How Car Donation Fundraising Works

Taking donations of automobiles can work for many different types of charitable organizations, no matter how small or large.

Before you eliminate this one from your stable of fundraising ideas, realize that you don't have to have a large automotive facility, parking lot or mechanic's garage to do it.

What Kind of Cars?

When you are asking for car donations, you'll get all kinds of offers. You may be offered a perfectly good second-hand car in fine mechanical condition, or you may get offered an unusable wreck. However, even that unusable wreck can bring you some funds, so don't discount it right away.

The price of scrap metal is at an all-time high. It would not be unusual to get $150 for a junk car at a scrapyard. Even if you have to spend $50 or $75 to tow the car there, you still turn a profit on the donation. And you'll do even better if you happen to know a tow truck driver who is sympathetic to your fundraising cause.

Don't limit your requests to functioning automobiles. Although these are more valuable and have more potential uses, the market is full of junk cars, and it will be easier to get someone to donate a car that they have no use for. In fact, most people would be quite happy to let you take that rusted, non-running hulk off their hands, regardless of the nature of your organization!

Running automobiles, on the other hand, can serve other purposes. They can of course, be sold to raise funds, or they can be used by your organization–or donated to needy people who need a way to get back and forth to work.

Most of the cars that are donated however, are not of high quality, and the primary model that most charities use is to take the cars as donations, and then sell them to raise funds rather than use them directly.

Selling at Auction

It may occur to you to try to sell the donated cars directly, and therefore get a better price for them, but that course of action is a lot more difficult than you may think. First of all, you have to have a place to store the cars, and if you have more than one or two at a time, you may have to deal with local and state regulations pertaining to running a car lot.

Some communities have strict regulations in this regard, and placing a dozen used cars in front of your facility with “for sale” signs on them may put you on the wrong side of local statutes.

A common way to do this is to work through an agent who specializes in moving donated cars, who will arrange for everything. The agent will arrange for towing if necessary, cleaning, and will arrange to sell the car at a wholesale auction.

Of course, when you are working with an agent, there is a fee involved, and you may get 50 percent of the proceeds when it's all done.

Wholesale prices for automobiles is surprisingly low. You may get $400 or $500 for what looks like a very nice and serviceable used car, and then half of that will go to fees and the agent. Nonetheless, if you have a good flow of car donations, it can be an excellent way to bring funds into your organization.

The Legalities

Selling a car is a little more complicated than selling a box of cookies at a bake sale. First of all, there is the issue of tax deductibility.

The donor will usually want to use the donation as a tax deduction, and they are entitled to do so. In the past, the deduction was equal to the market value of the automobile, but newer laws have been passed that say that the donor is only allowed to take a deduction equal to the actual sales price of the vehicle.

So, if you sell a vehicle at a wholesale auction for $400, that's the amount the donor can deduct. Again, there's a big difference. A vehicle selling wholesale for $400 may actual have a market value of many times that.

Before you start down the car donation path, you will also have to familiarize yourself with the ownership transfer regulations of your particular state. Pay a visit to the motor vehicles department in your community to make sure you're up to date on what paperwork is required for transfer of ownership.