Charitable Car Donations

Hi Topspeed,
Does donating a used car to charity really help people in need? What happens to the car?

Jennifer M. from College Park, Maryland

Hello Jennifer,

I think everyone has seen those ads that ask you to donate your used car to charity. What everyone may not know are the particulars as to why and how the process works. Most charitable organizations accept vehicle donations because it helps to fund the programs and services they provide. What actually happens to the donated car though depends on its physical condition.

Most charities will accept a car in any condition; after all, beggars can't be choosers. However, all of them prefer to receive used cars that are presentable and in good working order. A donated car that doesn't run is usually sold for parts or scrap and this ultimately brings the charity less money than a functional car. A donated car that is in decent condition is usually sold immediately via advertisement or auctioned off with other cars a charity has received. Once in a while, a charity will keep a donated vehicle for its own use but only if the need is truly there. The actual process of donating your car to charity is pretty easy and straightforward. Simply choose the organization you want to help and call them up. They will arrange to have your car picked up or tell you where you can bring it to make the donation. Choosing the right charity though merits some further investigation.

With so many charities existing these days, how does one choose the right recipient for a vehicle donation? Well, one of the most important things to consider is how your donation will be used. Will the money from the sale of your vehicle be used locally or outside of your community? Which programs and services offered by the charity will benefit from your donation? Many charitable organizations allow you to stipulate where and how your donation is used. So, if you want your donation to be used for helping the homeless in your neighborhood, you can specify that and the charity will fulfill your wishes.

Another factor to consider is the efficiency rating of the charitable organization. A reputable charity will have an efficiency rating of 85% or better. This means that 85 cents of every dollar you donate will go directly to helping people in need. The remainder will go to cover administrative costs that the charity incurs in the course of doing business. A rating of less than 85% usually means that the charity is poorly managed or may not be so legitimate.

An easy way to objectively compare charities is to examine their rankings through Forbes and the Better Business Bureau. Forbes maintains a comparative list of the 200 largest charities along with comprehensive financial details for each one. The Better Business Bureau evaluates and ranks charities through its Wise Giving Alliance. You can be sure that a charitable organization is worth giving to if it is ranked highly by both Forbes and the BBB.

Now, you may be wondering why people donate their cars to charity in the first place. After speaking with several representatives of the largest charities in North America, the answer was not surprising. The primary motivating factor for charitable vehicle donations is the tax write-off. No real surprise there. Up until recently, the IRS allowed an itemized deduction for the Blue Book value of your car, even if the market value of your car was a great deal less. However, it was only a matter of time before our government closed this loophole in our tax laws.

In 2005, new legislation was passed that only allows you to deduct the actual amount a charity sells your car for. You can thank United States Senator Chuck Grassley of Iowa for creating this disincentive to vehicle donation. Since this legislation was passed, vehicle donations to all charities have dropped by 30-50%. This has significantly reduced the ability of most charities to provide important services and programs to people in need. Fewer funds coming in mean fewer people being helped, plain and simple. Way to go Senator Grassley!

Don't be discouraged by the new legislation though, most charities do a good job of getting fair market value for your car. This means you'll still get a tax deduction worth more than the trade-in value of your car. Donation also saves you the headache of selling your own car. If any of my readers are thinking of donating their car to charity, please consider giving it to United Cerebral Palsy. UCP is one of the most highly ranked and efficient charities in the world and on a daily basis helps over 170,000 people with all kinds of disabilities, not just cerebral palsy. Simply give them a call at 800-872-5827 and they'll be glad to help you through the process. You can also find and donate to your local UCP center by visiting www.ucp.org and typing in your zip code. Your used automobile will improve the lives of many less fortunate people, what are you waiting for?

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