Charity Development Fundraising Blog

The majority of donated vehicles across the nation go straight to wholesale and salvage auction. For some of these vehicles, this is the most profitable route, but here’s the important thing to know: wholesale auctions are not the best route for all donated vehicles.

Camry on the left is just too good for a wholesale auction, but wholesale auction is the best route for the Camry on the right.

Some vehicles are just too good for a wholesale auction. They’re typically more valuable vehicles that will sell for more if we route them through retail outlets. It’s just plain unprofessional to send these kinds of cars through a wholesale auction.

Bottom line for the charity is: A higher vehicle sales price means more money to the charity.

You’ll often hear me talk about the problem of car donations being sent straight to auction, but with this caveat: wholesale car auctions do valuable and professional work. They’re simply utilized wrong (or out of laziness) by too many in the car donation arena.

In fact, I can tell by evaluating the 54 car donation cases tracked by the General Accounting Office Report on Vehicle Donations that these were probably all wholesale and salvage auction cases. The low final donations to charities are one indication of this. Another is the discrepancy between the donor’s assessed value and the actual sales price of the donated vehicle.

Valuable Car Donations Often Overlooked

Too often, car donations are received by a phone bank, picked up by a tow service and sent directly to wholesale or salvage auction. No one actually looks at the vehicle, and no charity-related auto professional screens it to evaluate its value.

This lack of screening is the first thing we must deal with in the car donation arena. It is the hub of the problem addressed in the GAO Report and the resulting Grassley Bill. The difference this one simple step can make to a charity receiving the donation is enormous.

The GAO’s Graph Explains the Typical Route of a Vehicle Donation

The General Accounting Office Report gave us a telling graph on the typical route of a vehicle donation. In its example, the charity received just $31on a vehicle with a value of at least $1,500. (For more on this valuation, see the discussion in our previous blog.)

GAO Graph illustrates a typical wholesale or salvage auction route

Now let’s take a look at the possibilities – the donation opportunities – that are being missed when vehicles go this easy route and are sent directly to wholesale or salvage auction. Using the standard fees quoted by the GAO report and as shown in the graph, look at the difference the sales route made for this truck and for the charities we serve (The truck sold recently for the price quoted):

1978 Ford F250 Illustrates Great Donation Opportunities, Too Often Missed

1978 Ford F250

We sold the 1978 Ford F250 shown here for $1,800 last year. After GAO quoted expenses of $313 and our 10% fee, the charity receives a $1,307 donation.

$50 – If this truck had been sent through the standard wholesale auction route noted in the GAO Report, the charity may have been left with about a $50 donation.

$1,257 – The extra steps we take to evaluate and sell the vehicle gets our charities more money. In this case, $1,257 more.

We have many, many more examples we could share, but you get the picture. Screening these trucks out of an easy route to wholesale auction means much higher donations to the charities we serve.

The numbers tell the story. Vehicle Donation professionals must begin now to take the responsibility to screen donations and then utilize the absolute best channels for vehicle donation sales. Charities are counting on us, and we owe them our best.

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

Change always begins with the first step taken, and that’s what my next several blogs are all about: taking the first step to making essential changes in the car donation industry.

Why? Because it’s time. It’s been over five years since the November, 2003, federal General Accounting Office (GAO) Report on Vehicle Donations focused on possible taxpayer abuse — and focused the public’s attention on how little of the proceeds from their car donations were actually landing in the hands of charities. It’s also been over five years since the Grassley Bill passed, revising car donation tax deduction law.

However, though the rules changed and the public’s respect for the car donation industry declined, most car donation businesses in the industry did not change; in fact, you can surf the Internet today and find a whole new proliferation of vehicle donation companies using the age-old tactics of “net proceeds” and percentages to steer dollars away from charities and into their own pockets.

