
What Happens to Donated Cars? - rohin
http://priceonomics.com/what-happens-to-donated-cars/
======
nsxwolf
My car donation story:

In 1998 I donated a car to the American Lung Association. It was picked up
from my driveway and I thought that was that.

Months later, I received a bill in the mail from the Chicago Police Department
for impound fees. I do not remember the total but it was in the THOUSANDS.
$4000 or so sounds about right in my cloudy recollection.

It had been dumped in an alley somewhere in downtown Chicago. The registration
had never been transferred and I was still the legal owner.

I got it cleared up (fairly easily, thanks CPD - must be a common enough
thing), but beware.

~~~
idoh
I've a similar story - I donated the car to KQED. Car gets picked up, get
receipt, end of story right? A month later an insurance company calls me, says
that my car was involved in a hit and run accident and I'm the registered
owner still. It was a hassle but I was also able to clear it up, thankfully I
kept the paperwork.

If I had to do it over again I would have sold it to a scrap yard and then
donated the money. If you don't physically see the transfer of ownership at
the DMV then you are open to these things happening.

~~~
bagels
From the DMV website: "When the owner of a California registered vehicle sells
or transfers title or interest in the vehicle, the seller must complete a
Notice of Transfer and Release of Liability (REG 138) and submit it to the
department within five calendar days."

<http://www.dmv.ca.gov/forms/reg/reg138.htm>

~~~
GFischer
if you think filling a simple form is "hassle", you don't know what the South
American / Spanish system is.

In my country, to sell a car, both the buyer and seller must have a notary
("Escribano", a special kind of clerk with a graduate degree). The notaries
must check several state and country records (with assorted fees), checking
for mortgages, impounds, even parking or speeding tickets (across all 19
states, which have separate records and systems). Then they write a special
contract, which has special legal validity since it was witnessed by a notary.
That contract is entered into the country registry of property.

After all that, you have to pay your notary a hefty sum (3% of the properties'
value for houses, and several hundred dollars for cars, even clunkers), both
buyer and seller sign the contract, the notary witnesses the act, buyer gives
the money to the seller and you're done.

So, after a few weeks, if all goes well, you can proceed to give the keys to
the buyer :P

Edit: it's worse, here's another version (which skips several steps, but adds
some I'd forgotten)

<http://board.totaluruguay.com/Transportation/Purchasing_cars>

"The usual order of events when buying a used car is...

1\. Find the particular vehicle you want to buy either privately or from a
dealer. The Sunday edition of El Pais offers a wide selection as does
mercadolibre dot com dot uy and you already know about bottles. If you are
used to northern second hand car prices, be prepared to pay an apparently eye-
watering sum for an old car with an improbably high kilometer reading.

2\. Find yourself an escribano/a to do the paperwork.

3\. You and the vendor visit the escribano, present your IDs, sign the
contract for sale, the purchaser pays the money, the vendor hands over a sheaf
of papers and the escribano will provide the purchaser with the appropriate
paperwork for the junta local to prepare a new "libretta" (plastic coated car
registration card) with your name, your physical address and the car's
details.

3\. Before driving the car to the junta local, the purchaser will need to
insure the car as insurance is now compulsory and the junta local will want to
see a certificate of insurance.

4\. On arrival at the junta local, the car will be physically inspected by a
funcionario to ensure that the engine and chassis numbers on the vehicle match
those on the paperwork. If the car lacks a current "patente" you will be
charged for however many months are due for the remainder of the calendar
year. If the vendor lived in the same departmento as the purchaser, the
existing plates go with the vehicle. If you are re-registering the vehicle in
a different departmento, you will be issued with new plates. It used to be the
case that the cost of the patente varied from departmento to departmento. I
have heard that patentes are to be standardised across the ROU from 2012.

5\. The escribano will start a series of searches to ensure that there are no
outstanding fines nor other charges due on the car in all 19 departmentos of
the ROU. This process can take several months but you can continue to drive
the car in the meantime. You cannot take the car out of the ROU until this
paperwork has been completed as one of the documents will be a certificate
from the Ministry of Culture confirming that the former owner(s) were not
Uruguayo figures of cultural importance. :-) "

That's why my country has the dubious distinction of being "most bureaucratic
country on earth" for several kinds of stuff (car transfers being one, and
construction being another, being so bizarre as you having to have a permit
and pay taxes to paint your own home)

~~~
lesterbuck
I'm sure there are all sorts of reasons why not, but the above list of
inefficiencies makes me start wondering about applying some code to one or
more of the steps. How about starting to automate the 19 searches, and sell
the service to the escribanos?

