Jobrad, German for “company bike”, is the ecological counterpart to the company car and is becoming increasingly popular as an alternative or addition to a private or company car.
Especially in big cities, the company bike is often a good alternative to the car, avoiding traffic jams and parking shortages. In addition, those who ride a company bike instead of a car actively contribute to environmental protection and promote their health.
In this article, you will find all important information and tips, as well as my opinion – with explanation – if the company bike “Jobrad” is worth its price and popularity.
What is company bike leasing (“Jobrad”)?
Company bike/e-bike leasing works this way: The employer concludes a framework agreement with a bike leasing company, i.e. Jobrad. After the agreement, the employees – that’s normally us – can freely choose their company bike at a cooperating bicycle dealer or also online.
The employer then leases the bikes or e-bikes we chose and lets them use them for the duration of the contract. We, the employees, can use our company bikes whenever we want: to ride to work, in everyday life, on vacation or for sports.
Company bikes via deferred compensation
Here the employee serves the monthly rates for the company bike from his gross salary; so-called deferred compensation, salary conversion or cash salary conversion.
This means that employees exchange part of their gross salary for another benefit, for example a company bike provided by the employer. They do not have to pay tax on the monthly rate like the rest of their wages. Only the private use, the non-cash benefit, must be taxed at 0.25% – almost nothing.
Employees save up to 40 percent with this company bike variant compared to direct purchase. If the employer contributes to the installments with subsidies, the savings can be even higher.
Company bikes as a salary extra
The second company bike option is tax-free: If an employer provides an employee with a company bike in addition to the salary and assumes the full cost of it, the employee is also exempt from tax on the non-cash benefit.
This means: The employee rides his company bike free of charge and tax for the duration of the leasing.
Why are company bikes so popular?
Company bicycles leased through deferred compensation are just being advertised as a win-win-win situation: The employee saves money, the employer does too, and the environment wins too. But only the latter is unreservedly true.
JobRad and other bike leasing companies advertise:
Die monatlichen Raten werden automatisch von Ihrem Gehalt einbehalten. Dank zusätzlicher steuerlicher Förderung sparen Sie bis zu 40 % gegenüber einem klassischen Kauf. Stellt Ihnen der Arbeitgeber das Rad kostenfrei zusätzlich zum Gehalt zur Verfügung, fahren Sie es sogar komplett steuerfrei.
The monthly rates are automatically deducted from your salary. Thanks to additional tax incentives, you save up to 40% compared to a conventional purchase. If your employer provides you with the bike free of charge in addition to your salary, you even ride it completely tax-free.
Also a quick look at the calculation tool shows that you can save up to thousand euro. And on the first look it is true.
So, what’s the catch with JobRad and other company bikes?
After a second look, it becomes clear – and I will explain you why – that following the deferred compensation model, the actual savings are much smaller than the ones previously stated.
In the fine print you can read that a high percentage of the saved purchase price arises from a fictitiously assumed bicycle insurance lasting till the end of the leasing, as well as a fix service price. For a bike price of 6000 euro, the fictive insurance and the service amount almost 850 euro.( I never had or needed a bike insurance and I do the service myself.)
And where is the benefit of the deferred compensation?
Well, for the same company bike price, the calculation tool states that the following taxes are saved over the leasing duration (36 months), as the amount directly goes to the monthly leasing rate and therefore you don’t pay them.
There is an example using the calculation tool assuming a gross monthly salary of 5.000 euro and a bike price of 6.000 euro:
| Wage tax | 883 € |
| Pension insurance | 450 € |
| Health insurance | 370 € |
| Nursing care insurance | 90 € |
| Unemployment insurance | 58 € |
| Total “savings“ | 1.851 € |
Now you can see that the actual savings – after having inflated the bike price with the fictive insurance – come from the tax you are not paying.
I don’t have any dogmatic opinion on taxes and any moral obligation to pay – or not to pay – them. The state offers the possibility of deferred compensation? That’s great.
Let’s do the math together
The money you don’t pay into the pension insurance fund is money that you are losing long-term, even though in our case we are talking about a reduction of 2,7% for the 36 months of the leasing duration.
Those who pay less into the pension insurance only seem to save; as a result, their later pension automatically decreases, and also their entitlements to sick pay and unemployment benefits decrease as well.
Now you could argue that we are talking about 968 euro insurance rates over 36 months, but this is not correct. In Germany, the employer pays the same amount to the social security funds. So you actually lose their share which is as high as yours, for a total of 1.936 euro.
