

Regarding this charge that's suspiciously close to 10% - Cyclescheme, and I assume the rest, give around 90% of the voucher value to the shop pocketing the rest for their admin. Hence why shops generally exclude sale bikes from bike to work, or mention a surcharge. Obviously the customer doesn't generally see this.

The other theory makes sense too of course, as the employer has to fork out the upfront cash from somewhere.

Pretty sure it is - 929 @69/mo is maths that don't divide, but 12*69 = 828 plus another £101 payment at the end........

I'm just about to buy a Fairlight Secan through Cyclescheme. Savings are poor if you purchase/make the final payment after one year, and much better if you do that after four years. 35%+ saving for me, and get to spread the cost, so that's good enough for me.

I looked at this a few years ago and while as a higher rate taxpayer it looks quite beneficial unfortunately at our company if you leave or they lay you off the remaining gross is charged against your last payslip - and we normally average a re-org every 9 months or so, just wasn't worth the risk, especially when paying full-retail in the first place.

You could buy a more expensive bike to make it more worthwhile?? 🙂

Can you use Green Commute Initiative, same principle with a £1 transfer of ownership fee after 5 years.

You could buy a more expensive bike to make it more worthwhile??

Yeah i could... but our scheme doesn't do say 36 months... only 12 and the payments would be too high for me to be happy with. As i say, it's more of a whim than a need.

Just did the calculation on our work scheme (run by Halfords) and numbers as below:

I am not a higher tax rate payer

If order value = £1450
Payments before tax = £111.54 (we get paid 4-weekly so it's 13 payments)
Payments net of tax = £74.45
Total I pay = £967.88
I save = £482.13

We have no additional payments to make at the end of the initial period, however, we agree at the start that we will continue to 'hire' the bike for a further 4 years, so a total of 5 years end to end.

Our previous scheme, run by Cyclescheme, was different in that at the end of the initial period you could either pay an amount to own outright at that point, make a one-off further payment equivalent to the previous monthly sacrifice and 'continue to the hire for 3 years. After that it was yours. I calculated that on my first C2W purchase, the bike was £750 and all in I paid c. £525.

The other month I spent £5k through cycle scheme.

All in it’ll cost me just over £3k.

You could run the scheme every year and end up with cheap riding.

Eta: cyclescheme as with fazzini above

I'm currently getting to the end of my latest Cycle to Work repayment period and i've never been charged any admin fees (I've done 4 or 5 now)
Current purchase is a £1700 Dolan which by my calculations is going to cost me about £970 + the final payment.
If you're a higher rate tax payer the scheme is in my opinion a no brainer (not interested in a debate about morality)

Last summer I sold a 2017 Pinnacle Arkose for £550, which had a ticket price of £999 when i bought it - i effectively had 5 years of free riding on it as the sales price was little less than i actually paid through the scheme.

But i thnk that’s at source… would would my pay packet be lighter by about £80 then ? Which is roughly 12 payments to equal about £900 (whcih is the 1450-580 roughly) ?

Lets say you earn £10 per hour.

you want a bike which is £1200 rrp, or £100 a month for a year.

To buy it on C2W then, you have to do 10 hours of work - you sacrifice some take home salary, and it goes straight towards the bike, and never gets accounted for in your taxation. Just as many do with pensions, or childcare vouchers (funny how no-one questions the morality of those salary sacrifices).

Lets now massively simplify the PAYE and taxation system and say you pay a nominal 25% tax on all your earnings.

You now have to work for 13.3 hours, to earn a wage of £133.3, to "take home" the £100 in cash required to buy the bike.

Thus, the bike to work scheme in this example 'saves' you £33.3 pounds, in this instance, or more accurately, 3.33 hours of your paid time.

Yup.

IIRC my £5k spend breaks down to £400 (rounding) per month, this comes out gross.

What that actually means is that my take home reduces by £230 (rounding)

So it actually costs me £230*12 (+ the fee at the end which will be c£350)

I haven’t had my morning coffee yet, but I think thats it.

Since this thread is trundling along far longer than it needs to, the following is wrong:

We have no additional payments to make at the end of the initial period, however, we agree at the start that we will continue to ‘hire’ the bike for a further 4 years, so a total of 5 years end to end.

You're categorically NOT allowed to agree at the start what happens at the end. If you do then it becomes a hire purchase and a whole different set of rules come into force!

( splitting hairs, I know)

It’s common for cycles provided under salary sacrifice arrangements to be sold or transferred to employees after the end of a period of loan. The exemption for certain loaned cycles will be prevented from applying if any agreement builds in from the outset an automatic transfer of ownership to the employee at the end of a loan or hire period (see EIM21667). However, where this is not the case, there is no contradiction in an earlier exempt loan being followed by a decision by the employee to buy the cycle.

Just as many do with pensions, or childcare vouchers (funny how no-one questions the morality of those salary sacrifices).

Well you can only spend those on pensions or childcare. Whereas C2W can be spent on toys not used for the intended purpose (I’m guilty of this!).

categorically NOT allowed

OK accepted that was poorly worded. But no further payments have been made by me.

