Road bike via company bike leasing: Is this possible and what do I need to bear in mind?

Let's see what we can do: triathlete Hanno Nüsslein, a successful age-group athlete in the middle and long distances, has thrown himself back into his hobby after the age of 50. With a training and nutrition concept, with a lot of discipline - and with top equipment. The mail-order time trial bike was to cost a whopping 9,000 euros. And because it was a mail-order bike, the price was non-negotiable. What to do?

For Nüsslein, the solution was quickly found: "My employer cooperates with a leasing provider that has the desired brand in its programme. To be honest, I didn't even calculate to the cent whether it would cost me my pension or what I would ultimately save." Shortly after placing the order, the desired Aero machine arrived at the front door fully assembled. It is being paid for in instalments, by forgoing around 250 euros gross per month from his salary instead of the 9,000 euros in one go.

Salary conversion

The aero weapon is not a classic "company bike" for commuting to work, but that is totally legal: several years ago, politicians decided to treat bicycles in the same way as company cars for tax purposes, and company bikes are now even more favourable than cars: private use is only taxed slightly. The state promotes the use of bicycles by its institutions foregoing revenue. Savings are made at the expense of tax revenues and social insurance - a purely political decision, just like the lower tax burden on diesel or even aviation fuel.

I was simply looking for a top competition bike for a limited time and with little stress. - Hanno Nüsslein, triathlete

The basic model of the procedure is called "salary conversion". The employer leases a bike for his employee and deducts at least part of the cost from his salary. Unlike for the employee's gross salary, the employer does not have to pay social security contributions for the leasing instalments. This clearly pays off for the employer. The employee, in turn, also saves on his social security contributions and - due to the lower salary - on tax. At first glance, a classic win-win situation.

But the leasing provider also earns money, of course: They receive commission from the bike dealer and sometimes keep a hand in the leasing instalments. There is also insurance, as the employer signs the leasing contract and only gives the employee the bike to use. It stands to reason that the employer and employee should not risk a dispute over a stolen or damaged bike. For this reason alone, all leased bikes are comprehensively insured, from fully comprehensive cover to wear parts and mobility insurance.

Service wheel leasing - the model is tempting

The services of leasing companies and insurers cost real money. If you were to simply add up all the costs for the bike and insurance during the usually three-year leasing period, the leased bike would be dramatically more expensive than a purchased one. The bottom line is that the government's foregone income makes the model tempting.

The two-wheeler industry association estimates that 70 to 80 per cent of expensive e-bikes are leased, and the trend is rising. Road cyclists, on the other hand, are rather reluctant. In the latest TOUR survey, only 14 per cent of readers stated that they had leased their bike. This could be due to a few peculiarities of the racing bike as a piece of sports equipment: Maintenance contracts and various types of insurance, which may make sense for similarly priced e-bikes and are part of leasing, have not been common for racing bikes until now.

Only a quarter of TOUR readers have insured their bike at all, mostly against theft. A racing bike is easy to lock away. They do a lot of servicing and repairs themselves. The insurance services of leasing providers are therefore less important. In addition, racing cyclists like to optimise their equipment, for example with different wheels, a different saddle or handlebars. However, the hire bike must be returned in its original condition.

Is service leasing the main gain or cheating?

At the end of the day, a company racing bike can still be a good deal - if service options or wear and tear insurance are of interest, if the purchase price "in one lump sum" would be too big a chunk or if the employer (as is often the case) covers insurance and part of the instalments. But even if the savings rate in the providers' online calculators sometimes flashes as temptingly as a slot machine on the jackpot, it's worth taking a closer look, and if in doubt, a tax advisor can help with the maths.

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Or you can look at it as pragmatically as triathlete Nüsslein with his 9,000 euro bike: "I was simply looking for a top competition bike for a limited time and with little stress. That's exactly what the deal seems to offer." He does not yet know whether he will buy the bike at the end of the lease or have it collected. "It depends on the offer," he says, "and I'll probably do the maths a bit more carefully than when I ordered it."

Service wheel leasing explained in compact form

Four parties are directly involved in leasing: a leasing company, its authorised dealer, the employer and the employee - in this case a racing cyclist.

