Famous Last Words

"I will never, ever drive a mini-van." These were the words spoken by my wife- Amy- back in 1999 when we were dating.

It was such a rich quote that I decided to write it down and save it for the ages. Fast forward 8 years and sure enough we are purchasing a mini-van for our family of four- the Honda Odyssey.

It has been my secret mission ever since 1999 to have my wife's words come back to haunt her. Not really. But I am having plenty of fun with her about it.

Actually, what I want to write about today is what to do with used cars. If you are able to do so; you should consider gifting your used vehicle to charity. Not every family is in a position to do this. But I have some reasons to recommend this course:

1. When given to the right charitable organization, the vehicle can be a life-changing gift to a needy family. I chose to give our 2000 Infiniti I-30 to Cornerstone Assistance Network in North Richland Hills, TX. This organization is constantly in need of reliable cars because they serve single mothers, reformed drug addicts, prisoners, people with financial hardships, etc...

In my situation, I have a car worth around $5000 as a trade-in according to http://edmunds.com. If I traded that car into a car dealership, I might have received that amount. But it would have been a battle. New car dealerships make their large profits on underpaying for trade-ins and selling you lots of stuff you don't need in the F&I (Finance & Insurance) office. But what happens to your car after that?

It might be sold at auction. This is the best outcome you can hope for.

In reality, it is often put on a tote-the-note lot and sold to a person with bad or unestablished credit. The car is likely marked up $2-$5k and the interest rate on these loans is 15% plus. In other words, your car contributes to a great problem. You are helping those who prey on the poor.

2. You do receive a tax benefit for giving the car away- if you itemize your deductions. You will receive either the fair market value of the car if it is used by the charity. Or you will receive a deduction equal to the what the car is sold for at auction if the charity sells the car. If the car is worth over $5,000, you will need to get a certified appraisal to back up your deduction claim.

The IRS puts out a publication that outlines the rules to follow in this area:

http://www.irs.gov/pub/irs-tege/pub4303.pdf

If you must sell your car due to financial necessity, there are some other options to consider besides trading it in to a car dealership where you will often not receive a good outcome.

Another option: you could sell the car yourself at a reasonable price. If you are dealing with someone who might buy their cars at a tote-the-note type car lot, you could even finance the deal. Charge 6% instead of 15%+. Sell the car for $500 over trade-in value instead of $3k over trade-in value. You are taking some financial risk here if you choose this option. The person who buys the car from you might not make the payments. But you are helping someone in need obtain a deal that they could not obtain otherwise.

This blog is not meant to make anyone feel guilty if they routinely trade their cars into dealerships. Nor is meant to indict all car salespeople as dishonest. I sold cars for a year right out of college. I know honest, hard-working salesmen. Unfortunately, those with high integrity get lumped into the poor reputation that the industry has due to the poor practices of some.

There are honest car salesmen who do not contribute to the predatory practices that take advantage of the poor and needy. If you find such a person, by all means sell them your car. My greater concern is for the practices that appear to be widespread in the industry dealing with used cars worth under $10k.

There are over 300 verses in the Bible that relate directly to God's concern for the poor. Proverbs 29:7, "The righteous is concerned for the rights of the poor; the wicked have no such concern."

For His Glory,

Ashley Hodge