5 Little-Known Perks of Donating Your Car

Cars can be a useful way to get from point A to point B, but sometimes, they cause more trouble than they're worth. They can be expensive to insure and maintain, and if you live in a city, it can also be difficult to find parking. And then there are the environmental impacts to consider.

If you feel the drawbacks of owning your car outweigh the benefits, you might consider donating it instead of selling. Here are five benefits of doing so.

1. You'll avoid the hassle of selling

Selling a car means haggling on a price and setting up test drives. You also have to do a bunch of paperwork to transfer the title to the new vehicle owner. And if for some reason you don't have the title anymore, you might find it nearly impossible to get someone to buy your car.

When you donate a car, things are a lot simpler. You and the charity you're donating to just have to agree on a time to pick up the vehicle and sign the title. Then, it'll take it off your hands.

2. You could get a tax break

Charitable donations to qualified tax-exempt organizations can earn you a tax deduction, assuming you itemize your deductions this year. Depending on your income, tax-filing status, and the number of deductions you qualify for, this could save you money and result in a larger tax refund compared to taking the standard deduction.

But the amount you save on taxes for donating your car depends upon the value of the vehicle in question. This is determined in a few ways. If the charity sells your car and uses the proceeds to further its cause, you may deduct the lesser of the proceeds of the sale or the fair market value of the vehicle. If the charity sells the car for less than $500, you may deduct the lesser of $500 or its fair market value. You would also use the fair market value if the charity kept the vehicle for its own use.

In order to claim any vehicle donation tax deduction, you must have a record of the donation from the charity you donated to. You also need records of any goods or services you received in exchange for the donation.

3. You'll support a great cause

Giving to charity, whether in the form of cash, canned goods, or a vehicle, means you're supporting a cause you believe in. Even if you don't make any money in the process, it can still feel good to know you're helping in a small way.

4. You'll probably save money

When you don't own a car, you no longer have to pay for everything owning a car entails -- gas, maintenance, parking, registration, and auto insurance, to name a few. Insurance alone can cost several thousand dollars. The average auto insurance policy in 2023 costs $3,017 per year. When you add in the other costs listed here, you could reasonably save $5,000 or more.

There might be some tradeoffs, though. You might have to pay for a bus or subway pass, for example, if you no longer have a vehicle to transport you. But these expenses likely won't cost as much as what you pay to own your vehicle.

5. You'll free up space

For those who store their vehicles at home, donating your car will free up space in your garage or driveway that you could use for other purposes. This could potentially be more affordable than paying for a storage unit to hold your belongings.

Donating your car is a big decision, but it could pay off for you in more ways than one. Think through the benefits outlined above and compare them to the potential drawbacks of not having a vehicle any longer. Or if you're thinking about buying a new vehicle, weigh the perks of donating your car against the potential trade-in value it offers to decide which option is best for you.