Let us say you have an old car and you are planning to buy a new car. Let us assume that the market value of your Current old car per Kelly Blue book or Edmunds or NADA is $2000. Following your options

Option 1 – Donate it to a standard charity who sells it

Find a Charity with 501(c)(3) tax-exempt status with the IRS and donate it. The charity will sell the car and send you a letter stating the amount the car is sold for typically this will be much less than the market value. Let us assume that they sold at auction for $1000. In this case, you can claim a deduction of the fair market value of U$1000. (If your car is sold for less $500, than an IRS special rule will kick in. Per this rule you can claim a deduction of the fair market value or $500-whichever is less with a written acknowledgment from the charity that meets the IRS requirements. Refer to Donor’s guide To Car Donations Publication 4303 (Rev. 03-2008) . Suggest work with a qualified tax account. Pros–1) You supported a charity 2) No hassle in selling or trade-in 3) tax deduction 4) Saves you time, effort. Cons – You may not get a full value of a car

Option 2 – Donate it to a charity as ‘program cars’

If your used car is in a great shape, safe and ready for some one to drive, the charity will qualify your car as a “program car” and inform the donor in writing if their vehicle may be provided to a disadvantaged person or qualified entity. In such cases you receive the full “Fair Market Value” tax-deduction after the charity provide your vehicle to a deserving family. Many charity does it, but the key to this that your car is in excellent shape. In this case if you are in 25% tax bracket, you will get a tax deduction of $2500 X 25% = 625$. The Best option. You get Fair market value without the hassle of selling the car

Option 3 – Trade it in on a new car

Trade-in will never a get you the best price. You are dealing with professional negotiators who are trained to buy your car at the cheapest possible price. And most of the time you will not have a pleasant experience. (You heard of the popular tick to worn you out at their location – The used car manager lost your keys to make you wait)  Dealers who trade in and buy your old car uses ‘Black book’ which is basically less than what they can get in a bulk auto auction. . They laugh at you if you talk about blue book retail value. If you have popular models like Honda, Acura, Toyota or Lexus you will have some luck. If you trade in is worth 2500$ per blue book, chances are you will only get around $1400. Pros–You can negotiate better for a new car. Cons: Difficult to deal with used car dealers and you don’t get the desired price

Option 4 – Sell it yourself

Use Craigs list, Ebay or Auto trader and sell it privately for a price close to its private party value of $2,000.This is the toughest part. You need to get the car in top shape, clean, tune it and prepare it make it’s saleability high. Also you may have to put up with buyers who haggle, fraudulent inquiries, and making sure you get the right kind of payment.. Unless you have  the patience and experience in selling, this option may not be suitable. Pros: You get the top dollar and is the most flexible option. You decide how much you can donate  and to the charity of your  choice . Not just the the ones who accepts cars. Con: A difficult process that involves time, effort and patience