I visited Brazil in the early 90s and heard how everyone had to physically
visit the bank and stand in a line to pay various utility bills. Mailing a
check had not penetrated that economy at the time (too few people had checking
accounts, whatever.) I wondered about a service that hired people to stand in
line for them, but would have to overcome the problem of handling cash.
Thankfully I have since heard that Brazil uses checks and other electronic
payments methods now.

~~~
lmm
It's in the escribanos' interest for the process to be long and complicated -
they're probably charging by the hour.

~~~
GFischer
Escribanos feel EXTREMELY threatened by technology. When a digital signature
bill passed, which gives legal equivalency to some forms of digital signatures
to escribano witnessing (the only way to give legal legitimacy to some
contracts in my country, absurd as it may seem), they protested strenuously.

------
smithbits
I'm a little confused by the conclusion that "It is up to donors to do their
research and donate in a way that will maximize the support they provide for
charities." I gave a 10 year old Honda Civic with 198,000 miles on it to KQED.
A truck showed up and took it away and I got a tax deduction. The car ran okay
but didn't pass the California smog test and the chances of me selling it to a
third party were small. I got what I wanted, an old car taken away for very
little effort. I chose KQED because I'm a big fan of public radio. It was up
to KQED to maximise the amount of money they got for it.

~~~
newbie12
Point is that taxpayers are subsidizing your gain in disposing a car that
isn't worth the book value, as well as the process of transporting and selling
the car, and KQED might not get much money at all.

~~~
yonran
The problem isn’t that the car isn’t worth the book value. As the article
stated, you can only deduct the price that the car gets at auction. The
problem is that you deduct the gross auction price rather than the net amount
that the charity can use. It comes back to the question of how much overhead a
charity should have (see also Dan Pallotta’s talks that have been making the
rounds).

What I don’t understand is what prevents a for-profit service that provides
hauling, and returns to you the auction proceeds minus hauling fees and zero
value insurance. Then car owners would have a real choice between pocketing
~50% of the car value and giving it to charity and getting only ~30% as a tax
deduction, and they would be less likely to give the car to an unsavory
profiteer.

~~~
pyoung
Assuming your car has to be towed away (for whatever reason), financially,
your best bet is to probably sell it to a junk yard. They will tow it for you,
and throw you a couple hundred bucks.

~~~
meepmorp
My impression was that towing is more about convenience for the donor rather
than operability of the car. This way, people donating cars don't have to
coordinate dropping off the vehicle at a location and then getting home.

------
_mulder_
An interesting read but, boy, was that a needlessly long article!

TLDR; Some car donation schemes are run as for-profit entities but we can't
tell how many because the Governement don't keep accurate records. If you
donate, do some research before you do.

Maybe someone should do a Priceonomics article on the length, and usefulness,
of articles vs, cost of time spent reading it.

------
kqr2
I like to use Charity Navigator before donating to new charities.

They have a quick guide on donating cars:

[http://www.charitynavigator.org/index.cfm?bay=content.view&#...</a>

------
tehwebguy
Interesting read, I wasn't aware of the tax situation around donated cars.

