Not happy with Cyclescheme add ons!

macleod113

Hi all,

just requested my £1k from work for a new bike and the Sensa bikes over at Merlin took my eye. Ultegra clad bike for a grand? Yes please.

After emailing Merlin, they confirmed they would accept the Cyclescheme voucher through the post.

However, they want a £65.00 admin fee and then £29.99 delivery on top.

I'm sure most mail order companies are the same but to have to fork out almost another £100.00 seems steep. I have a family to feed like so many fellow cyclists so i have a certain budget.

has anyone else experienced this?

FSR_XC

IIRC Cyclescheme charge retailers something like 10% to administer the scheme.

With a retailer like Merlin, they may not have as much profit in the bike as some others, so may be looking to pass some of this cost on.

When you add on the future value that you have to pay to retain the bike, the scheme isn't as beneficial as it was a few years ago.

Captainlip

this is true the retailer loses 10% of the value of the bike, if this is already reduced somewhat another 10% is going a good way to sending your LBS under, what will you do then when they no longer exist for aftersales support?

macleod113

I understand companies not wanting to take a hit on profits but me having to pay out extra on top means i will probably look elsewhere. I have previously had a bike from leisure lakes and they didnt add on a charge but i guess things may have now changed.
i will weigh up all the pro's and cons and see what Santa brings me. The Sensa bikes do look good though.
i have asked for a bike fit for Xmas so would rather spend the extra on that.

Captainlip

any bike store makes roughly 30% on a bike, at best 35% margin, if that bikes then on offer "x" amount then you say the magic words you want cycle to work, thats another 10% off their margin on top of the discount already given on the bike, with wages to pay stock to buy, bills to pay, how do you expect a bike shop to survive if you were to have it your way?

macleod113

i am in no way condemming the stores in question here. i understand needs to make profits. i have used Merlin before and have had great service from them. i was just surprised when i heard of the extra i would have to pay. i'm sure most people would agree that they wouldnt expect to pay further fees and charges.
that you explained the 10% charge is great thanks. i didnt know that. its just a shame its the bike shop that seems to suffer potentially losing customers by having to charge extra.
i am still undecided on which bike to go for, my point being that if one company does add this extra charge and one doesnt then its likely me and others is likely to go there instead.
should all bike shops make the charge the decision comes down to bike preference and not cost. a decision i thought i could make to start with.

Briggo

There's plenty of stores that don't charge any extra for purchasing through cyclescheme, even with discount, but then some remove the discount and charge RRP.

Captainlip

clearly the bike in question has been reduced already hence the fees. at our store no fees are incurred but tend to avoid discounted bikes purely for this reason.

if you chose a bike thats not so heavily discounted id be suprised if there were fees then.

macleod113

Yes you are right, i think it was supposed to be £1200 and reduced to £1000. i emailed them to see what they said and they pointed out the additonal charge.
i have also heard about some shops not allowing discounted bikes to be bought on the scheme.
i'll make a decision based on the funds available at the time.
thanks for your opinions everyone

Captainlip

I think you should still go for the bike youve decided on and look at the charge as helping your LBS out, if you look at the £200 discount plus the extra £100 they lose from the scheme, they are probably only making £50 out of the sale, these extra charges only make that a bit more.

I know its money out your pocket but youve clearly decided you wanted that bike.

diy

I added the fees to my tax claim. Not sure if its right or not, but since I go stung for the benefit after a year of hire. I thought it only right that the total fees paid should be adjusted. It was the square of bugger all, but since I pay enough tax to have my own private chief constable. I claim everything I can

griffsters

It may sound harsh but if as you say you have a family to feed and its over budget then perhaps you need to look at a cheaper bike?

They need to cover the extra cyclescheme costs and if profit margins are slim to start with they need to pass these on - still a great bike for the dosh tho. Just not as great as you first thought!

Edit: Looks like someone has already explained the 10% cyclescheme cost above

jonny1967

Ribble charge £65 admin, Planet X charge £100 admin. Leisure lakes dont charge an admin because they have a much bigger mark up on the bikes. If you think its unfair try and buy an Ultegra equipped bike from one of them for £1000 on the cycle scheme, you will see it makes sense to buy from Merlin. BTW I recently bought the Sensa Lombardia and the quality of the frame is equivalent to bikes costing double what you are looking to pay. But bear in mind that at the end of the hire period you have to pay £250+ to buy the bike outright or a one off payment of £55 to hire it for another 3 years at which point the bike becomes yours

Grill

Cycle schemes are scams in themselves, especially if you're not in the 40% bracket. It will be cheaper and better for you in the long run to just buy it outright. If you don't have the means to do this then even most of the zero percent financing options are better, or just pop it on a credit card with a low/zero percent introductory rate.

MountainMonster

Captainlip wrote:

this is true the retailer loses 10% of the value of the bike, if this is already reduced somewhat another 10% is going a good way to sending your LBS under, what will you do then when they no longer exist for aftersales support?

