by Pamella Neely
What do you need to keep in mind when deciding whether to sell or donate a car you are ready to get rid of? One thing you need to consider the value of the car. Another thing to consider is whether there is a charity to which you might like to donate it. Also, consider you tax bracket and how it will affect your net profit, as well as considering what you time is worth to fix it and advertise.
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.
Other expenses also need to be factored in. You need to advertise. Let’s say you spend $80 on advertising. That means only $670 for the car now. You may also need to have it professionally detailed. Subtract another $70 for that. Now your car is only going to net $600.
You will need to get the care inspected by a mechanic to be sure it is running correctly. Also, you will want to repair body damage to ensure you are getting top dollar. Subtract $75 or mechanic fees for the inspection alone, and you not have a car that is only netting you $525.
We are now down to $595 as the value for the car. There may still be other expenses to consider, such as body damage repairs or mechanical repairs that are necessary to be able to sell it. Then, you would be down to even less than that value.
What if the financial benefits to donating the car? Would it compare at all to the $595 you anticipate getting if you sell it? Most cars donated to charity are sold at auction. A new IRS rule says that to get the full deduction a car must be sold and in use immediately after donation. You will typically get a $500 tax deduction or possibly even more, if the car sells for more. You see that if you donate the car, at the most you would come in with only about $25 less than what you would get for selling it. Possibly, you would get even more as a deduction. Even if there is only a $25 difference, is it worth the time and hassle you go through to earn only $25?
To most of us, our time is extremely valuable. You only have a limited amount of time, and probably could find something better to spend it on than fixing up and selling a car for such a small amount of net profit. You will have to arrange you schedule to allow time to handle the sale, plus having to deal with strangers. Is it worth it to you?
What kind of time are you looking at to sell a car? Count on an hour and a half or so making signs and/or producing ads. Another one hour can be consumed in phone calls. Mechanic appointments may take two hours and may be inconvenient with work schedules. Cleaning and detailing may consume another half hour. You have easily just used up five hours before you ever get the car sold.
What kinds of tasks must you schedule for? You have to schedule time for the potential buyers to come and check out the car and give it a test drive. Often, you will set aside time in your schedule to show the car and the potential buyer never shows. Sometimes you will be asked to take the car to a potential buyer’s mechanic to have it inspected. You can easily consume an additional three hours this way.
The total time involved so far, with conservative estimates, is approximately eight hours. You have to go through several things that may not be something you really are interested in doing, just to get a buyer. In contrast, to donate the car it takes only a phone call to get someone to come get it. You will also have the satisfaction of helping a charity. So which is the better deal for you, selling or donating?