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I've just had an email from Cyclescheme as I'm approaching my 12 month hire period. I've loved the bike and want to hang on to it.
The options I've got are;
1. Pay a £70 deposit and continue a 36 month hire period after which I own the bike at no extra cost.
2. Pay £250 and own the bike outright now.
What am I missing here? Why would anyone take option 2 over option 1?
Not looking at getting another bike through the scheme (I've hit max capacity on the bike front).
Just making sure I'm understanding the EUA correctly. Sorry if this has been covered.
is there a cost per month after the £70 ?
The email suggests that the EUA is a one off deposit with no further cost.
[i]1. Cyclescheme's Extended Use Agreement (EUA)
For a Cyclescheme package under £500 you’ll be paying 3% of the original value, and for a package over £500 you’ll be paying 7%. The bike then remains ‘hired’ for a further 36 months (but with no further monthly payments) until ownership is officially transferred to you at no further cost. This means a worst case scenario of a payment of £70 and saving of at least 25%.
If you wish to keep the bike package at the end of this extended hire period, then we can simply keep hold of your deposit and use it as payment for your bike package. If you’d rather return it, then we will refund your deposit in full. Either way, you’ll only pay the one-off deposit mentioned above, nothing more.[/i]
What am I missing here? Why would anyone take option 2 over option 1?
If you actually want to own the bike now, rather than in 36 months time. Until then it's the property of your work.
Not true. It's between me an the Cyclescheme.
Essentially I own the bike once I pay the £70 anyway? If it gets stolen it's on me.
[i][b]What happens if I leave my employment during the extended use period?[/b]
The Extended Use Agreement is between you and Cyclescheme, so even if you leave your current job the extended use period will continue to run, subject to continuing to use the bicycle for Commuting.[/i]
It's all to do with residual value. Imagine you want to sell it. If you take ownership now, it's only one year old so it's worth more than it will be in another two years time. You've already paid a "rental" fee for 12 months and they're not expecting you to continue at that rate for another 24.
okay that makes more sense. Thanks.
So this relies on the person part of the scheme being honest and not wanting to sell within the 3 years.
I'm going to hold on the bike anyway so this works for me.
So this relies on the person part of the scheme being honest and not wanting to sell within the 3 years.
Yes, that's what I was clumsily (and slightly incorrectly) getting at above.
And, of course, you absolutely must continue to use it for commuting for the three year period 😉
It's the standard wheeze to get around paying HMRC the VAT they think they're owed... Ride the depreciation out for another three years, until the bike can effectively be written off as worthless, or declared as having very little residual value... Then you can have it.
Option 2 is there to make option 1 look good TBH...
It's one of my issues with C2W and similar schemes, the general vagueness over what happens at the end of the hire period and how the different schemes apply/get round HMRC rules on the transfer of the asset (the bike) at the end of the hire period, I'm sure they'll eventually close the loophole that allows what the OP's scheme operators are currently doing...