Should You Donate A Car or Sell It?

Whether you should donate a car or sell it yourself depends on four things:

1) the value of the car
2) which charity you’ll be giving it to
3) your tax bracket
4) how much your time is worth to you

First, get the Kelley Blue Book value of the car. Then cut that price by 30% for what you’re really going to get from a buyer. Then cut that price again by your tax bracket.

Then cut that value back again by the cost of advertising the car for sale, plus the time you’ll spend selling the car. If you’re going to get the car cleaned up before you sell it, add this price in, too. This is the real value of your car.

Here’s an example of how it might break down:
1989 Chrysler Conquest TSi in zip code 03031 with 160,000 miles and standard features in fair condition has a trade-in value of $760, and a private party value of $1525.

Cut that by 30% and you get $1067.50. You want to get rid of the car, so you price it at $1000 so it will go quickly.

You are single and make $50,000 a year which puts you in the 25% tax bracket, so you’ll net $750 off the sale of the car after taxes. If you donate the car and the charity sell it at an auction (which is what happens most of the time), you’ll get a $500 tax deduction.

Advertising the car on auto trader will cost you $50 (on the “enhanced” plan). You opt to have the car cleaned up at a local car wash place, and that costs you $70. You also place an ad in your local newspaper for a month, which costs $30.

You have your mechanic look over the car and make up a nice little info sheet on the mechanical condition of the car, which costs $75. So your total cost for preparing the car to be sold is $225. The net sale value of the car has now dropped to $525, which is not too far away from what you’d get by donating the car.

Also, consider the value of your time for getting all this done… let’s say one and a half hours for the auto trader and the newspaper ads, two hours for the appointment with the mechanic, and thirty minutes getting the car cleaned up at the car wash place. 4 hours of your time to get the car ready to be sold, versus one hour to just donate the car.

Enter the hassle factor. With the car listed, you can optimistically expect five to ten inquiries before the car is sold. At least two people are going to want to come see the car, which means rearranging your schedule, dealing with strangers (do you let them take the car out by themselves, or do you go along for the ride with them?). Preferably they aren’t roughnecks with broken noses, but nice teenage girls looking for a car under the close supervision of a parent. Any serious buyer is also going to want to have the car looked at by their own mechanic, so you’ll need to schedule that as well.

Compare this to if you donated the car: you make one phone call, then a tow truck comes to haul it away. Just be sure you’re giving the car (or van, or boat, or trailer) to a charity that will actually use the car or give it to a needy person to use.

Per new IRS rules instituted in 2005, this is the only way you can get the “full” value of your car – if the car is sold at auction (which is what happens in the majority of car donations), you’ll get either the gross proceeds of the sale for the charity (auction value of the car), or $500, whichever is less. Someone has to be using the car after you’ve given it away for you to qualify for the tax deduction for your car donation.

Only you can know, but it’s wise to figure the dollar amount of how much the hassle to sell a car versus donating the car costs. Just as an estimate, I’d figure one hour fielding phone call inquiries, three hours showing the car to people (some people will make the appointment to see the car, then not show up), and an hour and a half to have the car looked at by their mechanic, and another hour for the “close” of the sale when you hand over the title, etc. Total time to sell the car: 6.5 hours. Total time to prepare and sell the car: 10.5 hours.

Ready to donate your car yet?
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