‘Cash for Clunkers’ Puts the Brakes on Donations

Riteway Charity Services in Sun Valley, Calif. turns thousands of donated cars into money for local food banks, homeless shelters and Boys and Girls clubs. They say the recession put a dent in donations; they're down 30 percent from last year.

"It's pretty bleak, pretty bleak," said Teresa Deutsch, co-owner of the charity. "People are very leery to donate their vehicle. They are holding on to what they have, fixing the cars that they have and so the charities are really affected by that. It really hurts us."

Now the car rebate program has really put the brakes on, leaving charities third in line. Charities can offer a tax write-off as little as $500 next spring. But that just can't compete with the program handing car buyers rebates of between $3,500 and $4,500 for trading in their gas-guzzlers for new, higher-mileage models.

"In this tight economic time, I thought I might as well get as much help as I can," said Debbie Chang, a car buyer. "So yeah, I have thought about donating but unfortunately I do need a vehicle for myself."

The Senate is likely to extend the wildly popular program with a $2 billion injection before leaving for a month-long recess this week. The funding would triple the cost of $1 billion rebate program and give as many as a half-million more Americans the chance to grab the new car incentives through September.

Car companies have credited the clunkers program with driving up sales in late July. Most consumers are buying smaller, more fuel-efficient vehicles under the program, according to a list of the top-10 selling cars released by the National Highway Traffic Safety Administration.

But repair shops and parts stores are hurting as some customers trade in their clunkers instead of fixing them.

The latest IRS figures show 300,000 cars were donated in 2005. And while the program may be a shot in the arm for dealers, charities that rely on donated cars say Uncle Sam has put them on life support.

Some economists worry the program may be a drop in the bucket.

"My only concern is what happens when the program expires, which is going to be soon," said Jack Kyser, an economist at the Los Angeles County Economic Development Corporation. "Do sales go back down, which they very well could. This is sort of an artificial stimulus."