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.

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.)

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

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

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

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

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.

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