Not read the whole thread, but at the end of the day you are getting a free loan and paying it off at reasonable prices, and saving VAT. I wouldn't complain.

That is avoiding the fact I wouldn't even use the scheme anyways.

diy

I saved a few quid but I probably would have bought second hand otherwise. If you can get the voucher in the low season then great but if it coincides with the tax year then you won't get a bargain. Maybe 10% lower than you could get by negotiating.

jagx400

Makes you wonder what the mark up on a bike is, lets face it its all price fixed. I paid £725 for my Specialized Allez Sport. It was that price at every bike shop, looks like Specialized have dictated the price.

Briggo

Grill wrote:

Cycle schemes are scams in themselves, especially if you're not in the 40% bracket. It will be cheaper and better for you in the long run to just buy it outright. If you don't have the means to do this then even most of the zero percent financing options are better, or just pop it on a credit card with a low/zero percent introductory rate.

Please explain how its a scam and cheaper to buy it outright.

bompington

At the risk of sounding like a stuck-needle pedant, I should point out, like I do on every thread, that the Cycle to Work scheme is a salary sacrifice scheme which is legally a contract between you and your employer. Your employer buys the bike, you hire it off them with tax & NI knocked off, at the end of the scheme you can buy it for a fair price or continue the hire, for a sum agreed between you and your employer - which can legally be zero - until the residual value is low enough to be written off. BTW, you don't necessarily have to pay 25% for the residual value at the end of the contract, if your employer agrees to accept less then you have to pay the tax on the difference as it is considered a benefit in kind. (E.g if the residual value is £250 and you pay nothing, HMRC would call that a £250 benefit which you pay 20% = £50 on)
Companies like cyclescheme.co.uk act as intermediaries, saving employers some admin, and taking a 10% cut off the bike shop in return, which certainly sounds like easy money to me. Big retailers like Halfords do their own schemes.

None of this really helps, of course, if your employer has fixed into one retailer or scheme you have to go with it. But do the maths yourself, it does still work out cheaper to buy any given bike: I really can't follow the reasoning of those who claim that it's a scam, or that it's cheaper not to use the scheme.

thefd

bompington wrote:

At the risk of sounding like a stuck-needle pedant, I should point out, like I do on every thread, that the Cycle to Work scheme is a salary sacrifice scheme which is legally a contract between you and your employer. Your employer buys the bike, you hire it off them with tax & NI knocked off, at the end of the scheme you can buy it for a fair price or continue the hire, for a sum agreed between you and your employer - which can legally be zero - until the residual value is low enough to be written off. BTW, you don't necessarily have to pay 25% for the residual value at the end of the contract, if your employer agrees to accept less then you have to pay the tax on the difference as it is considered a benefit in kind. (E.g if the residual value is £250 and you pay nothing, HMRC would call that a £250 benefit which you pay 20% = £50 on)
Companies like cyclescheme.co.uk act as intermediaries, saving employers some admin, and taking a 10% cut off the bike shop in return, which certainly sounds like easy money to me. Big retailers like Halfords do their own schemes.

None of this really helps, of course, if your employer has fixed into one retailer or scheme you have to go with it. But do the maths yourself, it does still work out cheaper to buy any given bike: I really can't follow the reasoning of those who claim that it's a scam, or that it's cheaper not to use the scheme.

Thanks that explains it quite well.

One question - as an employer (we are VAT exempt) I cannot see how I can introduce it without my company having to pay the VAT. I would like to introduce it but don't want to be out of pocket by masses if lots of folks take me up on it! Can you explain how it would work for me? My understanding is that the business would buy the bike then claim the vat back (which I cannot do). Is that correct?

dynamicbrick

I've bothered with cyclescheme for 2013 - £1000 worth - with my eye on a crosser, probably a Cube.

There's a lot of contradictory information on both the cs website, and my company's intranet benefits page. However, it seems to work thus - £1000 gross salary reduction, or £80-something quid a month. At the end of the year, as far as any of us can work out, the company passes ownership of the bike to me for £0. I'm then hit for BIK.

Now, as a higher rate tax payer, to have a £1000 cash to spend on a bike, I'd first need to earn £1,666 (probably more actually, as there's NI to also pay). So in essence I've saved £666. Given that the BIK value isn't likely to be £3,330, I'd quids in.

There is a slightly disadvantage in that I cannot get a discount, or buy an outgoing/discounted model (apparently). However, unlike buying one on a credit card, if I lose my job, I have the option to surrender the bike and walk away.

Grill

Briggo wrote:

Grill wrote:

Cycle schemes are scams in themselves, especially if you're not in the 40% bracket. It will be cheaper and better for you in the long run to just buy it outright. If you don't have the means to do this then even most of the zero percent financing options are better, or just pop it on a credit card with a low/zero percent introductory rate.

Please explain how its a scam and cheaper to buy it outright.

