Donating a car could be one of the most cost-effective ways to help charities, says industry experts.
The auto donation industry is full of deceit and fraud, with many states investigating clothing for false advertising and personal transactions.
These eight tips can help donors protect themselves while trying to help others.
Thinking of donating your clunker to a charity for a nice tax deduction? Proceed with caution.
Giving used cars for "charity" has become a favorite way for Americans to get rid of unwanted vehicles. And why not? You can avoid selling headaches or emptying cars, helping charity causes and lowering your tax burden all at the same time.
Unfortunately, the experience is rare, in fact, like a win-win situation. Not only do charities typically see little of the sale of used cars, but donors can collide with tax officials if they are not careful.
"In the end, donating used cars could be the most cost-effective way to give to a charity," said Stephanie Kalivas, an analyst with CharityWatch, an organization that monitors the charity industry.
The problem is that the industry is full of deceit and misinterpretation. Public attorneys from various states have been investigating car donation donations for false advertising and sales themselves. Many of these organizations are nonprofit intermediaries that contribute tokens to participating charities. Others misrepresent the cause they support and / or give a low percentage of their raised funds to the target they declare.
Kars4Kids, for example, a New Jersey-based organization with a bland yet highly successful advertising jingle, has received over 450,000 car donations, according to its website. The organization, however, gets a D rating from CharityWatch for distributing less than 50 percent of the money it needs and because, despite the national advertising campaign, it fails to adequately disclose that the money only benefits Jewish children, and almost exclusively in the New York area / New Jersey.
"They are not transparent about what they do," Kalivas said. "Many of these organizations mislead the public, and people need to be careful."
Wendy Kirwan, director of public relations for Kars4Kids, said the marketing and operating costs of car donation programs are high but because organizations are processing donations at home, more money flows to charity work than others who use third parties. He also said that while catchy ad jingles do not spell that children benefit from charity, information is already available on their website kars4kids.org. "This is an innovative way to support charity in a way that helps charities and donors," Kirwan said. "A lot of people will not donate to charity if not with their car."
For people just looking to get rid of unwanted cars that they will not take tax deductions, it may not matter what happens to the vehicle and its benefits. Kalivas, however, shows that charity would be much better if people sold their own cars and donated sales, or simply asked for a charity they knew to see if they had a car donation program.
If the car is valuable and you plan to take it, protect yourself. Individuals who donate cars may accidentally mark themselves with large red flags for Internal Revenue Service auditors.
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