Forum menu
Not naming names here but its come to our attention that our employer doesn't want to outlay the cash on a cycle to work scheme through cycle solutions and has therefore used a finance company. Fair enough.
What wasn't obvious to a few employees was
the cost of the goods in their contracts added up to more than the rrp's of their items ie a credit charge.
Sifting through the small print of the contract is this:
[b]12.2. We will tell You if We are leasing the Goods from someone else to supply them to You under this Agreement if You ask Us[/b]
Nice.
The thing is, how can your employer or Cycle Solutions say that you'll save say 40% when their is a finance charge on top.
Mis-selling or the way it is?
Your thoughts please
In a proper cycle scheme the way the savings work are explained here:
[url= http://www.cyclescheme.co.uk/employers/employer-faqs#/getting-a-bike/faqs/what-is-salary-sacrifice-and-how-are-savings-made ]what-is-salary-sacrifice-and-how-are-savings-made[/url]
This 3rd party finance thing sounds dodgy, how will the savings come about?
RRP is just that - recommended. There's nothing to stop a company charging more than the RRP especially when there's a captive market as there is with a C2W scheme. The finance company have to make their cut somehow.
Going into a shop and buying a bike for £1000 with an RRP of £900 is your choice, But if you purchase said bike using £900 C2W voucher and end up paying £1000 due to finance charges that is a whole different matter.
surely if you are entering a finance agreement without knowing the rates of interest etc then that is mis selling?
Also if it is a finance arrangement then that may fall beyond the scope of the Cycle To Work scheme (might depend on exactly how the agreement is written), which could result in you not getting the tax break you expected. Remember you are not buying the bike, you are hiring it for a period so actually RRP and the cost of the bike shouldn't really come into it!
There is nothing wrong with financing the scheme via a third party, however the scheme provider / employer does need to be transparent that savings will be slightly lower due to the finance charges. In my experience savings are reduced by about 5% when third party finance is used.
Th cost of the goods is still the same then a finance charge is added on top, eg, about £80. So if you were getting a £500 bike you would repay £580. This amount (£580) is what you salary sacrifice so the tax break still works in the same way it's just that it's costing you slightly more, but over 12 months it's really not a lot and still is a really good benefit.
Our employer also finances the scheme via a 3rd party so there are monthly finance charges added. Perhaps I didn't read the small print closely enough (I never do!) but I wasn't aware of this at the time. However, it still represents a saving over the hire period and it means I could get a new commuter bike now rather than taking ages to save up.
I must admitt seeing my first payslip with the salary sacrifice taken off I did think they had worked it out incorrectly, as the monthly ammount x the hire period worked out more than the cost of the bike, but then I remembered the tax break.