# When Does It Make Absolute Sense to Donate Your Car to Charity

“Ah, it’s time to change the timing belt again. I’m tired of maintaining this beat up car. Probably the money I’m gonna spend on this car is more than its worth. How can I get rid of this car?” Well, you are not alone. Many of us went through this scenario before. In general, you have 3 options to get rid of this old car: 1) sell it yourself, 2) trade in, or 3) donate your car to charity.

Wait, Donate my car to charity? What’s in it for me? Is it even an option? Does it even make any financial sense? I love to donate to Charity but donate my car? Is that too much?

Actually, you may end up killing 2 birds in 1 stone: donate for a good cause AND earn some money in return!

I’m going to show you when does it make absolute sense to donate your car to charity.

## Let’s Make Some Assumptions First

I’ll put everything as general rule of thumb for estimation. As long as you get an idea on how I come up with the ball park calculation, you can pluck in the numbers for your case.

Most of you should know that donate your car to charity can get you tax deduction benefits. Let’s just take an average single American that makes USD \$70,000/year. The federal + state tax bracket for this income is about 35%.

When you donate your car to charity, let’s say the fair market value that you can price from Kelly Blue Book is USD \$1000 and your charity sold your car for \$1000, you will save USD \$1000 x 35% = \$350 for your income tax. In other words, you “sold” your car for \$350.

What if the same scenario above but your charity only sold you car for \$1? According to IRS, you can still treat your car was sold at USD \$500 as the fair market value. That will save USD \$500 x 35% = \$175 for your income tax. You “sold” your car for \$175.

So, this is your baseline. As long as Kelly Blue Book values your car at \$500 or above, you will bank \$175.

Let the fun begins!

## Selling Your Car By Yourself?

Selling your car is a hassle. It feels like work. Don’t you agree? Good. So let’s back to the assumption where you make USD \$70,000/year. By default, a standard American full time worker works 2080 hours/year. This is per the standard HR definition. If you translate your \$70,000/year into hourly rate, that’ll be \$70,000 / 2080 ~= \$35/hour.

Since you are going to do all the leg works by yourself, here are the steps, costs, and hours that will take you to close your sales:

Material CostLabor Cost (Hours x \$35/hour)Total CostComments
Minor touch up on your car\$1002 hours x \$35 = \$70\$170Spot fix some dents and paints. Clean it. Misc small fixes.
Take pictures and editing them\$01 hour x \$35 = \$35\$35
Smog check certificate\$601 hour x \$35 = \$35\$95This is the DMV requirement. Assume you pass on the first run and min wait time at the smog station.
Show to prospects for test drive\$05 hours x \$35 = \$175\$175Assume you take all the inquiries and show 5 times to close your sales
Visit bank with the buyer to get the cashier's check\$01 hour x \$35 = \$35\$35To prevent fraud, you don't want any wire transfer. Go with your buyer together and see the fresh cashier's check made in front of your eyes
Wrapping up DMV paper work\$01/2 hour x \$35 = \$17\$17Notice of release on liability, sign title, etc
Grand Total\$600

That’s right. Before you sell your car, you’ll potentially incur an intangible cost of \$600 during your sales cycle to complete the transaction. That means if your car is valued at \$1000, the “net profit” that you will earn is actually \$1000 – \$600 = \$400 more or less.

In other words, if your car is valued less than \$600, forget about selling it yourself. Don’t waste your time.

Let’s explore our next option.

This option is much easier and convenient but as a general rule of thumb, the dealership will low ball you 3x from the fair market value. It’s a common practice for most of the industry anyways, including professional services, construction, lawyer, etc.

1 part covers the employee’s salary and commission, 1 part covers the store rental and operating cost, and 1 part covers the actual profit from the sales.

If your car is valued at \$1000, you will expect to get a trade-in offer around \$300-\$400 instead.

Intangible cost, on the other hand, is actually relatively low. You probably need to negotiate with the salesperson and fill up some paper work. It should take you about 2 hours or less. If you factor in with the labor cost, that’s only additional \$70.

Check out the huge difference between selling your own car by yourself vs. trading in:

Offer When You Sell Your Own Car

Now it’s down to the third option:

## Donate Your Car to Charity

It’s actually as easy as trading in your car. All you have to do is to either call the charity organization up or submit your request online. Then someone from the charity organization will arrange a mutually convenient time to come pick up your car. It’s that easy. The intangible cost is about 2 hours x \$35/hour = \$70

Some charity organizations also offer you vacation vouchers and other perks. They may subject to taxation though. That’ll be some extra benefits when you donate your car to charity.

Lastly, helping other struggling families and earn some good karma for yourself? PRICELESS.

So, what’s my conclusion?

## Key Take Away

For average American:

1. If your car is valued more than \$1100, try to sell the car yourself. You can potentially get more money.
2. If your car is valued less than or equal to \$1100, just donate your car to charity. It’ll save you a lot of headache.

If you make more than \$70,000/year, you may even want to donate your car to charity when it’s valued at a higher price because your intangible cost will be substantially higher. Adjust the calculations accordingly.

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Disclaimer: This is based on my personal opinion. You should always consult your financial or tax adviser for any official financial matters.

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