In our previous blog post, we explored what kind of bike you can get with different kind of budgets, but what about the savings!?💰 Thanks to the tax advantage of the employee benefit bike, you can save a significant amount of money (usually approx. 15-35% of the purchase price of the bike) compared to buying the bike "on your own" without the bike benefit. An additional plus, of course, is that you don't have to pay the amount in full right away, but in monthly installments of €100.
In practice, you can think of it in a way that with a benefit bike, you receive a part of your salary as the bicycle, but you do not pay tax on the bicycle part of your salary. So you get a bike worth €100 per month, but due to the progression of taxation, your income will decrease by less than €100. In other words, the savings arise from the fact that by acquiring an employee benefit bike, your taxable income is reduced by the taxable value of €100/month, which allows you to reduce the tax rate of the remaining income.
The absolute savings usually increase along with the price of the bike, and therefore many people tend to get a better quality bike as a benefit bike than what they would otherwise buy in a store without the benefit. But what do these savings really look like dressed up as numbers? It depends on various factors such as your salary, your tax rate and the price of the bike/bike package you choose. Let's take a look at it now in more detail through different examples.
Savings in the purchase price of the bike through tax
Example: Sam the Cyclist gets a benefit bike
Sam's monthly salary before taxes: €3,600
Tax rate: 21%
Tax value (i.e. the monthly payment for the bike/bike package): €100*
Price of the bike package: €2,600 (bicycle) + €400 (accessories): €3,000
Contract length: 40 months
The bicycle chosen by Sam costs €2,600. In addition to this, he wants to buy a new helmet, pedals, fenders and a bike lock at the same time. With these accessories, the total price of the bike package will be €3,000.**
At this point, you might be wondering why the contract period lasts for 40 months, when the price of the bike package is €3,000 and the monthly instalment is €100 - shouldn't the contract period then logically last for 30 months?!
This, in all its simplicity is because the monthly instalment of the bike package includes, in addition to the price of the bike and accessories, also a few other costs such as financing costs, insurance costs and emission compensation.
*The fixed value of €100/month is due to the fact that the tax exemption for an employee benefit bike is a maximum of €1,200 per year.
**Fixed accessories belonging to the bike, such as lights, locks and studded tires, can also be included in the taxation of the bicycle benefit. A bicycle helmet is also considered as part of the benefit. You can see the list of accessories approved by the taxman here.
After accepting the contract (and receiving the bike), €100 per month (tax value of the bike package/monthly fee) will be deducted from Sam's gross salary for the next 40 months. Sam's monthly taxable income therefore decreases as follows: €3,600 – €100 = €3,500. Since Sam's taxable monthly salary is reduced by €100/month (or €1,200/year), he can order a new tax card with a lower tax rate and pay less taxes in the future. In this case, approximately 0.6% less than before.
To summarise 👇
Sam's old net salary (from €3,600 gross salary) with a tax rate of 21% (€756): €2,844
Sam's new net salary (from €3,500 gross salary) with a tax rate of 20.4% (€714): €2,786
👉 €2,844 (old net salary) - €2,786 (new net salary) = €58 (cost of the bike/month)
After utilising the employee bike benefit, Sam pays €42 less tax than before the benefit (€756 - €714), i.e. Sam's disposable (net) income does not decrease by €100/month, but by €58/month. In other words, the benefit bike does not cost Sam €100/month, but €58/month. In terms of the total bike cost and savings, in practice this means the following:
Total cost of the bike: 40 (length of the contract period in months) * €58 (monthly cost of the bike) = €2,320
Savings: €3,000 (original purchase price of the bike package) - €2,320 (total cost of the bike package to Sam) - €30 (1% redemption cost of the bike)= €650
👉 With the employee bike benefit, Sam saves €650 (21.67%) of the value of the bike package compared to if he had bought the bike "on his own" without the bike benefit.
How salary level and the purchase price of the bike affect savings
As mentioned earlier, the final savings and the total cost for the bike depend on various factors such as your salary, your tax rate and the purchase price of the bike/bike package you choose.
In the earlier example, Sam the Cyclist acquires a bike package worth €3,000 with a gross salary of €3,600, and saves €650 from the original purchase price. But what if Sam chose a bike (or bike package) that costs 1,000 or 2,000 euros instead? What would the savings look like then? Using the same calculations as in the previous example, in the tables below you can see how the salary and the price of the bike concretely affect the final savings. We will also examine what the numbers would look like for Pete the Pedaler and Rose the Rider, whose monthly salaries are different from Sam's.
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* The calculations are based on the Pro service package and the savings are always compared to a situation where the same bike would have been bought for the same price without the bike benefit.
** At the end of the contract period, it is possible to redeem the bike for yourself with a redemption cost of 1% of the original purchase price of the bike. In all the examples above, it is assumed that the bike is redeemed at the end of the contract period.
Employee Benefit Bike Calculator
With the Employee Benefit Bike Calculator you can calculate an estimate of your own savings when you get a benefit bike from Vapaus. The calculator is also very handy when you compare bikes in different price categories and think about how long you want to commit to a benefit bike.
👉 Employee Benefit Bike Calculator by Vapaus
Bicycle price - what can you get for your money?
If you haven't gotten around to reading our previous article about bike budgets of different sizes, check out our short guide to bikes in different price categories here.
And finally - just as a reminder 😎
- You can also get a benefit bike purely for leisure use and you don't have to pedal even one meter to work on it, if you don't want to! In other words, the employee benefit bike is a regular or electric bicycle purchased with the help of bicycle benefit offered by your employer, which you can use to complete ANY bicycle journey of your liking. 🚴
- If your mind, your employer, or your life situation in general changes so that you don't want to or can't continue with your benefit bike contract, with Vapaus' cancellation cover the bike will never end up in anyone's hands without wanting it.
- Every benefit bike acquired from Vapaus is fully insured at no additional cost. The insurance covers theft, vandalism and accidents. The insurance also applies if a family member is using the bike at the time of the accident. In addition there are no geographical restrictions on the insurance, so you can take your bike with you even on a holiday without having to worry!
What kind of bikes do Finns choose as their benefit bikes? Check the most popular types, ebike share and the average price: State of Benefit Bikes in Finland 2024 report