Charity Development Fundraising Blog

When we discuss car donations, the Grassley Bill and the U.S. General Accounting Office (GAO) Vehicle Report of 2003 are a part of the discussion whether we mention them out loud or not. Both have had a major impact on public perception of our industry and on tax laws.

The U.S. General Accounting Office Report, which received a great deal of publicity, left the public with the idea that very little of the money raised by the sale of their donated car was ever going to make it into the hands of a charity. In the most noticeable example quoted in the report, the 2001 sale of a 1983 GMC truck was traced, showing it selling at auction for $375 and yielding just $31 to the charity.

Though the report focused on the tax deductions claimed for donors ($2,400 in this case), the underlying message was that something was amiss in the car donation world; i.e., why did the charity receive just $31 and why did this truck sell for just $375?

The U.S. General Accounting Office Report – perhaps unintentionally – painted everyone in the vehicle donation industry with the same greedy brush; it didn’t matter if you ran a fair organization, or not.

The study tracked 54 cases from car donation to charity contribution. Based on these cases, it stated that proceeds charities received from car donations “were generally considerably less than the amount donors claimed on their tax returns….”  This discrepancy was the major concern to them, but what I noticed here was the second part of their finding: “…this difference is due in part to donated vehicles being often sold at auto auctions at wholesale prices, and processing expenses and third-party fees reducing the amount of proceeds charities receive.” (Page 15)

The Report also found that, “Charities or third-party agents typically sell donated vehicles through [wholesale] auctions.” (Page 14)

This tells me that few or none of the vehicles the GAO Report tracked were sold retail, meaning that most entered wholesale auto auction or salvage channels, regardless of their possible value to a charity and donor.

Let’s take the General Accounting Office example of the 1983 GMC truck. What if, instead of being sent directly to a wholesale auction, it had been sold at retail? An auto industry professional would have valued and sold the truck, if in reasonable condition, at (conservatively) $1,500 (lower than the claimed $2,400 but significantly higher than the $375!). So, what if, in addition, the car donation firm had given a fair portion of the sale to the charity?

The charity could have made somewhere in the neighborhood of $1,000 instead of $31. The car donor then would have been pleased with his legitimate tax deduction ($1,500) AND his charity donation. And that donor may have been back again in the future, bringing in another donation to this charity, and also telling friends, family and co-workers how well it went. Instead, though, the charity lost lots of money on the car donation, and it might have lost this disappointed donor forever, too.

We’re uniquely positioned as vehicle donation professionals to make sure that fairness flows in all directions. A big part of making this happen comes with making sure everyone in the process – from donor to charity – has all the information they need to make the best choices.

It’s time we as an industry opened our doors and windows – created transparency – so that donors know how much their vehicle sells for, how much goes to the cost of selling it, and how much (in dollar figures) ends up at their charity.

– The only way to change an industry is by example
Tim

Every donated vehicle has a story, and this one had a pretty good ending. I’m not complaining, considering the market.

A month ago I told the beginning of the story of a 2005 Ford E350 Sportsmobile 4×4 6.0L Turbo Diesel, long body, Sportsmobile conversion that was donated to charity.

This van in a good market could sell for above $70,000. (What a nice donation that would make for a charity!) Along with the troubles in the economy in general, though, the recreational vehicle market took a hit, and sales were down. We marketed the van directly to consumers, partnering with Sportsmobiles of the West, knowing that this collaboration put us right in the middle of the sportsvan retail market.

The E350 sold. Not for what we hoped. In this market, we got $50,000, which was considered by Sportsmobiles of the West to be fair market value. That’s a nice donation for the charity and a healthy deduction for the donor. No Complaints.

-Tim

Here’s how to get rid of even your most devoted car donor: under-value his car donation.
That’s right: Sell that vehicle he or she donated to charity for less than it is worth.

His tax deduction will plummet along with his donated cars’ sale price. He’ll wonder why you didn’t care enough about his gift to give it the attention it needed to sell somewhere near fair market value. He’ll think twice, maybe three times, before donating another vehicle to your charity. And what will his negative experience imply about the rest of your charity? Will he lose faith in that too? What will he tell his friends and neighbors about your charity?

To see donors’ vehicles getting less than their fair share of attention drives me crazy.

One of the most important services that car donation fundraisers offer is automotive expertise. We also need to have marketing and fund-raising expertise. It’s all part of the package, and I’d say that any vehicle donation fundraiser who doesn’t have expertise in the automotive industry is not a good bet.

How are you going to know you’re under-valuing a vehicle if you don’t screen it, see it and know its value to begin with?

Automotive vehicles of all kinds are a passion here. So is getting the most return on every donated vehicle. As any non-profit executive will tell you, finding new car donors is a tough job.

Losing them is easy.

– Tim Finnigan

Sometimes we find gems and classic cars in amongst the vehicles donated to charities and handled by Charity Development. Often, by screening them out and selling them through retail channels, we add significant dollars to the amount we raise for a charity.
Here’s our latest example of a “save” from the auction block.

It was a 2005 sports mobile, and it was headed for auction; it was valued at about $10,000 wholesale by the auction company. They were thrilled that they were getting bids in for $14,700. We stopped the sale in its tracks.

Let’s talk about this van that I suspected immediately and then verified through further research. It’s a special van, a 2005 Ford E350 Sportsmobile 4×4 6.0L Turbo Diesel, long body, Sportsmobile conversion. It is in great condition, sleeps 4 to 5 people, and it’s a favorite for everyone from outdoorsmen to scientists to surfers.

From wholesale auction to retail – a big difference in a charity’s return.

A similar one sold recently for $68,000, and the original price in 2005 was $95,000. This is an example of the real, bottom-line value of car expertise in the car donation arena. It stands out because it is an expensive specialty vehicle, but it’s not uncommon to find cars that should sell for close to $2,000 at retail ending up instead at a wholesale auction, and selling for $500. The result, of course, is less return for the charity and a lower tax write-off for the donor. (Let me add here that auctions are great and have an essential place in the general run of car donations.)

Direct-to-Consumer Car Donation Marketing

We did a lot more after we plucked this car out of the auction. We marketed it on an Internet direct-to-consumer auction (which could have brought us up to $45,000), and we are marketing it now to sportsmobile enthusiasts at $72,000. We think there’s a buyer for this high-ticket car, and we believe that the many hours of extra work and time marketing it will make a huge difference for this car donation’s charity.

In this win-win-win, the donor will be happy with the charity for doing its job well; the charity will end up with a larger donation check; and the community, knowingly or not, will benefit from more money going into the hands of a charity.

Tim