In the world of philanthropy and sustainable giving, the car donation industry has gained significant traction as an easy and impactful way to support nonprofit organizations while also responsibly disposing of old vehicles. Navigating this field requires more than just a willingness to contribute; it demands a comprehension of the terminology that defines the process, benefits, and outcomes of car donations.
We’ll decode the jargon and industry terms that drive the world of car donations. From “remarketing” and “points of sale” to “tax deduction” and “fair market value”, an understanding of these terms not only empowers potential donors but also ensures that charities have a better understanding of how car donation programs work. Whether you’re a potential donor looking for new ways to give back or an organization seeking to establish a meaningful partnership through our Car Donation Wizard, we’re here to explain the fundamental terms that shape the car donation industry.
Vehicle Remarketing Terms
Wondering what happens to donated cars? Cars donated to charity are sold at auction or to direct buyers. The proceeds from the sale of these vehicles are sent to the donor’s intended charity. These terms cover the remarketing aspect of car donations:
Remarketing: The business, art and science of selling used cars, largely at wholesale.
End of Life Vehicles (ELV): A vehicle that has reached the end of its usefulness largely due to age, mileage, condition, needs of repair or expense of maintenance. These are the majority of donation vehicles ARS processes for our charity partners.
ACV: Actual Cash Value (often referred to as the “blue book” of a vehicle).
Points of Sale: Three types of sale points with varying fees and locations. ARS has a network of over 3,600 registered points of sale.
National Wholesale Auction: Manheim, Backlot, Copart and IAA are examples of national auctions where vehicles can be sold after donation.
Independent Auction: Smaller, regional operations or hybrid auctions.
Direct Buyer: Professional auto dealers, recyclers, and brokers that will process the vehicle for scrap and recycled parts.
Car Donation Terms
Before you donate a car to charity, it’s important to understand the terminology that you’ll encounter during and after the donation process.
VIN: Vehicle Identification Number; a unique code that identifies each individual motor vehicle.
Tax Deduction: Amount that can be deducted from taxable income to reduce the amount of taxes owed.
Release of Liability: Form that notifies the state that you’ve transferred ownership of your vehicle and releases you from liability.
Title Transfer: Process of changing ownership of your vehicle.
Fair Market Value: Price at which a vehicle would change hands between a buyer and a seller. You can determine your car’s value using platforms such as Edmunds and Kelley Blue Book.
Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes: IRS form required for donated vehicles that sold for over $500. When itemizing taxes, you must include Form 1098-C on your income tax return in order to take a full deduction for the vehicle.
From understanding the significance of fair market value and IRS regulations to navigating the complexities of vehicle titles and release of liability, familiarity with these terms empowers both donors and nonprofit organizations.