The 411 on Starting a Car Donation Program

Does your radio station advertise for car donations? Blue Avocado reader Eric Haynes knows all about it – his Kansas City nonprofit accepts car donations and he's here with the inside story and how - surprisingly - to make it work on a modest scale for you:

Do you remember your first car? As I approached my 16th birthday, I daydreamed about the hot rod that would rocket me to the top of the high school social order, and rock my nights with its hi-fi stereo system.

My dad, on the other hand, had no consideration for my social status – he found me a rusting station wagon! I nearly gagged at the sight of the oversized nerdmobile.

Stepping Into the Car Donation Fray

Families greet their teenager’s first car with excitement and trepidation; nonprofit people receiving their group’s first donated car often feel much the same way.

While there are the large, national organizations that liquidate thousands of vehicles per year at auction (and are the target of much controversy--see Get the 411 on Car Donations [4]) most nonprofits that accept cars are community organizations that are given two or three or five cars a year.

Community nonprofits (like Hillcrest Transitional Housing where I work) obtain donated vhicles:

• to liquidate/sell the cars for cash
• to use the vehicles in service programs (delivery van at a thrift store); or
• to give the vehicles to clients (a homeless mom in need of transportation to seek work).

Why would a donor want to give away a car?

Some thoughtful donors appreciate how useful a car can be.

“I could have sold those cars and donated the money, but the organization couldn’t have purchased a car of the same value with the cash contribution," says Gregg Hejna, who has donated two vehicles to our organizations. “Donating dollars is more efficient, but sometimes a donated service or product is more effective."

Whether your organization is approaching the on-ramp to vehicle donations or looking to improve miles-per-donation on an existing, large-scale campaign, I encourage you to review four tips before shifting into a higher gear:

1. Kick the tires: What’s the most effective way to handle the process?

First decide whether driving the campaign yourself or hiring a “chauffeur” would work best. Numerous for-profit businesses and nonprofit organizations act as brokers, providing services to manage vehicle donations, including towing service for nonoperational vehicles. Most will process all of the paperwork (which really isn’t difficult) and liquidate the asset at an auction (often for a small percentage of the selling price).

Keep the donation process simple, and make it easy to contact your organization (whether through a website or dedicated phone service). If you go with a third-party liquidator, get references and check their reputation. Make sure they have a stated privacy policy and that they clearly tell the donor the amount of proceeds going to your organization. There are some unscrupulous businesses hoping to make a fast buck and will think nothing of taking advantage of your donor base. Do your research!

2. Look at the Blue Book: Is it worth accepting the vehicle? What is the value of the donation to the donor?

In an environment where uneducated donors give expired medicines to a homeless shelter (happens more often than you think), bear in mind that donors often overstate the true value of their donation. Nostalgia and past maintenance expenses may inflate the value in the minds of some donors; others are simply attempting to pad their tax deductions. Such abuse has led to significant changes in the tax rules [5]. Donors can no longer self-assess the value of a vehicle that is to be liquidated; they must receive a receipt from the nonprofit stating the vehicle’s sale price. For vehicles to be used by the nonprofit for its own purposes, self-valuation is handled by the donor as a normal in-kind gift (always advise donors to consult a tax professional).

3. Check for blind spots: What are the costs of receiving vehicle donations?

It sounds like a no-brainer to accept all in-kind gifts, but be sure to consider all costs associated with marketing, accepting, and processing donations (including fuel, transportation, storage, and securing vehicle titles).

It is important to consider the time costs of accepting a vehicle that is nonoperative, has significant maintenance needs, or is worth only salvage. Time spent by volunteers and staff can quickly eat up any financial gain to be had from the sale of a “junker” that was used up by a donor’s teenage son. A thorough walk around of the process prior to embarking on a major campaign will help reveal potential blind spots.

Storage can be a significant issue. Our organization received notice from the city when the street and yard began to resemble a used car lot while we processed a wave of donations and waited for titles to arrive in the mail.

4. Check the odometer: How many miles of use do you need out of the vehicle?

A car on its very last legs, coughing fumes as it wobbles down the road, is not an acceptable vehicle for use by a family in need, but may be of value to a salvage yard. I learned this the hard way after I picked up a stranded mom and her three kids when the older car that we had “gifted” her with collapsed within one month of receiving it. Luckily, another donor came in with a minivan that is still running strong after two years. The ultimate purpose of the vehicle will determine what type of vehicles you should accept.

Like the teenager with his first car, a nonprofit takes an exciting step toward maturity when it accepts its first vehicle donation. Limiting solicitations to cash donations is akin to hanging out at the local go-cart track when you could be in the Indy 500. Nonprofits spend nearly 90 percent of their time soliciting cash contributions, yet 96 percent of the world’s wealth is held in physical assets such as real estate, excess or outdated business inventories, or personal possessions, including vehicles.

Moving to the Next Level

A car donation program is a great way for a nonprofit to expand its donor base and provide new ways to involve existing donors and volunteers. It is also an easy way for nonprofits to get their feet wet in asset donations of all kinds, learning the ropes of processing, tax laws, and asset management. Keep in mind the total costs associated with the process to insure your best chances for success before you start. That first car may be an ugly station wagon, but could lead to further success down the road.

By the way, about my first car: my mother came to my aid. “Maybe a high school boy might feel a little uncomfortable driving a wagon,” she said. My dad assured my social status the second time around; the next car he found was a sporty green MGB convertible, just in time for my senior year.

Eric is a site director for Hillcrest Transitional Housing [6], a 35-year-old Kansas City organization with a 90-day education and housing program for homeless families. For rejuvenation, he escapes the flatlands of Kansas and hikes 14’ers in the Rockies. Here he is atop Mount Democrat outside of Breckenridge, Colorado, at 14,148 feet. Photo credit for billboard: telethon.

Have you ever given your vehicle to a donation program? Does your group have a program? Have you ever received a vehicle as a beneficiary through a nonprofit’s car donation program? Let all of us learn from your experience -- post in Comments below!