Probably not related, but I'm also interested in the advertising for people
that buy "junk cars". I'm saving the SMS junk car spam I get, planning on
plotting the advertised price against a timeline for fun.

~~~
speeder
I am from Brazil, I dunno how it works in the US, but here, "junk cars" are
for illegally bringing back to streets illegal cars for some reason or
another.

Here the system is very simple, yet efficient and lucrative: You steal a car
(for example a BMW, here in Brazil those get 2, even 3 times the US price).

Then, you buy a junked BMW, maybe even a totalled one, with roughly the same
model.

Then you "mashup" the two, mixing the two cars into one, making sure the
serial numbers on the chassis and engine end being the least illegal ones.

Then you bribe some officials... And you can resell your "refurbished" and
"used" BMW for the US market price (that here is 1/3 of the normal price), you
can even claim to clueless buyers that you bought the car in the US and is
reselling here (this is illegal here, reason why the car is so expensive, you
need a special permit to buy a car outside Brazil), to make them think the car
is legal.

Of course, since you made the car using two cheaply obtained cars, this is
very lucrative.

Some people don't even steal cars, if the model is popular enough (And still
lucrative) you can just keep buying junked cars until you have enough parts to
build a sell-able one.

~~~
grecy
I think a variation of that happens in every country in the world.

I've heard it called all kinds of names like "re-birthing".

~~~
guylhem
If you remove the "stealing" part, re-birthing is about creating value and
recycling.

People are spending their time and skills in creating good cars (ie that the
market is willing to buy) from unusable cars.

They take say 5 bad ones and make 1 good one. That's like a 20% recycling -
and the bad one can be sold for parts.

Why exactly is it a bad thing???

EDIT: Yes, I would be comfortable driving myself and my family in such a car.
When I buy a car, I take it to a professional I chose (not one that the seller
chose) for a 2nd inspection - one that I pay for myself. If the market can
provide me such a car and a professional to evaluate the car, yes, I am quite
comfortable with that.

Would you prefer "brand new" cars that have unknown defaults that can be
fatal? (but that you will learn about only after N people died) These new cars
passed all the government tests after all, so do you trust them more? A used
car has an history - a professional know the defaults of that particular brand
and model, and knows what to look for.

Maybe it's my own biais (aversion to uncertainty?), but everything fails. I
prefer things (cars, computers, prescription drugs, etc.) which precise
failures are known in advance, thanks to say 100k people having use that same
thing for 5 years.

Unfortunately, that exclude most "new" things, since the models are constantly
"upgraded".

~~~
grecy
You're right, it's not always a bad thing.

That being said, cars are often "written off" or somehow declared illegal to
ever be driven on the road again once they have a certain level or kind of
damage. This is done to keep everyone safer by removing vehicles that don't
meet an acceptable minimum standard.

If I chop up 5 cars declared illegal for road use, and make one car from them,
is it safe enough? How is that tested? Usually, people that are "re-birthing"
cars are not interested in telling the new buyer the history, so nobody will
even know the particular car has a questionable safety history.

Would you be happy driving your young family in a car that I welded together
from other cars?

~~~
fr0sty
Cars which are "written off" by insurance companies are also known as a "total
loss" or "totaled" and the title for that car will be branded as such. These
things only happen in the case of insurance claims after accidents and such.

Those cars are, as you say illegal to operate as-is, but there are many non-
running cars which would be (if certain repairs were made) perfectly legal to
drive. Buying up several of these cars and assembling the best pieces is
neither illegal or nefarious. Even buying a few "totaled" cars as donors for
certain parts is perfectly fine as well.

~~~
grecy
> there are many non-running cars which would be (if certain repairs were
> made) perfectly legal to drive. Buying up several of these cars and
> assembling the best pieces is neither illegal or nefarious. Even buying a
> few "totaled" cars as donors for certain parts is perfectly fine as well.

Right, but that has absolutely nothing to do with what the original comment
mentioned about pulling together parts from illegal cars to make one legal
car.

Let's be perfectly honest, even if I put together 5 1991 Subaru Loyales to
make one good one, I won't be making money because it's still only worth $2k.

On the other hand, if I can "get" a few 2009+ luxury cars and turn them into a
good car, I stand to make a lot of money. I think you'll find you can't
legally and cheaply get 2009+ luxury cars.

------
skybrian
Assuming there's no fraud, there are four parties who gain from this
transaction: (1) the person getting rid of the car without doing any work (2)
the person buying the car (3) the person or company whose job it is to do the
work (4) the charity.

