Car Donations: Putting Profits Back in the Hands of Charities

Sept. 29, 2008 - PRLog -- When a car donor turns his car over to his favorite charity, he assumes the charity will receive a handsome chunk of the car’s sales proceeds. Often, he’s wrong.
All too often, only a small portion of real dollars finds its way into a charity’s account.  A U.S. General Accounting Office report from December, 2003, still holds true across much of the industry.  It found that charities were receiving much less than the vehicle values claimed by car donors. In fact, it said “most [were] receiving  five percent or less” of those reported values.
The GAO was most concerned with the difference in tax deductions claimed and the amount charities received.  Legislation was passed limiting vehicle donor deductions to either $500 or the validated sales price of the vehicle. Currently, there’s an effort afoot to get that limitation raised to $2,500 or the actual sales price.
“What’s of most concern to professional car donation fundraisers, though, is not the legislation aimed at car donors, although that is a concern. Of greater concern is where is the money going? Why are charities receiving such a low percentage on average?” asks Tim Finnigan, owner of Charity Development, LLC http://www.charitydevelopment.com, and a fund-raising consultant with a 12-year track record in raising money for charities through vehicle donations.
He’s examining the industry and points to two major factors charities need to investigate before signing any car donation fund-raising contracts; those two factors: sales venue and contract percentages.
Car Donation Sales Venues – Off to Auction
As the GAO traced vehicles through the donation pipeline, it discovered that most vehicles are sold through auction firms. “There’s nothing wrong with selling some cars via auction,” says Finnigan, “but auctions sell to wholesalers or salvage companies, and those buyers purchase the vehicles at great discount and then resell commercially for real value.”
Where does that leave the charity waiting for its car donation check? It leaves them with a smaller dollar value on that check.
Finnigan insists that the car donation industry must change radically from its current easy and somewhat lazy approach to processing vehicle donations, and it must bring in knowledgeable car professionals to carefully and individually screen donated vehicles before they send them off to the auction block.
A car aficionado himselfhttp://www.charitydevelopment.com/about-charity-developme..., Finnigan cites the GAO study’s example, a GMC Jimmy truck that netted its charity just $31. “Going back to that time, 2001, and taking that truck through a different process, screening it, cleaning it up and selling it retail for the customer, it could have brought in at least $2,000,” he says, estimating conservatively short of the vehicle’s $2,400 fair market value at the time. “And even if you split that gross sales revenue 50/50 with the charity, the charity comes out way ahead: it would have received almost $1,000 instead of the $31 it did receive. Wouldn’t that kind of return make a big difference when multiplied by all the vehicle donations charities may receive in a year?”
Contract Percentages – Converting to Dollars
Most car donation fundraisers, however, do not split gross sales figures. They split net figures. And here’s where charities need to read their contracts with car donation professionals very carefully, according to Finnigan. On close examination, charities will find all manner of overhead being deducted from the sales price before the then-reduced proceeds are split with the fund-raising facility.
With every extra fee that comes off the top of the sale, the charity’s split is reduced. “Watch those percentages, fees, and charges very closely,” says Finnigan. “They can make a huge difference in what you actually receive from every donated vehicle.”
Even if charities received a bigger slice of the pie, car donation fundraisers can easily make an honest profit, says Finnigan. Through his Charity Development consulting firm, he insists on “a fair return to all, a win-win-win for all working within the system, benefiting all.”

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Tim Finnigan, owner of Charity Development, LLC http://www.charitydevelopment.com, is a car donation fund-raising consultant with more than 12 years of experience in the field. He works with not-for-profit organizations to help them make the most from all vehicles donated on their behalf.