5 Reasons Donating Your Car Will Improve Your Finances
If you’re looking to stretch your monthly budget and are living paycheck-to-paycheck, cutting back on gourmet coffees and eating out less often isn’t the type of financial advice you need to hear — you need a bigger change. You should be asking yourself, “Should I donate my car?” The answer is yes. Donating your vehicle may seem like taking a loss, but getting rid of your car will actually improve your finances in five tangible ways.
1. Qualifies You for a Tax Break
You donate your car instead of selling it. So how is that going to improve your finances, exactly After all, donation means you won’t get any money for your car. Not true.Donating your vehicle could lead to a big tax break at the end of the year, meaning a bigger refund. If, however, you owe taxes, your donation will at least alleviate some of the burden by decreasing the amount of money you owe. That translates to real, spendable cash in your bank account.
When it comes to donating a car, the Kelley Blue Book value isn’t that important. You could wind up pocketing more in tax deduction dollars than you would get by selling your vehicle. Regardless, the car will be off your property and your financial situation will improve.
2. No More Gas and Maintenance
It’s hard to go without a car, especially in more rural areas. However, there are options, and if you’re looking to stretch a budget, not having to pay for the gas and maintenance costs of a vehicle can make a huge difference. According to Time, the average American household spends $4,155 on gas each year, and one visit to the mechanic can cost almost as much.
Opt for public transportation if at all possible. If you don’t live close enough to a bus, train or subway stop, consider bicycling, at least to the nearest stop. Alternatively, talk to your neighbors or co-workers and bring up the idea of carpooling. Chip in toward the cost of gas in exchange for not having to worry about car ownership.
3. No More Car Washing
In addition to not having to pay for gas, you won’t have to pay for car washes, either. The cost of car washes doesn’t add up to the cost of gas, but $10 here and $10 there does add up over time. While it is better to keep your car clear of grime that could cause rust, excessive car washing is not necessary and often becomes more about appearance than necessity. It’s true that you can save money washing your car yourself, but you waste a lot of water doing this, and there’s a good chance you could spend that time doing something more productive.
4. No More Car Insurance Payments
Whether you pay annually or every month, car insurance payments are a necessity, but often a waste of money. While it’s true that it’s better to pay for insurance and not need it, think of all the money you spend protecting yourself from something that may never happen. Car insurance costs hundreds if not thousands of dollars each year; this is money you could be saving or spending on something tangible. Insurance costs are especially high if you’re young or you’ve had an accident in the past. Turn the payment into zero dollars by forgoing your car altogether.
5. No More Car Loan Payments
Think of all of the bills you have to pay each month: rent or mortgage, school loans, phone bill, utilities and credit card debt. Maybe you have cable or Internet, health insurance and other bills, too. A car payment is another bill, but one that can easily be eliminated. You’ll still be paying for the car even as it depreciates in value, meaning that by the time you’ve paid off the car, it will be worth only a fraction of the amount you’ve spent.
If you’re able to sell your car and pocket a bit more cash, that’s an option, too. But if your car is more than just a couple of years old, chances are you’re not going to get much. For example, Forbes reports a depreciation of 56 percent after only five years on high-end vehicles. You’d probably get more via a tax break than you would by selling. Regardless of what you do with your car, unburden yourself from relying on your vehicle, and you’ll feel more financially secure.
About the Author:Minnie Young is a financial advisor and frequent blogger. She often speaks on financial topics such as frugal living and stretching tight budgets.