Donate or Sell Your Car - Tips for Deciding
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?
In determining the value of your car, you need to consider what the \"real value\" is. Many people mistakenly believe that they will get whatever the Kelley Blue Book says is the expected value. That is not always the case. Other factors affect what you can expect to get. The value stated by the Kelley Blue Book (KBB) is a good starting point in estimating what to ask, but is often not a reasonable expectation. A more realistic estimate would be to cut the KBB estimate by 30%. Of course, it will be further cut by the tax liability based on your tax bracket.
Whatever price you get from the estimated KBB price that has been discounted will have to be cut again based on your income tax bracket. Let\'s say you are in a 25% bracket, and you come up with a value of $1000 for your car. You will have to discount it further by the income bracket percentage to get the true value. In this case, the car would really only be bringing you $750 net.
An additional expense to consider when you think about selling is the cost of advertising. You will have to subtract whatever advertising expense you have from the net profit. Assume you are going to have to spend $80 to advertise in an auto magazine and $30 for a newspaper. That totals to $80. Subtract that from the $750 net, and you are not down to $670. To get the top dollar for your car you may need to get it professionally cleaned and detailed. That will cost you probably another $70. You are now down to $600 for that $1000 car.
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.
We are now down to $595 as the value for the car. There may still be other expenses to consider, such as body damage repairs or mechanical repairs that are necessary to be able to sell it. Then, you would be down to even less than that value.
Let\'s look at the difference in profit potential for donating compared to selling. Most donated cars are sold at auction. The IRS says they must be sold at auction and in use shortly after you have given it away in order to take the full deduction. Your tax deduction will more than likely be $500 or the auction price. If you get only the $500 deduction, you will be netting just $25 less than all the trouble of selling it. Is it really worth it?
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.
The total time involved so far, with conservative estimates, is approximately eight hours. You have to go through several things that may not be something you really are interested in doing, just to get a buyer. In contrast, to donate the car it takes only a phone call to get someone to come get it. You will also have the satisfaction of helping a charity. So which is the better deal for you, selling or donating?
Pamella Neely writes about how to donate a car or sell it.