So the only real saving in leasing a JobRad is the reduction of the wage tax, linked to the reduction of pension (for sure), sick and unemployment benefits (in case you need them). This way you can see that the advertised benefits aren’t as fantastic as the bike leasing companies want you to believe.
And it’s still a leasing, so who owns the bike at the end?
The net cost of the bike leasing, so the money you actually have to pay from your net income, is about 3.591 euro in this example (5.000 euro gross income, 6.000 euro the bike price), meaning that every month you pay 99,75 euro from your net income. (Corresponding to 168,91 euro from the income before taxes.)
But – here comes the big but – at the end of the leasing the company bike doesn’t belong to you yet. JobRad, as other bike leasing companies, states that they intend to make you an offer at the end of the leasing, however they cannot make a binding commitment in advance for legal reasons.
Am Ende der Laufzeit beabsichtigt die JobRad GmbH, Ihnen ein Angebot zu machen. Eine verbindliche Zusage dafür ist im Vorfeld nicht möglich.
The good news is that I didn’t find any comments or statements of people who wanted to buy the company bike after the end of the leasing and didn’t receive an offer. So far, all employees who wanted to buy their leased company bike had the opportunity to do so.
The estimated offer from JobRad to you amounts to 1080 euro. So adding up the leasing rates you paid, we get a total of 4.671 euro. (99,75 * 36 + 1.080 = 4.671)
If we consider, and we should, as it is our money, that at least the missing pension insurance is also a cost, we get to a total of 5.571 euro, mentioning that the 900 euro pension insurance (450 * 2) of now will have a completely different weight when we will retire.
Still, a small economic benefit for us employees remains. (And a big one for the employer who actually saves 968 euro.)
What happens if you leave the company you are working for?
This case, as well as other that I will mention soon, is one of the thoughest and perhaps the most annoying one.
The best case scenario is that you are changing company and the new one also offer a bike leasing program with the same bike leasing company you have your company bike from. The new employer could inherit the leasing contract from the old employer and for you nothing changes.
But – how I hate these big “BUTs” – they aren’t forced to do so.
In the case you cannot transfer the contract from one employer to another, i.e. when you leave the company without having a new job, the story gets complicated and expensive for us employees:
- All outstanding lease rates must be paid
- In addition, the bike residual value (10%) must be paid.
- In addition, 19% VAT is added to the outstanding rates and the residual value
- The insurance fee does not apply anymore: the insurance ends
- If you leave the contract within the first 6 months, there is an additional penalty fee (~10%)
The outstanding lease rates and the residual value must be paid – without the (small) benefits of the deferred compensation: You pay the whole amount from your income after taxes. Then you additionally have to pay the German VAT (“Mehrwertsteuer”) on this amount.
More articles like this here: financial tips for expats in Germany
Let’s have an example
Assuming I have closed the contract for a company bike one year ago, and now I leave the company. I have paid so far 2.027 euro from my gross income (168,91 * 12) – before taxes -, meaning that the effective amout paid from my income after taxes is 1.197 euro (99,75 * 12).
Now I have to terminate the contract and therefore must pay the whole monthly rate (168,91 euro) for the remaining period, 24 months, from my income after taxes – and not before taxes as before: 4.054 euro.
In addition, I also must buy the company bike – in case JobRad makes me an offer, and they probably will: 10% residual value of 6.000 euro = 600 euro.
Let me pay the VAT on the sum of both items: (4.054 + 600) * 1,19 = 5.538 euro.
Having already paid 1.197 euro from my net income in the previous 12 months, the total cost of the bike now becomes 6.735 euro. (The pension insurance I did not pay in the first 12 months amounts to 300 euro, which come on top of the total cost of the bike.)
The same calculation with a contract termination after 24 months will result in a total cost of 5.975 euro, saving 25 euro in comparison to the list price, but “losing” 600 euro from the pension insurance.
Conclusion: Is leasing a company bike like JobRad worth the money?
As you may already assume following me through the argumentation above, I am not a big fan of company bike leasing. With the calculations, I wanted to show you that the economic benefits are much smaller than advertised, and in case your employment situation changes, you could face high costs, higher than the total bike price from a shop or an online store.
From the perspective of an employee, I would not recommend having a bike leasing unless you are 100% sure not to change company – or not to be fired -, so that at least the short-term economic benefit fully applies.
Of course, the whole argumentation does not apply to the salary extra leasing model, in which the employer covers all costs and we employees just enjoy the ride on our new shiny bike. So far, the salary extra model is quite rare.
Perhaps you already have a company bike like Jobrad, or you are thinking about leasing one. I would be happy to know what you think about it, and the other readers too!
References:
JobRad Dienstradleasing: https://www.jobrad.org/
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