I've just got to the end of my first Cycle2Work scheme, the Halfords one. I've paid 12 * £162.50 for the £1950 voucher I got, and there's some unclear wording about them contacting me about a final payment, but no indication as to how much it will be. Anyway, I'll see what they say.

Also, obvs, it means I could now take out another one, and subtle conversations with MrsIHN have begun...

Just as many do with pensions, or childcare vouchers (funny how no-one questions the morality of those salary sacrifices).

Yes they do. Loads of people, including myself, think it's grossly unfair that richer people benefit loads more from cc vultures and pension tax relief.

I'm not a higher tax payer, but mine works out to a saving of just over £400, for a Cotic Cascade frame and Salsa Carbon fork, Hope headset and couple of other small bits. Not an amazing saving but I still got the bike I want £400 cheaper, pay over 12 months 0%, can't chose not to pay for it as I could with a 0% CC. Win, win IMO.

Cyclescheme reccomends the 4 year "own it later" option with a final cost of £113.33, which I will be doing. Thats included in the £404 saving.

OK accepted that was poorly worded

there’s some unclear wording about them contacting me about a final payment

Sorry. I should have actually pushed home the point I was trying to make:

The end of hire process is hideously unclear and confusing because MRC has mandated that it has to be vague and unclear in order to comply with some stupid regulation they have.

Yet another example of how C2W is badly setup and conceived.

I wonder how many bikes are sold within 4 years when the ‘own it in 4’ has been chosen.

Yes they do. Loads of people, including myself, think it’s grossly unfair that richer people benefit loads more from cc vultures and pension tax relief.

That's a slightly different thing though isn't it, that's about the amount of tax relief you get, not whether you should get any. And I happen to agree with you, it seems reasonable that basic rate relief is available on this stuff, but not higher rate.

But childcare vouchers and pension contributions can only fund the thing they are supposed to fund, whereas Cycle to Work is, if we're honest, massively abused - it's supposed to be about helping people get a cheaper, healthier and more environmentally friendly way of getting to work, when in most cases the bikes bought are rarely, if ever, used for that. We are, in effect, getting the taxpayer to subsidise our hobby.

I wonder how many bikes are sold within 4 years when the ‘own it in 4’ has been chosen.

I think we could safely say that if i bought something it wouldn't be here in 4 years 😀

and our wives' hobbies and our kids' hobbies...

Well, yeah, 'zactly

I find it especially obnoxious that C2W is not available to employees where the repayments will take their effective hourly rate to below national minimum wage.

Many of those who this would benefit from this, albeit a financial benefit a lot smaller than the better paid, are excluded from this when it could free them from reliance on paid for/public transport.

🙋 I use mine to ride to work.

I find it especially obnoxious that C2W is not available to employees where the repayments will take their effective hourly rate to below national minimum wage.

Many of those who this would benefit from this, albeit a financial benefit a lot smaller than the better paid, are excluded from this when it could free them from reliance on paid for/public transport.

Yeah, that's no good

I use mine to ride to work.

Oooh, get you 😉

I cycle to work every day when not on call (one week in four) and need the work van, but my current commuter wasn't bought on C2W. My new bike will hopefully be bought on C2W, but I most likely won't be commuting on it. Where do I stand on the morality scale out of interest?

I think the pitchforks will be coming!

Where do I stand on the morality scale out of interest?

Somewhere between Fred West and Pol Pot 🙂

Where do I stand on the morality scale out of interest?

Somewhere between Fred West and Pol Pot 🙂

Move along - that's my spot.

As might be of interest to others too, the wording in the agreement explaining the £2180 gross reduction says
“(The £2180) which is made up of the purchase cost of the items plus the amount it will cost my employer to fund this purchase.”

......It might be something the employer opts to do, some maybe waive the financing cost rather than pass onto employee. I work in public sector and hence maybe finance cost has to be passed on rather than public purse. Anyway, moral of story check the numbers and read the small print. Bit of a minefield.

When a scheme is set up the employer has options of how to pay for the bikes purchased via the scheme. Many opt to pay the supplier outright, many take a finance option involving a third party company. Lets say an employer expects 5 orders per month for a total of £10,000. Not every company can pay the supplier £10k, or whatever, every month, so opt to finance the scheme. What you are seeing is the cost of financing the scheme, as you've said.

What you don't seem to have worked out though, is that the figures you are quoting are from gross pay, ie it is the actually salary sacrifice, on which you don't pay tax or NI. So, the actual amount you are paying for the order, if you are a basic rate tax payer is 68% of £2180, £1482.40. You are losing out on maybe £120, if your employer had opted not to use a financed scheme, but still making a substantial saving.

What you don’t seem to have worked out though

What makes you think he hasn't worked that out?
Looking at what he wrote, he seems to be well aware of that.

What makes you think he hasn’t worked that out?
Looking at what he wrote, he seems to be well aware of that.

Because he/she said:

In wonder how many basic rate payers end up paying more than the initial purchase price without ever realising.

They aren't paying more than the initial purchase price.

In terms of the finance charge, I still can’t find any reference to it existing. Does anyone have a link?