Transparency in Car Donations

The public deserves better than what it’s getting from many in the car donation sector. It deserves an industry that works within established guidelines, one that can be trusted to be fair and committed to the dual goal of car donations: getting donated dollars into the hands of charities and tax deductions for the donors.

The Association of Fundraising Professionals (AFP) has drawn up a Code of Ethical Principles and Standards that applies to the car donation fundraising professional, too, with one exception, percentages, which I’ll get into in a later blog. (In brief: Car donation percentages work out better for charities than flat rates.)

I’ll be tackling the task of bringing problems out into the open, not just to air dirty laundry or to point fingers, but to seek solutions and open the windows to industry-wide transparency.

I welcome your collaboration along the way. In the end, I hope we’ll have our own guidelines that we can all agree to and that will honor the public’s trust.

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

Here’s how to get the most from every car donation to your charity: tell your car donors to sell their vehicles themselves, and then donate 100 percent of the proceeds to your charity.

Radical idea? Especially coming from someone who runs a car donation consulting firm? I’ve been told that it is. I’ve also told donors about this radical idea when they’ve asked me how to get the absolute most for their causes.

Unfortunately, most car donors tell me it’s just not feasible for them to sell and process their own donation; most don’t have the time to wait by the phone, the expertise to get their car ready for sale, or enough clear knowledge of the car’s value.

Still, owner sales would be the road to the highest possible proceeds for a charity, everything else being equal.

No fundraiser, whether they’re working within a charity or as a car donation fundraising consultant such as myself, can match a 100 percent donation. In-house fundraisers have overhead – direct costs such as salary and indirect costs, office and maintenance budgets.

Consultants have similar overhead. These costs are ours to bear as they are in any business or non-profit organization, and this is as it should be.

My thought for the day is: beware of any consultant who tries to pass his overhead fees on to you.

Working and Fundraising Together

Our job is to work together – you, the charity organization and me, the consultant – to get the most return for a car donation. This helps your charity, and it keeps your donors happy and loyal to your cause. We’ll never be as perfect as 100 percent, but your charity should be getting the lion’s share of all funds raised.

- 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.

2005 Ford E-350 donated to charity

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

Charity Development Answers Questions

Car donations have the potential to be a win-win-win situation, a win for the donors, a win for the charity they donate to, and a win for the community. Sometimes they are exactly this. But too often, the value of a car donation is dissipated on its road to charity.

And this is what I want to talk about in this Charity Development blog. Where do some of these car donations go astray? And can we find a way as a fundraising community to make sure car donations achieve their purpose?

Let me first say that the over-riding purpose for car donations, in my opinion, is to raise money for charities. Period. That is why we’re in this business of collecting car donations and taking on the responsibility of finding the most effective way to sell the vehicles; it’s all about raising money for our charities.

Car donor Benefits

As a side benefit, vehicle donations also serve the interests of car donors. Think about why an individual donates a car in the first place. In my experience, I’ve found that most donors have a deep interest in the charity they donate their vehicle to, and the more valuable the vehicle, the more sincere interest they have in that charity.

It’s true that car donors get a nice tax write-off for their charitable giving. That’s a motivating force, too, to turn the car over instead of selling it at the nearest used car lot. The Grassley Bill that limits deductions and the current legislation under discussion notwithstanding, car donors do expect to benefit from their donations.

Community Benefits

When the system’s working right, we all as a community benefit, too. Here’s my thinking on that: when we as private citizens contribute to the work of our charities – feeding and sheltering the homeless, mentoring our youth, funding disease research, and more – then government funds are free to go to other community requirements, for everything from education to maintaining highways. We all benefit from a government running under a healthy budget.

Fundraising System

So, what does all this have to do with the car donation fundraising professionals that keep the system going? Lots. It’s up to us to make fundamental changes in the standard operating procedures of the car donation system. We need to educate charities on how to get the best value for their car donations. We need to create a transparent system, so charities can make informed choices.

And that’s what you’ll find in this blog: discussion for informed choice.

— Tim Finnigan