Sell, Trade, or Donate My Used Car, Which is Best?
Posted by Brian England on Thu, Sep 02, 2010
When you are ready to trade your used car for a new one, trading in your old vehicle to a dealer is probably the easiest thing to do, but it will also probably bring you least dollars. If you are time constrained, and simply don't want the hassle of having to do anything around getting rid of your old car, trading it in is probably a good option. Essentially, you are making the decision that your time is worth more than the extra money you could get by selling the vehicle yourself which in many cases can be over 50% more than you can get from a dealer.
Selling privately should bring you a higher price, but it will also take more of your time. When selling privately, you should take the car through the Maryland State Inspection before advertising. If it passes the MD inspection, it's a great selling benefit. If it fails, you can have it fixed so that you can offer the vehicle as having "Passed the MD State Inspection". Alternately, you can not fix the vehicle, but be honest with potential buyers and tell them exactly what repairs are needed.
Another option is to donate your old car to a charity and take a tax write-off. This has become more and more popular especially if the car is old and not in good shape. But, many people don't realize the rules for donating and writing off the vehicle's value.
Car donors used to be able to deduct the "fair market value" or "Blue Book value" of their car donation. In 2005, the bill was changed to allow this deduction only on cars donated to charities that actually use the car to help low income families. BEWARE; most organizations sell the donated cars at wholesale auctions. Under the law, donors will be able to deduct only the amount for which the car is sold at auction! This donation typically results in a deduction of a fraction of the fair market value.
In addition the charity must prepare and you must attach to your tax return, a statement identifying the vehicle and stating the amount for which it was sold. Failure to attach the statement will result in disallowance of your deduction.
So when making the decision about which path to take with your old car, just be sure to do your homework and figure out how much time you will have to dedicate to getting the job done. Don't end up with an old car sitting in your driveway!
photo courtesy of caius