1. The employer cooperates with a leasing company whose authorised dealer carries the brand of the cyclist's choice.
2. The employee selects the bike of his choice from the authorised dealer (or consignor). The employer concludes a contract with the leasing company for this selected bike. He - and not the cyclist himself - is the lessee.
3. The employer provides the employee with the bike for use, usually for a contract period of 36 months. The costs for the leasing plus the compulsory fully comprehensive insurance are deducted in full or in part from the gross salary. The employee saves on taxes and social security contributions due to the lower salary. This is the real savings trick with company bike leasing.
4. The employee uses the bike at will, privately or professionally. Exclusive leisure use is also perfectly legal. It appears as a "non-cash benefit" on the salary statement and must be taxed - but for an 8,000 euro bike, only 20 euros per month would be taxable.
5. Shortly before the end of the contract term, the employee receives a purchase offer on request at a flat-rate residual value, usually 15 to 18 per cent of the new list price. If the employee does not wish to take the bike, the leasing company will arrange for it to be collected. The bike is returned in "proper condition", i.e. with normal wear and tear.

Horses' feet & small print

• The lower pension contributions due to lower gross wages reduce the pension. With average life expectancy, this can easily amount to a four-figure sum. Short-time working allowance or daily sickness benefits also fall.
• The basis for calculating the instalments is the recommended retail price for the bike. The dealer has little room for manoeuvre for discounts as he pays commission to the leasing company.

• The comparative calculations between leasing and purchasing always include insurance, sometimes to a considerable extent. However, not everyone insures their racing bike.
• Some leasing bike insurance policies exclude competition use.

The invoice, please

The number of leasing providers is constantly growing, but their calculations are similar. We have calculated the approximate costs for two fictitious racing cyclists using one of the online leasing calculators and an annuity calculation tool

Cyclist one earns the average German gross salary of 4,100 euros per month, has two children and is in tax class three. At 5200 euros, her dream bike costs exactly the average price that TOUR readers stated in the latest survey when considering a purchase. The leasing bike reduces her gross income by around 150 euros and her net income by 100 euros per month.

If the employer - as is common practice - covers the cost of insurance (820 euros for the example provider), the calculator totals the net costs for the bike purchased at the end of the leasing period at 4460 euros. For the conventionally purchased bike, the online calculator simply adds the obligatory insurance for leasing and arrives at 6020 euros. That would be a 26 per cent saving on leasing. If the insurance is disregarded, a saving of 740 euros remains.

As worthy of discussion as these basic assumptions is the neglect of pension losses: roughly speaking, the leasing bike reduces the pension by 4.30 euros per month. This tiny amount adds up to around 1000 euros over the lifetime of the cyclist - which could be added to the favourable leasing price.

Cyclist two is a high-earning, childless single man in tax class one. He earns 8,000 euros gross per month and wants to lease an equally expensive bike. With a leased bike, he receives 234 euros less gross per month and has 135 euros less net. For him, the calculator shows a total price of only around 6000 euros for the bike he takes over at the end of the lease, a theoretical saving of 2000 euros (not including insurance). In 2023, the contribution assessment ceiling for general pension insurance will be €7,100 per month in the new federal states and €7,300 per month in the old federal states. Up to the contribution assessment ceiling, an employee's income is subject to contributions, everything above is non-contributory. Leasing therefore has no effect on the pension.

Interview

The company Jobrad is the pioneer of company bike leasing in Germany. Company spokeswoman Lara Burger answers the TOUR questions.

The Interview was led by Jörg Spaniol

TOUR: Service bike leasing is the result of political decisions. Was Jobrad itself involved?

Lara BurgerThe founder of Jobrad, Ulrich Prediger, is actually the inventor of this option. At the time, the aim was to give bicycles at least the same tax advantages as the company car privilege for cars. This required a great deal of dialogue with the relevant authorities and politicians. However, he achieved more: today, bicycles are even better taxed than company cars.

TOUR: That sounds tempting for employees. Nevertheless, some trade unions have reservations about deferred compensation. Why is that?

Lara BurgerIn companies that are bound by collective agreements, the collectively agreed wage must not be undercut by company wheel leasing, as this would undermine the collective agreement. However, more and more sectoral collective agreements now take into account the framework conditions for company leasing because there is demand from employees and employers.

TOUR: At first glance, the savings are sensational. But the reduced social security contributions are regularly left out of the calculations - another point criticised by the trade unions ...

Lara BurgerOf course, this has an impact on the pension or daily sickness allowance - perhaps particularly noticeable if someone has a low income and wants to ride a very expensive bike, because even a leased bike costs money. Trade unions and employers' associations have agreed in their collective labour agreements that the respective impact on social benefits must be pointed out before a contract is concluded, and we also do this on our homepage. However, given a normal relationship between income and bike price, the benefits far outweigh the cost of buying.