In terms of the finance charge, I still can’t find any reference to it existing. Does anyone have a link?

I googled 'financing a cycle to work scheme'. First result:

https://www.cyclescheme.co.uk/finance/faqs#:~:text=How%20are%20the%20bikes%20funded,longer%20periods%20considered%20upon%20request).

Yes they do. Loads of people, including myself, think it’s grossly unfair that richer people benefit loads more from cc vultures and pension tax relief.

What about non cyclists? You could argue C2W is grossly unfair to them.

Let’s not kid ourselves C2W is a nice little tax avoidance scheme which you’ve been happy to indulge many times.

Because he/she said:

In wonder how many basic rate payers end up paying more than the initial purchase price without ever realising.

I'm assuming that was just hyperbole, or he was factoring in surcharge on sale items and the final payment fee which would actually take you damnd close to the break even limit.

Given that he wrote:

Don’t forget about finance costs. Often not transparently stated but our scheme near 10%. So it’s purchase price plus finance cost that comes out your gross.

And:

But should be obvious when gross deduction is stated as more than your purchase price

and:

The charge to the employee gross is voucher value plus finance cost.

£2000 bike and voucher. Gross deductions £121.11 x 18 months = £2180

pretty obvious to anyone that a £2k bike costing £2180 gross

I think he understands. But let's ask him...

Bri, did you realise the finance cost was added on to the amount that is take from your grosspay?
😉

Cheers Jon,

Makes my something like £2k saving look ever better value!

I've used Green Commute Intiative twice now & had the pleasure of the research to set everything up at my previous employer, so know more about this than I'd like.

The % charge gets taken off what the scheme give the shop - so some places will just add that to the bill so they don't lose out. In my opinion, GCI was by far the best scheme if you have a say in the matter - they only charge 5% commission and their extended 'hire/ownership' period model effectively means you pay them £1 after 5 years, rather than the larger final payment of the others.

Quick illustration close to what I did:
- Wanted a £3k bike from shop.
- Employer bought 'voucher' from GCI for £3157.90
- GCI kept 5% of the voucher total (£157.90)
- GCI paid shop £3k
- I paid my employer £3157.90 from pre-tax salary as quickly as possible (schedule is up to you and employer - think the only legal restriction here is that it must not take you below minimum wage)
- GCI own the bike for 5 years but 'loan' to me
- I ride the bike
- After 5 years, I will pay the cycle scheme nominal £1 transfer fee.

...and a side note that I'd rather not have had first-hand experience of - if the bike is stolen, there's no transfer fee to pay.

The % charge gets taken off what the scheme give the shop – so some places will just add that to the bill so they don’t lose out.

Unless I'm misreading you, that's nothing to do with the employer finance schemes mentioned above, that's simply a shop adding a surcharge to the order to offset the commission owed to GCI.

I’ll not confess to what I do for a living but take it for sure I know the difference between gross and net.

As the generalist guessed, yes that was my point. Finance cost on top, plus an end of life residual to pay (our scheme seems to no longer offer extended hire so bigger residual at end of 18mths) and for a basic rate tax payer it starts to be borderline if over full term there’s much of a saving, if any.

Some will still like the pay monthly convenience etc but on simple arithmetic under the scheme I was on, your be cheaper potentially buying in cash from LBS and more so if as cash buyer you secure a discount on RRP. Assuming you have cash (i get that important point).

To be clear I’m talking of my experience of our scheme. Clearly other schemes differ per this topic.

The myriad of views on here just emphasise to me the complexity, lack of transparency of some schemes and different levels of understanding there is.

If nothing else this topic might give some useful insight for anyone new to schemes.

It should scrapped and just stop charging VAT on bikes.

Finance cost on top, plus an end of life residual to pay (our scheme seems to no longer offer extended hire so bigger residual at end of 18mths) and for a basic rate tax payer it starts to be borderline if over full term there’s much of a saving, if any.

For your £2k bike, with finance cost and end of scheme payment, you’ll pay £1620 over 12 or 18 months. A £380ish saving. The word ‘borderline’ is doing some heavy lifting there.

Btw, the not so secret thing about C2W schemes is not to use Cyclescheme - not all providers take a final payment. Also, try to persuade your HR department not to use finance and then the savings are better, as you say.

25% residual as I recall and tax on that. Again, some schemes may differ but on ours 9% lost to finance charge, say 5% tax on residual. A fair chunk of headline saving disappears to a basic rate tax payer.

Just as many do with pensions, or childcare vouchers (funny how no-one questions the morality of those salary sacrifices).

Yes they do. Loads of people, including myself, think it’s grossly unfair that richer people benefit loads more from cc vultures and pension tax relief.

https://singletrackmag.com/forum/topic/fix-your-bike-voucher-how-did-you-spend-yours/

So weeksy thought I should use a £50 voucher to fix my old bike up, which I ride to work on everyday and yet....
I'd get a bike in cycle to work but not a 40% tax payer and my employer doesn't do it, you would imagine it would be available to all public sector workers wouldn't you!

Should NOT, that should read 😄😄😄