THE CAR DONATION INDUSTRY IS FLAWED: AN OVERVIEW
Nearly all donated cars are immediately flipped for cash, and donated cars are rarely driven by a person in need.
The current model is oriented around quick and easy cash at the expense of the poor, the car donors, and the nonprofits.
Wheels to Work will show in this article that as many cars as possible must be given to an actual person. Not only is it common sense to utilize the donated cars, but we will show, indisputably, that using the better cars is the superior option.
By the current model, your donated car will be flipped, and due to the nature of mass sales, about 25% of your car’s tangible value will be given to a nonprofit. In our model, the car is simply given directly to a person, which ensures that 100% of your car’s tangible and intangible value goes directly to an actual person.
The Current Situation at Its Best
The following are a few necessary numbers. Please bear with me.
Roughly speaking, about 20%-33% of donated cars are unsuitable to be used by anyone, and they are scrapped for parts. The rest of the donated cars, 66%-80%, are sold at auction. There are rare exceptions to this, but none of those exceptions exist in Cleveland.
For example, let’s say you donate a car worth $3,000 to a charity in Cleveland. The following is more than possible, it happens on a regular basis across the country.
The vultures pick away at your car…
You donate a $3,000 car to charity.
That car is sold for ~$1300 at auction
The third party (normally for profit) handling your car donation keeps most of the money.
Hopefully, $650 makes it to a nonprofit. Hopefully. On average, third parties keep 65% of the gross sale of cars according to the General Accounting Office (GAO). Some do better, and see below on how many do much, much worse.
You get a tax break for $650 when you could have gotten $3,000 with WTW.
Then the for profit industry sells that car…
Assuming industry standards of a 35% mark up, a used car dealer lists your car for $4,000.
Assuming industry standards, your car is financed for around $6,000.
Defaults, destroyed credit, garnished wages, and similar hell can follow.
Or, you know, you could just give the car directly to a person who needs it.
Say what you will about WTW, but we have logic on our side, undeniably. Let me break it down.
Donated cars in decent shape need to go to a person or organization. The cars need to be used.
That option does not exist in Cleveland.
Wheels to Work is created to facilitate this.
Winners and Loser
The current model, at its best, makes sense in many ways. The nonprofit barely has to lift a finger for a crucial donation, and most of these nonprofits work off tight budgets. Then, the for profit companies are just trying to make a buck.
Who can blame anybody?
Our point is to look at the winners. In our model vs the current model, who wins?
The winners with WTW are the guy or gal donating the car, the one receiving it, and the non profits.
By the current model, the winners are the auction house, the used car dealership, and the auto loan sharks.
When the current model is performed appropriately, it is not an awful situation, but WTW can improve the industry.
But, when it comes to car donation, it is often far from the best case scenario…
Car Donation Companies Can EASILY Be Scams
The scary part is that the scenario listed above is often the best scenario. We shall now describe how often car donations turn into unequivocal scams.
In short, if you are a bad person, the car donation industry is a great place to thrive. WTW wants to change that.
For the remainder of this section, I will merely reference outside sources. Let the facts speak.
CNBC’s Andrew Osterland wrote, “The car-donation industry is riddled with fraud and deception, with multiple states investigating outfits for false advertising and self-dealing.” You can read his article here.
Stephanie Kalivas, an analyst with CharityWatch, a noted nonprofit watchdog, stated, “At the end of the day, donating a used car could be the least cost-effective way to give to a charity.”
Investigators at a local Illinois newspaper (read here) dove deep in 2017 on car donations. It is only natural that a third party take a fee from the car’s sale (WTW does not by the way) for facilitating a car donation. Far too often, that fee takes the value of the car. Here is a quote from the article:
Automotive Recovery Services of Westchester, Ill., processed donations worth $6.5 million for the National Veterans Service Fund in Darien, Conn., but the charity received only $1.2 million, about 18 percent.
Cars worth more than $2 million were given to Tampa-based Vetmade, but only $91,000 — 4.5 percent — made it to the charity.
In Fullerton, Calif., Faith’s Hope Foundation saw only $3,000 trickle in from nearly $600,000 in donations.
The examples are endless…
Furthermore, here are a few more scams for good measure mentioned by Mercury News:
Well-meaning folks donated cars worth more than $2 million to Tampa-based Vetmade in 2015 – but only $91,348 made it to the charity, according to data from the California Attorney General. That’s 4.5 percent.
Fund Raising Partners also handled car donations totaling $593,889 for Faith’s Hope Foundation in Fullerton. The return to that charity was even lower – just $3,213, or 0.5 percent.
I might add one more quote from that article, for good measure, “Give vehicles to charities that can actually use them.”
Nonprofit Watchdogs
If a charity can receive 50% of the sale price of a donated vehicle, it is a better case scenario, according to CharityWatch and Charity Navigator. I’ll let them speak for themselves, instead of muddling their words with a paraphrase.
CharityWatch: “A charity that uses a donated vehicle for transportation or hauling goods obviously benefits directly from such a donation. However, in many cases donated cars will be sold en masse, either by the charity itself or by a dealer to raise funds for the charity. In the case of a dealer, the charity generally receives a flat fee per car, sometimes as little as $45 per car.”
Charity Navigator: “The biggest winner in the car donation process is usually the donor and not the charity recipient. But if you take your time, ignore the quick and easy television appeals, and find a reputable, high-performing charity that will make the most of your donation, then you can maximize the amount that actually gets to charity and minimizes your risk of an IRS audit.”
Lastly, I will leave two links from CharityWatch (one and two). They cover two well known, nationally prominent organizations. You have heard or seen their ads several times. All we are doing is providing a link to two articles regarding these famous car donation charities.
We are terrified of being sued by them because they are one of those nonprofits that sues frequently, so to be clear, we are not referring to them as scams, we are simply acknowledging their attention garnered by CharityWatch.
Our Model
For the nuts and bolts, WTW functions as a third party car donation service. Instead of selling a car and giving some of the money to a nonprofit, we just give the car directly to the client of a nonprofit.
We provide the logistics, marketing, and liability shield of car donation for nonprofits in Cleveland. We do not handle that many cars per year, so we consist of one employee (me) who provides a car donation service to nonprofits in Cleveland.
The purpose of this article is not to describe WTW’s process, but we would be remiss if we did not mention it. Here it is.
You have a car to donate.
You come to our website, fill out some questions. If your car is deemed suitable, we will take it. We can guarantee that your car will be used by the client of a registered nonprofit.
The nonprofit selects a client to use your car.
WTW navigates the logistics of the car transfer .
Keep in touch— we want to tell you about your car and how it is used.
Cash vs Something More
We will be quick on this one.
There is nothing wrong with quick cash. You could donate your car for a fraction of its worth, and a nonprofit would be helped.
Or, you could change someone’s life.
You could give them a shot at work, at friends, at a new life. School, rockclimbing, and maybe a girl across town. Life opens up with a car. Life happens with a car.
I gave away my car, I started WTW, and I need more cars.
More cars, more stories… something more.
Let’s get to work.
