Donating cars to charity has become a very popular way to make a charitable gift. It can seem like less of a financial burden than writing a check, and the charity will likely have a good use for the car. The real question is whether or not it makes financial sense for you.
Is It Time for a New Car?
The first question to ask yourself isn’t whether or not to donate your car to charity, but whether it’s time to get rid of your car. Some people like to replace their car every time their lease is up and the car is still in great shape. Others will drive their car into the ground, nursing it through repairs until it can go no farther. Obviously, the value of these two cars is very different, and the decision to keep the car depends on what your financial situation and values are.
It generally makes sense to think of disposing of your car when it begins to cost you more time or money than you deem it is worth. A variety of situations can lead you to this, such as:
- Your car is unreliable or needs many little repairs that you don’t want to undertake.
- Your warranty has expired.
- Your car needs expensive repairs.
- You no longer drive much and the insurance and registration costs are a nuisance.
Determine Your Car’s Worth
One way to help decide whether you’re ready to donate a car to charity is to find out how much it’s worth financially. You can look up the “blue book value” on the Kelly Blue Book website. There you will get a ballpark estimate against which you can balance your costs.
Understand Taxes & Car Donations
Don’t forget that you can only deduct donated cars on your taxes if you itemize your deductions. If you don’t itemize deductions, your charitable donation won’t be taken into consideration.
Another important point to consider is the value of your deduction after donating a car. For example, a $1,000 donation to charity doesn’t mean you’ll pay $1,000 less in taxes. It means that $1,000 will be subtracted from your annual income, so you will pay taxes on a smaller amount overall.
What Makes Sense for You
Supporting a charity is a very personal choice. Charities fill an important role in society and have seen their funding cut while demand for their services increases. On the other hand, you may need a new car to replace the one you plan to dispose of.
Ask yourself a few questions:
- Will I need a bigger loan to buy a new car if I don’t sell my existing car? How much more is that going to cost me in interest payments?
- How much of a deduction will I get exactly for my car?
- Will I be itemizing deductions next year or taking the standard deduction?
- How much is the deduction going to save me on my taxes?
- Is donating my car easier than trading it in or selling it myself?
Once you’ve arrived at the answers to these questions, you’ll very likely know whether or not car donation is the right choice for you.