Auto donations: A profitable proposition if they're handled right

Q: What happens to a car when someone donates one to a charity? Is it junked for scrap, resold for parts, shipped to Africa, resold in a lot somewhere? It seems many nonprofits are seeking those types of donations. Are they really that profitable for charities?
C.M., via e-mail

A: Charities approach auto donations in different ways, but they all try to maximize the amount of money they'll get.

Often what happens to a donated car depends on its condition, says Jerry Ramsey, president of Charity Auto Donations, in Austell, Ga. The company works with dozens of nonprofits that don't wish to handle the administrative work associated with auto donations.

Mr. Ramsey says he takes a three-pronged approach to maximizing a car's value. Vehicles that run but need lots of repairs are taken to the nearest auto auction. They are then sold to the highest bidder, which could be a dealer or a salvage yard.

Autos that are in better shape he cosigns with dealerships in the Atlanta area, in the hope of selling the car at retail prices and realizing a bigger return.

In some instances, especially with specialty cars, Ramsey will sell the car on eBay. He recently did that with a rusty 1960s-era muscle car, receiving $1,600 from an old-car buff in Missouri.

If your car is sitting in the back yard up on blocks, Ramsey suggests calling a salvage yard directly, as those vehicles typically aren't worth enough to cover the cost of towing.

Depending on the number of cars donated, these programs can be very profitable. For example, the National Kidney Foundation, a cars-for-charity pioneer, collects millions of dollars each year from its program. According to a spokeswoman for the group, 73,000 autos were donated to the charity last year, bringing in about $17.6 million. That's nearly one-third of the nonprofit's total revenue, she says.

As for how profitable car donations are, it depends on the charity.