Cars And More

Having trouble deciding whether you should donate a car or sell it? It’s important to keep four things in mind when deciding if you are donating your car or selling it to whoever is willing to pay your asking price. These four things are: –What is the value of the car? –What charity could you donate your car to? –What tax bracket do you fall under? –How much is your time worth to you?

First, when we say determine the value of your car, this means the “real value”. A common mistake, made by many people, is to just automatically assume that they will get whatever dollar value Kelley Blue Book reports. KBB is a good value base but it’s sometimes not realistic. You can start by cutting that KBB value by 30% to guess the amount you will most likely get from a buyer. For example: Let’s say a 1989 Mercury Topaz - in zip code 15045 with 170,000 miles - in fair condition with standard features - could have a trade-in value of $760 and a private party value of $1525. Cutting that private party value by 30% gives us a new value of $1067.50.

The discounted KBB price will be cut again based on the tax bracket you fall under. If you are single and have a gross income of $50,000 a year, you are in the 25% tax bracket. This means, assuming that you do succeed in selling the car for $1000, after taxes you’ll just be netting $750 from the deal.

Other expenses also need to be factored in. You need to advertise. Let’s say you spend $80 on advertising. That means only $670 for the car now. You may also need to have it professionally detailed. Subtract another $70 for that. Now your car is only going to net $600.

Most people want assurance that the car is running correctly before they offer it for sale. To get a mechanic to check it out and write you an information sheet to show the buyer, you will have to invest approximately another $75 or so. Also, the appearance of the exterior can mean a lot toward getting top dollar. You may want to do body work as necessary to give it that pristine appearance. That will be and added expense to insure top dollar.

It is easy to see how your car goes from the $1000 you initially valued it at to the $525 it is not worth to you. You may even have to lower the net value even more if you have to fix a mechanical problem. If you have to do any body work to fix dents and scratches, you will have to subtract even more. Can you see how the value rapidly decreases?

Now consider this. Most cars donated to charity are sold at an auction. In fact, the IRS instituted new rules in 2005 that stated that the only way to get “full” value after donating a car is if the car is sold at an auction and in use after you’ve given it away. Donating a car to charity will typically earn you a $500 tax deduction or the gross proceeds of the auction value of the car. Assuming that you donate a car and earn a $500 tax deduction - is the potential of a $25 profit for selling your car worth the hassle?

Selling a car can be quite time consuming. You will have to deal with strangers and answer all their questions and concerns about the car. You may get phone calls at all hours, some being very inconvenient for you. Your time counts for something.

Selling a car may mean having to deal with phone calls at whatever time the phone rings, whether it is convenient to you or not. You could well spend an hour or more dealing with potential buyers and their questions. Planning and producing ads and signs can easily consume another hour and a half. Taking the car in to the body shop and mechanic may take an additional two hours and may even involve having to miss some work or arrange another means of transportation while it is in the shop. Having it cleaned and detailed may involve another half hour or so.

What kinds of tasks must you schedule for? You have to schedule time for the potential buyers to come and check out the car and give it a test drive. Often, you will set aside time in your schedule to show the car and the potential buyer never shows. Sometimes you will be asked to take the car to a potential buyer’s mechanic to have it inspected. You can easily consume an additional three hours this way.

Add it all up and it takes approximately eight hours and about a dozen different steps to sell your car. In comparison, when you donate a car, it’s a matter of one phone call before a tow truck comes to haul the vehicle away. The car is put on auction and eventually goes to a person in need. You don’t think or worry about it until it’s time to claim your tax deduction. So, are you ready to donate your car?