Charity Development Fundraising Blog

To Wholesale or Not to Wholesale a Donated Vehicle – You Decide

Tim — Thu, 27 Aug 2009 18:16:29 +0000

As I mentioned in the last blog, the expertise of the car donation field lies in the handling of donated vehicles. Anyone can get a car towed to a wholesale or salvage auction and have it sold. But those of us in this field who work closely with charities know that we can make a huge difference when we do a good job processing a donated car. In fact, we can make the difference between a healthy donation to a charity – or just lunch money.

I have a video I want to share with you because I think it illustrates what I’m talking about.

Recently, we had some fun with this donated 1968 VW van. We uploaded a YouTube challenge to readers – “What’s it worth?” we asked. And I’m asking you here, too: What do you think this VW van is worth?

Should we recycle it for parts and crush the rest? Should it be sent to a wholesale auction? Or is there something about this neglected old VW Camper Van that might capture the heart of a buyer? And then, once that heart is captured, bring in more money for the charity the van was donated to? What’s your estimate of the value?

We sold it for almost $700, even though, if you’ll look closely, you’ll see it has no intact motor. Yet, it’s a VW van restorer’s dream. We knew there would be someone who would love this old VW!

And here’s what we’ve learned. With the right vehicle, knowledge, care and effort, we can sometimes increase a vehicle donation value by 450 % (percent). We did it with this old VW. Sending it to be recycled would have brought in about $150 at most instead of almost $700, which we sold it for.

2005 Ford E-350 donated to charity

We do the same thing, too, with high-end vehicles. The Sportsmobile mentioned in a previous blog is a good example of this. Because we screened it out, we sold this 2005 Sportsmobile, which had a high bid at auction of $14,700 — which we declined, instead bringing the van into our retail program -- for $50,000. This was about a 350 % (percent) increase in sale price.

Whether an old or a new car, there’s a common thread between these two donations: both went to retail and both sold for 350 % (percent) to 450 % (percent) more money because of that. — What do you think that meant to the charity or to the bottom line for the van donor’s tax deduction?

We receive many thousands of donated vehicles — cars, vans, trucks, boats, you name it – and from the beginning we’ve refused to take the lazy route of simply shipping them off to either salvage or wholesale auction when a vehicle deserves better.

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

Wholesale Auctions – Not Always the Best Route The majority of donated vehicles across the nation go straight...

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Wholesale Auctions – Not Always the Best Route

Tim — Mon, 27 Jul 2009 20:15:52 +0000

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

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Car Donations What the GAO Report Does NOT Tell You

Tim — Tue, 07 Jul 2009 20:22:29 +0000

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

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It’s Time for Change in the Car Donation Arena

Tim — Mon, 22 Jun 2009 19:24:37 +0000

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

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ID Theft – How Charities Protect Their Good Names

Tim — Mon, 27 Apr 2009 19:15:16 +0000

The public is aware that Toys R Us and other large corporations diligently protect their names against copy-cats and ID theft. The reason’s obvious: copycats and thieves cash in on the brand recognition, good name and national marketing done by these large corporations.

ID thieves try to steal the good name of well-known charities in the same way. It doesn’t get talked about much, but large, successful charities – those with both brand value and brand recognition – are often victims of attempted ID theft.

Charity Donors Being Deceived

ID thieves dupe consumers with variations on a good name; imagine the consumer’s confusion when approached to donate to the U.S. of Red Cross (NOT the American Red Cross) or to look-alike names such as Cars for Causes, impersonating as Cars 4 Causes®.

We Take Legal Action

We in the charity realm protect our good names as diligently as do major corporations.

This often seems to come as a surprise to the thieves using the Cars 4 Causes name to drive donors to their Internet donation forms, and they seem surprised when we discover them. We usually do! Either a car donor calls to complain about shoddy service, mistakenly thinking Cars 4 Causes is the organization they donated to (Imagine their disappointment when they discover they’ve donated to some imposters!), or we see a series of bogus Internet links misleading trusting donors.

We Pursue ID Thieves

We’ve built our brands through marketing, creating our reputations and building well-deserved trust amongst charitable donors and organizations. So, we in the charity realm are getting the word out: we pursue ID thieves. We send 20-day cease-and-desist letters and we pursue violators in court. As a consultant for Cars 4 Causes, I’ve helped to pursue a China-based company using the Cars 4 Causes name, as well as other ID thieves here in the U.S.

We’re serious about protecting our good name. Car donors trust us; charities trust us; we follow through on our promises.

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Took a Market Hit, Sold Anyway!

Tim — Wed, 10 Dec 2008 22:32:03 +0000

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

2005 Ford E-350 donated to charity

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

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Shabby Car, Beautiful Donation

Tim — Fri, 05 Dec 2008 22:30:30 +0000

You don’t expect much of a donation from an old car that’s been garaged for a lifetime and neglected for even longer, but this one brought in a cool $8,000.

Lotus, shabby on the outside

It’s shabby, but it’s a 1964 Lotus Elan, a California black license plate car. Its condition? Even a generous appraisal would call it poor. It wasn’t running and hadn’t been registered for ages.

Here’s an interesting thing about the car donation world: most vehicle donation firms send unregistered and non-running older cars straight to recycle (or the chopping block).

We don’t – it’s that screening commitment we have. We look at every car before we move it along, and this is exactly what we did here.

What tipped me off, too, was that fact about the car being garaged for so long. Not just rotting in the backyard, but garaged. That tells me that someone had plans to restore it.

Lotus, shabby interior, beautiful donation

Apparently those plans did not come to fruition.

So, a charity benefited, and, OK, so did car enthusiasts. Once the new owner restores this little beauty, it’ll be on the road (or being raced), and that’s one great way to beautify a highway.

- Tim

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A Radical Idea for Car Donation Fundraising

Tim — Fri, 21 Nov 2008 17:11:38 +0000

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

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How to Lose a Loyal Car Donor and Charity Supporter, Forever

Tim — Thu, 30 Oct 2008 20:00:41 +0000

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.

Giving a car to charity as a gift

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

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Advice to Charities: Never Turn Away a Junk Car

Tim — Tue, 21 Oct 2008 22:47:24 +0000

Junk cars – those old cars sitting in someone’s backyard – though not drivable, still have value for non-profit organizations. Charities, not being automotive professionals, sometimes turn their noses up at these low-end donations. “What’s the value of a car that can’t move?” they ask me.

Car being recycled

I have a good answer. They can be recycled. A fair percentage (though not the majority) of cars donated are not road-worthy. They get towed and usually are moved straight into recycling distribution channels. There, they offer a wealth of under-appreciated benefits to charities and communities.

About 85 percent of an automobile is recyclable. Its usable parts move through salvage yards to a second life to repaired vehicles. The leftover metals, plastics, glass and rubber find new life in everything from appliances to automobiles to bicycles. And, depending on the scrap metal commodity market at the time and region of donation (Scrap metal prices are different on the East Coast than on the West Coast), recycling a clunker can often bring as much as $400 to a charity.

Recycling these old vehicles does another good turn for the community, making sure that the old, pollution-spewing vehicles do not return to the road.

We advise our clients to accept almost all vehicles, including old junk cars, because even these old clunkers can bring in significant money for the charity if handled properly. Also, in addition to raising funds for their cause, the charities are doing their part to recycle and reuse.

– Tim Finnigan

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