Cash For Clunkers Could Hurt Charities

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WASHINGTON, DC (WUSA) -- The Cash for Clunkers program begins Friday, July 24. It's aimed at getting more buyers into dealer showrooms and gas-guzzlers off the road. But it could have one unintended consequence; hurting the charities that depend on vehicle donations such as Melwood, based in Upper Marlboro, Md.

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The non-profit worries that the new program to get old cars off the road will swallow up the supply of used vehicles it depends on. "Cash for Clunkers targets the sort of vehicles that are usually donated to Melwood," according to Janice Frey-Angel, president and CEO of Melwood. They tend to be older, high-energy, gas-guzzlers, larger vehicles and sometimes the third vehicle in the family.

At Melwood, a donated car gives the former owner a tax deduction of at least $500 up the actual sale price at auction. That is typically much less than the $3,500 or $4,500 that clunker owners will now get from a dealer under the new federal program.

Melwood isn't alone with their concerns. Frey-Angel says Melwood is in touch with other charities around the country. "We partner with other agencies and they use our call centers to have vehicles donated. They are all going to be impacted by this. It's not just a Melwood issue."

Clunker Congressional sponsors restricted the program to vehicles that get 18 miles or less a gallon to help limit the impact on charity donations.

But Melwood is already struggling with a drop in donations even before the new program due to the recession and a tax law change that lowered the tax donation value of car surrenders. In 2005 car donations brought in $12 million for Melwood. This year they are projected at $4 million. Because of that budget crunch, Melwood just laid-off 103 workers and has been forced cut back on services for those with developmental disabilities. And the organization worries that cuts may have to go even deeper.