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and CEO of the Better Business Bureau s Wise Giving Alliance, to testify about a donor expectations survey the Alliance had recently conducted Summary of Mr Car s Testimony before the US Senate Finance Committee June 2004 Mr Car is the pseudonym of a confidential witness testifying at the 2004 Grassley hearing on nonprofit accountability This witness had firsthand knowledge of the methods used by fundraising vendors who specialize in managing automobile donations for nonprofits In his testimony, he outlines in great detail the process for car donations The following summary describes several processes used in these transactions The Process of Auto Donation Using a Broker Potential donors see an advertisement in their local newspaper proposing fair market value as a tax deduction The donors are usually are looking at donating an older vehicle they do not use, but in some cases the cars are nearly new Donors call a toll-free number, at which point either the charity will answer the call or the call is forwarded to a third-party broker The potential donor provides a description of the vehicle to the broker, year, make, and model The broker will verify if the vehicle has a clean title The broker will then tell the donor to refer to Kelly Blue Book to determine the amount of his or her tax deduction Next, the broker will tell the donor that a local towing company will pick up the car in five to ten working days In most cases, the towing company is owned by either an auto auction or used car dealer After the car is picked up, it goes to auction The standard commission for the auto auction house is 25% of the sale price of the vehicle If the car goes to a used car dealer, there is usually flat rate pricing Flat rate pricing will typically be $75 a car and $125 for trucks These are the rates for cars produced between 1985 and today In addition, the broker at the beginning gets a sliding scale reimbursement between 30% and 45% of the check value he or she receives for performing the following duties: advertising, operating the toll-free hotline, title work, and assigning auctions to pick up the cars Check value is ot what the car sold for For example, if a car sells at auction for $1,000, the auto auction receives 25%, or $250 The broker will receive 30% 45% of the $750 remaining However, the auto auction double dips by charging a buyer s fee to the purchaser and will thus make close to $350 However, this unfortunately is the best-case scenario The Process of Auto Donation Using Flat Rate Sales Flat rate sales are the way for insiders to cheat the charities Again, these are cases that I know firsthand We received a vehicle donation for a charity of a 1999 Ford Contour We received a fax for the pickup order and it was a $75 unit This meant that the.

car was already assigned to be sold at the used car lot and, regardless of sale price, the most the broker would get is $75, and the charity would only get a percentage of that; for example, $30 $40 The car actually sold for $3,500 Thus, the intermediaries got well over $3,000 profit and the charity received pennies This is common industry practice across the board and is known as flat rate sales fees The Process of Auto Donation Using Fixing Cars Another example of an even more terrible practice is what is known as fixing cars Involves intermediaries purposely disabling vehicles that were prescreened as running vehicles and therefore worth more so when the vehicle arrives at the auto auction or used car dealership, they can call the broker and inform them the car was misrepresented, and the broker 99% of the time does not contact the donor to reconfirm the vehicle s condition Again, fixing cars is a common practice in the industry For example, a 1996 Ford Crown Victoria was picked up in running condition However, two days prior to auction, the vehicle was disabled by turning the distributor cap to offset the timing In this case, the auto auction disabled the vehicle and then sold it to them through their used car license That car, the Ford Crown, went for $275 dollars, and it was then after the auction that the insiders took a timing light to reset the distributor and drove the car away The intermediaries later sold the car for probably about $3,700 Another technique is to simply pull out the fuse block or blow the fuse and then put it back in after they ve purchased the car themselves for less than its actual value This, again, is very common In fact, I personally was approached by a couple who donated their vehicle because their son died They wanted to donate their vehicle to the charity to try and make a difference The car was sold at auction for $4,200 Once all the percentages were taken out that charity received less than $300 There has to be something that can be done about this So many people out there donate their cars to make a difference or research, treatment, and transplants However, the truth is, there wouldn t be enough money from that car donation to buy my mother s medication for one month, let alone help the progress of research and treatment The following exchange took place following Mr Car s testimony:.

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