Better Gas Mileage

What four things should your consider when trying to decide to donate a car or sell it? These four very important things are: 1)the value of the car, 2)a charity that could use the car, 3)your tax bracket, and 4)the value of your time.

In determining the value of your car, you need to consider what the “real value” is. Many people mistakenly believe that they will get whatever the Kelley Blue Book says is the expected value. That is not always the case. Other factors affect what you can expect to get. The value stated by the Kelley Blue Book (KBB) is a good starting point in estimating what to ask, but is often not a reasonable expectation. A more realistic estimate would be to cut the KBB estimate by 30%. Of course, it will be further cut by the tax liability based on your tax bracket.

The discounted KBB price will be cut again based on the tax bracket you fall under. If you are single and have a gross income of $50,000 a year, you are in the 25% tax bracket. This means, assuming that you do succeed in selling the car for $1000, after taxes you’ll just be netting $750 from the deal.

An additional expense to consider when you think about selling is the cost of advertising. You will have to subtract whatever advertising expense you have from the net profit. Assume you are going to have to spend $80 to advertise in an auto magazine and $30 for a newspaper. That totals to $80. Subtract that from the $750 net, and you are not down to $670. To get the top dollar for your car you may need to get it professionally cleaned and detailed. That will cost you probably another $70. You are now down to $600 for that $1000 car.

You will want to ensure that the car is running properly. Take away another $75 for a mechanic to inspect the vehicle and write up an info sheet on the car’s condition that you can present to prospective buyers. It’s also important to remember that a car’s exterior condition may be more crucial to its sale than anything else. You may also want to repair body damage on the car as even the most seemingly insignificant everyday nicks and dings can discourage a buyer.

Do you see how the net value from selling the car now goes from $750 to $525? There is actually potential there for less than $525. What if something is wrong with the car? What if you need work done to fix some dents and scratches?

Let’s look at the difference in profit potential for donating compared to selling. Most donated cars are sold at auction. The IRS says they must be sold at auction and in use shortly after you have given it away in order to take the full deduction. Your tax deduction will more than likely be $500 or the auction price. If you get only the $500 deduction, you will be netting just $25 less than all the trouble of selling it. Is it really worth it?

Selling a car can be quite time consuming. You will have to deal with strangers and answer all their questions and concerns about the car. You may get phone calls at all hours, some being very inconvenient for you. Your time counts for something.

Selling a car may mean having to deal with phone calls at whatever time the phone rings, whether it is convenient to you or not. You could well spend an hour or more dealing with potential buyers and their questions. Planning and producing ads and signs can easily consume another hour and a half. Taking the car in to the body shop and mechanic may take an additional two hours and may even involve having to miss some work or arrange another means of transportation while it is in the shop. Having it cleaned and detailed may involve another half hour or so.

You can expect to have to show the car five to ten times before you get a buyer. You will have to schedule the showings at the customers convenience, and sometimes will schedule an appointment to show the car and have them not show up. This can eat up the time, and add as much as three hours to the time required to sell your car.

It is plain to see how at least eight hours are consumed in selling your car, with only $25 expected profit. Can you really afford it? If you donate the car, you just have to call someone to come tow it away to auction and you are done. You never have to think about it again until income tax time when you take that deduction. It is obvious that donating your car makes much more sense than selling it.

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