Why You Need To Be Cautious While Donating Your Car
The goal with every donation is to help those in need, and hence thousands of people in America donate their cars to charitable causes every year. Unfortunately, while the cumulative value of all the vehicles donated may sum to a lot of money, the final donation which reaches the intended audience is only a tiny fraction.
According to experts, a large chunk of the donated money is often spent by firms that specialize in vehicle donation programs. For example, Just Donated Inc. once spent around 95.5% of the money it received from the sale of cars with a cumulative worth of $2 million on administrative and operational expenditure.
However, that is not the worst, or the best, outcome of vehicle donations. As you will see, there are many companies which are able to process car donations at a great price, generating and giving most of the total value of donated cars to the intended charities.
Vehicle Philanthropy Is Expensive
While you may think it’s easier for charities accepting and processing car donations to liquidate the car into cash and use that money to help those in need. But that is not the case. The trouble lies in the fact that those organizations which are in the business of processing cars in large volumes tend to have high running costs as well.
Not only is the entire process of acquiring, storing, and selling donated cars a time-intensive process, it is also one which requires a lot of expenditure such as mechanical repair costs to bring the cars in usable shape, storage facilities to keep them until they are sold, expensive towing, a lot of paperwork, and, of course, advertising costs to promote the sale so it reaches the eventual buyer.
According to Phil Kraft, who is the Executive Director at National Veterans Services Fund, the final amount which eventually reaches the charity out of a vehicle donation depends upon the market value which the vehicle, in its current state and form, can command, and the cost which would need to be incurred in its solicitation.
He also stated that when it comes to donated vehicles, the market is often soft in the price aspect. This means these vehicles sell for much lower compared to if you sold them yourself as a private owner.
The Working Mechanism
As we have already established that it’s quite difficult to manage vehicle donations, hence charities often delegate the responsibility of monetizing vehicle donations to commercial fundraisers for a fee. The rest of the process is systematic.
First, a donor is expected to respond to advertisement and make the phone call and prompting a charity or commercial fundraiser to accept a vehicle. The latter will only do so if the vehicle’s market value is higher than the cost which would incur in its processing, which is almost always the case. The commercial fundraiser deducts all the processing costs associated with the sale from the proceeds and after keeping its cut gives the rest back to the charity which originally received the vehicle.
Not All Is Lost
While the abovementioned information may give a stark outlook of vehicle donations, it does not apply to every organization involved. There are many commercial fundraising organizations that are able to return even more than 80% of the market value of vehicles to the charity which receives them.
These are those organizations that use multiple methods apart from expensive auctions to sell off the vehicles, such as direct selling to buyers, and by keeping a high rate of turnover to avoid vehicle storage costs. Why everyone does not employ best practices is a matter of question, and those not giving back a high return need to be avoided.
What You Can Do
To avoid donating to a commercial fundraiser that is known for giving a low return to charities, it is up to you to conduct thorough research on websites such as CharityNavigator. Also, if your vehicle is in terrible shape, it’s best to not donate it at all.
Instead, sell it yourself and donate the money you raise to your preferred charity organizations. The last bit of information you require is the percentage which a particular fundraiser will give to the charity. If the rate is too low, then avoid donating your vehicle to that fundraiser and look for other options.
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