Selling Cars vs. Donating Cars: Which is Right for You?

By: Kathy Teel July 28, 2012
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Most folks are familiar with the process of selling a car, even if they've never actually sold or bought one. After completing some paperwork, one person walks away with some extra coin and another drives away in a new ride.

Vehicle donation, however, isn't as common.

Donating your car to charity is a quick way to unload something you don't want, as well as help your friends and neighbors in a cause you support. Many charities allow you to donate a car, which they then use to conduct charity business or resell for a profit.

So, if you have a vehicle you need to get rid of, which is the best option for you?

Pros and Cons to Donating and Selling a Car

For some, donating used cars is more appealing than slapping a "car for sale" sign in the window.

Yet, what are the pros and cons when you donate a car to charity? Would selling your car be a better move?

Donating a Used Car: Pros

  • Car donation helps people in need. Donating your car to charity will help a cause you believe in, and also give you a sense of personal satisfaction. You'll help make the world a better place to live.
  • You're getting rid of something you don't want. A broken-down car might cost more to repair than it's actually worth, or it may have little-to-no trade-in value. A more valuable vehicle might require too much time and money to keep. Also remember that, as long as you own the car, you'll pay extra taxes on it and incur other expenses.
  • Generally, donations are tax deductible. You can deduct the fair market value of the car if the charity gives the car away or uses it for charitable purposes. If the charity sells the car, you can deduct the amount and get a break on your taxes. Check with the IRS for more details.

Donating a Used Car: Cons

  • Car donations bring no money. Obviously, auto sales put some cash in your pocket. Donating it won't. You need to decide if that's all right, particularly if you plan to buy another car to replace the old one.
  • You can't avoid paperwork. Donating your car doesn't mean you drop it off somewhere and never think about it again. It's still your responsibility to transfer the title and provide accurate information about the car (like the odometer reading). You also need to know the fair market value of the car, and file the appropriate forms with the IRS come tax time.
  • Some charities are scams. If you don't carefully research the charity to which you're giving the car, you might find yourself donating your car to crooks. That will become a problem if you try to deduct the fair market value of the car on your tax returns, and it may result in your being flagged for an audit.

Have you ever had to choose between donating and selling your car? What choice did you make?

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