Should I Donate My Second Car
Donating the car is simple. Dealing with the insurance on it is the part worth thinking through first.
It depends on what the car is costing you to keep insured
If the second car just sits there and you're still paying to insure it, donating it usually makes sense. You stop paying for coverage on a car nobody drives, and you can claim a deduction for the donation if you itemize.
It makes less sense if that car is the one a visiting relative drives, or the one you'd use if your main car were in the shop. Before you donate, think about whether you actually need a second vehicle available, not just whether this specific car gets used much.
What happens to the policy once the car is gone
Once you sign over the title, call your insurer and take the car off your policy. Don't wait for the renewal to do this. Insuring a car you no longer own doesn't protect anything, and you're paying for coverage you can't use.
If this car was the only other vehicle on a multi-car policy, dropping it can change your discount on the remaining car. Ask your insurer directly what the premium looks like with one car instead of two before you assume the savings are as large as they look on paper.
Some insurers prorate the refund for the unused months of coverage, others don't. Ask how the refund works before you cancel, not after.
Keep the paperwork from the charity showing the date you transferred the title. If anything happens with that car after you've handed it over but before the insurer and the DMV have processed the change, you want a paper trail showing it was no longer yours.
What the donation is actually worth to you
The deduction you can claim depends on what the charity does with the car and what it sells for, not on what you think the car is worth. Ask the charity how they handle this and what documentation they'll send you, since you'll need it at tax time.
A common mistake is assuming the deduction will offset most of the cost of letting the car go. For an older car worth little, it often doesn't come close. Weigh the deduction against what you'd get selling the car privately or trading it in, since either of those might leave you with more than the donation does.
If the car still runs and passes inspection, get a sense of its trade-in or private sale value before you decide. Donation is the easiest option, not always the one that leaves you furthest ahead.
Questions people ask about this
Can I donate a car that isn't running?
Most charities that accept car donations will take one that doesn't run, often arranging to have it towed. Ask the specific charity how they handle non-running vehicles and whether towing costs anything, since this varies by organization.
Do I need to cancel my registration too, or just the insurance?
Both. Insurance and registration are separate from each other, and canceling one doesn't cancel the other. Check with your state's DMV on how to formally transfer or cancel the registration once the title is signed over.
What if I still owe money on the car I want to donate?
You generally need to pay off the loan before a charity can accept the car, since the lender holds the title until then. Ask your lender what's owed and whether they'll release the title once it's paid.
Will dropping to one car lower my insurance rate on the car I keep?
It often does, but not always as much as people expect, since some multi-car discounts are larger than the cost of insuring the second car alone. Ask your insurer for a quote with just the one car before you donate, so you know what to expect.
Is it better to sell the second car instead of donating it?
That depends on what the car is worth and how much the deduction would be worth to you at tax time. If the car has real resale value, selling it usually puts more money in your hands than donating it does.
See what dropping to one car does to your premium before you make the donation final.
Call your insurer this week and ask what your premium looks like with only one car on the policy, so you know the real savings before you commit. Get the payoff amount from your lender if you still owe anything on the car. Contact the charity and ask exactly what paperwork they'll give you for tax purposes, and how they determine the car's value. Once the title is signed over, remove the car from your policy and ask your state's DMV what's needed to cancel or transfer the registration. Keep every piece of paperwork from the donation date forward.