The proportion gained by the charity might be relatively low but everyone
gained something, so it's unclear that it's inefficient.

~~~
obviouslygreen
"Assuming there's no fraud" makes two very nasty assumptions: That there _is_
no fraud, and that fraud is _the only_ way this can go sour for the donor.

If both of these were the case, I imagine there would be no reason at all for
articles like this or most of the comments here. As it is, there _is_ fraud
_and_ there are other issues at work making this riskier than it should be
(from a prospective donor's point of view).

------
bifrost
I made the mistake of donating a car I didn't want and was too lazy to sell,
never again.

I was told all the way "oh, you'll get KBB value for your car!" and the
reality was never that, I would only get the auction value. I got less than
half of what the car was actually worth...

~~~
fr0sty
> I got less than half of what the car was actually worth...

First, the car is _worth_ whatever someone will pay for it and not a cent
more. Also, as of January 2005 you cannot use the KBB value or "fair market
value" of your car for your deduction and rather MUST use the auction price
for the car.

Here is the KBB page about that change:
[http://mediaroom.kbb.com/index.php?s=43&item=130](http://mediaroom.kbb.com/index.php?s=43&item=130)

~~~
3minus1
> First, the car is worth whatever someone will pay for it

This is a nice little definition except that it doesn't mean much in the real
world. OP could have gotten a better price if he invested some time and sold
the car himself. He could have gotten a price closer to his own perceived
value of it's worth.

~~~
fr0sty
> if he invested some time

If he invested some time then he would not just be selling the car as-is
where-is. He would be selling the product of the car + his effort which may
actually be a net loss depending on how much time he spent and how much of a
better price he received.

~~~
bifrost
If I had spent 2 minutes posting the photos and a description of the car,
responded to 20 emails @ 1 minute each, then spent maybe 2-3 10 minute visits
with people to sell the car it would've been a net win even if I did that
every day for a week.

------
makr17
interesting article. and after finishing it, the radio spots on my local npr
affiliate pushing the car-donation angle make me a little bit sad.

from the title, I was really hoping they would talk about what happens to the
cars _after_ auction...

~~~
greenyoda
The most likely thing is that the car is disassembled and sold as spare parts,
which usually brings in much more money than selling the car itself,
especially if the body is old and beat-up. For example, you can probably sell
the car's computer or ignition control unit or ABS controller for hundreds of
dollars. If someone has a car that runs well and is worth thousands of
dollars, he probably won't just give it away for a tax deduction; he'll try to
sell it or trade it in. (This is also what happens to lots of stolen cars:
they get taken to a "chop shop".)

~~~
_mulder_
If the car is of an age old enough to be scrapped or donated, to buy an ECU or
other Electronics for a similar car of a similar age probably means the
replacement bits are worth more than the car is, which would make the whole
exercise uneconomical, further increasing the number of scrap cars and thus,
number of replacement ECUs, thereby increasing supply and reducing price.

------
theycallmemorty
The barriers involved in selling used cars are so high that people have
established a billion dollar industry by simply taking the cars from people
for free and promising them money later through tax receipts.

Just let that sink in.

------
vanderZwan
Dammit, I was hoping this was an article about how those old minibuses find
their way from Northern and Western Europe all the way to West Africa.

------
tedsanders
Why does the article refer to this as a tax loophole?

Isn't this a tax deduction working as intended? It's giving a tax break to
people who support charities.

~~~
lmm
The intention is that donations to charity don't have income tax applied to
them. When you donate an object like a car it's not really the same - most
likely you bought it, got your money's worth from it and now want to be rid of
it, so it's not really like you're donating something you paid income tax on.

~~~
spullara
You paid income tax on the money used to pay for the car. By donating the
residual value you are recovering part of the income tax that you already
paid.

~~~
lmm
Yes, but for many people I suspect the value to them is much lower than the
auction price. If you were following standard accounting like a business you
would probably have fully depreciated the car before the time came to auction
it.

------
pbreit
And people complain about government waste...

------
spacecadet
Recycle cars. End of Story.