My girlfriend got a bike on cyclescheme a year ago. She spent £1000 on the bike and accessories and was charged retail. Now that she's a year in her options are to either buy the bike for £250 or extend the cyclescheme for another three years for £80 after which point she will own the bike. The other option is to giv the bike back which is simply ridiculous. Had she just shopped for a good deal she could have saved herself £300 on the bike and accessories and she would actually own the bike. I wouldn't finance a car for 4 years, why on earth would I do so with a bike?

pdw

There are good schemes, and bad schemes. Good schemes don't charge the retailers a fee, so don't restrict your choice or incur admin fees, and don't charge the full price of the bike as a rental fee and then charge you more to transfer ownership.

The reasons why the schemes run over 4 years (or more) is in order to get the greatest benefit from a particular tax break. They're not finance schemes, they're a rental followed by the option of a purchase. The rental can be done tax free, the purchase cannot, and HMRC impose minimum values on the purchase price which decrease with age.

diy

Given some of the comment here people are struggling with the difference between net and gross. The bit I don't understand is why you cannot hire the bike for 750 and then buy it for 250 avoiding all tax. The reason of course is that the scheme is actually making about £150 just to print some forms for you.

pdw

You can do that but then you don't "avoid all tax". Only the £750 rental could be paid tax free (i.e. out of your gross income). It's more tax efficient to pay more rental, and then defer the transfer until the bike is worth less (ideally until it is worthless...)

A scheme that requires you to pay £1k in rental and then a £250 transfer fee not very good, and probably provides more benefit to the company than the employee.

diy

Good point, for me it was 1000 rental and free bike plus 50% tax on 250. It was the last bit I was trying the consider, this years scheme is a 2 year scheme which is a bit better. Only I don't need a new bike and actually prefer buying used.

NITR8s

Its only fair as ppl have said they lose out on 10% of the price of the bike. I assume they charge for delievery anyway, so you are only paying £65 admin fee really.

When I was looking to get a bike via cyclescheme most companys add the 10% back on straight away.

By the way Planet X & Ribble both charge extra for cyclescheme vouchers. This is the reason I didnt buy from them as couldnt justify spending the money on basically nothing. If ribble didnt have this extra charge I would own a ribble bike now, their loss really.

rolf_f

MacLeod113 wrote:

However, they want a £65.00 admin fee and then £29.99 delivery on top.

I'm confused. In what way is the £29.99 delivery charge a Cyclescheme add on. It's Merlins standard delivery charge for bikes.

dynamicbrick wrote:

I to have a £1000 cash to spend on a bike, I'd first need to earn £1,666 (probably more actually, as there's NI to also pay). So in essence I've saved £666. Given that the BIK value isn't likely to be £3,330, I'd quids in.

As a higher rate taxpayer, I'd hope you are smart enough to work out that your discount is about 40%, not the 60% you've contrived to imagine it to be. You really need to actually read the stuff on the website rather than guessing randomly

diy

Where did you get the impression he was a 50% tax payer?

Briggo

Grill wrote:

Briggo wrote:

Grill wrote:

Cycle schemes are scams in themselves, especially if you're not in the 40% bracket. It will be cheaper and better for you in the long run to just buy it outright. If you don't have the means to do this then even most of the zero percent financing options are better, or just pop it on a credit card with a low/zero percent introductory rate.

Please explain how its a scam and cheaper to buy it outright.

My girlfriend got a bike on cyclescheme a year ago. She spent £1000 on the bike and accessories and was charged retail. Now that she's a year in her options are to either buy the bike for £250 or extend the cyclescheme for another three years for £80 after which point she will own the bike. The other option is to giv the bike back which is simply ridiculous. Had she just shopped for a good deal she could have saved herself £300 on the bike and accessories and she would actually own the bike. I wouldn't finance a car for 4 years, why on earth would I do so with a bike?

So based on that in no way is it a scam, it's just your opinion.

Now lets look at the numbers shall we - based on 20% tax rate

£1000 bike =
Net salary -£56.67 per month x12 = £680.04
After one year you pay 7% to 'lease' it for a further 2 years after which the bike is then yours.
£680.04 + £70 = £750.04

You could give it back but that would end up costing the company money to store and dispose of it but its your choice and no one is forcing you.

So a no questions asked, not effecting your credit rating loan is given to you. You save just under £250

Alternatively you could pay £250 at the end of year one and purchase the bike outright, so therefore costing £930.04 on a no questions asked, not effecting your credit rating interest free loan after one year and saving you some money.

Do many companies who offer interest free loans on the bikes they sell offer them at reduced rates? If so then that option is perhaps better if not then the cyclescheme is better.

If you can afford to purchase a bike cash/credit card upfront then perhaps that is overall better but getting 30% off the price of a bike? (without it being in the sales) Brilliant if you can...
But the scheme is in no way a scam and it's actually quite good but its an option for those people out there who in the situation would prefer to take it over paying cash up front.

orangepip

the thing that amused me at the end of my cyclescheme was the charge for disposal. I think they were going to charge me £89 to pay off the final 5 % and keep the bike or £89 to dispose of it... Not much of a choice there really.