What Happens to Donated Cars?
priceonomics.com
priceonomics.com
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.
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.
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)
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.
There exist services (called "gestorías") where you hire someone to stand in line and do the paperwork for you where applicable.
Other records (like the record of ownership) have been computerized, but can ONLY be queried by someone with the notary ("Escribano") degree. I actually thought about tackling that one for data mining (it has the actual purchase prices for houses and cars and land), but there are personal data privacy issues too, and even if you get the degree, it can (and probably will) be revoked if you use it for stuff like that.
In Uruguay everyone had to stand in line to pay utilities, now we have services to pay them, and banks and credit cards offer internet payment tied to your bank account or credit card, there's even a startup that uses smartphones to scan the barcodes :) called Paganza http://www.paganza.com/ (that was started by some former coworkers of mine)
http://www.dmv.ca.gov/online/nrl
IIRC, the guy towing the car even gave me a copy of that form. At the time I thought it was just more DMV bullshit paperwork, but filling out that form was a lot easier than clearing up some of the messes described in these stories would have been, so I guess it is actually useful.
If your country's system is such that the buyer has responsibilities that are beyond your control (i.e. they have to submit the final forms, you can't), make sure you take good copies of everything you fill in and sign so if there are questions of ownership later you can prove you are acting in good faith (otherwise you risk being seen as trying to hide behind grey parts of the process to avoid tax, registration fees, or whatever you are required to do/pay in your current legal jurisdiction).
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.
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.
They have a quick guide on donating cars:
http://www.charitynavigator.org/index.cfm?bay=content.view&#...
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.
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.
I've heard it called all kinds of names like "re-birthing".
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".
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?
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.
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.
The proportion gained by the charity might be relatively low but everyone gained something, so it's unclear that it's inefficient.
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).
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...
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
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.
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.
It doesn't matter what you paid or what the blue book value is. You will only ever get what the person willing to pay the most for it that you're able to sell it to will pay. I didn't like it or agree with it the first time I heard it (from someone who ended up not buying a car I was trying to sell) but, years and many experiences later, I understand that it's true.
Right, if I'd sold it via Craigslist I could've gotten double the money I would've gotten at auction, you seem to have missed my point :)
So not only would I have ended up with more cash in my pocket, I would've ended up with more cash in my pocket to pay taxes.
This is why donating a car is dumb.
from the title, I was really hoping they would talk about what happens to the cars _after_ auction...
The private school has both religious and secular education.
It also provides family support for children with troubled backgrounds, or other issues.
The same thing that happens to any used car that is sold in general. There is nothing related to charity once the car is on the used car lot and for sale. Just some of the sale price are kicked back to the charity.
Cars here (Uruguay) are so expensive, we try to maintain them forever
An old article (from 1969!!!) illustrates the point:
http://sportsillustrated.cnn.com/vault/article/magazine/MAG1...
"The official position is that car owning is a sumptuary sin." It still is, and so new cars are taxed about 100%. Take any U.S. car, triple its price, and that's the cost in Uruguay. Old cars (2005 and older) can be five to ten times more expensive than in the U.S. (my 2002 small Renault Twingo sells for U$ 9.000)
Just let that sink in.
Isn't this a tax deduction working as intended? It's giving a tax break to people who support charities.
A "charitable donation" that mostly goes directly to lining the pockets of a for-profit entity shouldn't be tax deductible, but in this case it is deductible -- hence, a tax loophole.
In other words, charities getting into the side business of large-scale car sales to generate revenue bends the law in a direction its authors never intended [1]. In particular, the charities' for-profit partners in this side business end up with most of the revenue from an immediate liquidation of these tax-deductible donations -- and that outcome seems to go against the fundamental concept of tax-deductible charitable giving. This practice is apparently legal and lightly regulated, according to the article -- it's within the letter of the law. But it goes against the spirit of the law, which is that only donations to charities should be tax deductible.
[1] This is according to the article's idea of the law's authors' intent: That charities would use the donated cars for their own operations, or give them to the poor people they serve. Is this picture of the law's authors' intentions correct? That's another discussion entirely.