Vehicles can be both a blessing and a burden for nonprofits. Whether it’s a supporter donating an RV you don’t need, your organization deciding to sell an old van, or a staff member offering to sell their car to the church at a “good deal,” vehicle-related decisions can get complicated quickly.

Because vehicles are high-value assets that carry unique risks, the IRS, donors, and your board all expect you to handle them with diligence, transparency, and integrity. This guide pulls everything together: what to do when a vehicle is donated, how to sell or buy one properly, and how to navigate tricky related party transactions.

Accepting Vehicle Donations

Vehicle donations can be generous gifts—but they also come with strings attached.

Benefits

• A vehicle donation can create immediate value if it aligns with your mission (e.g., transporting clients, delivering supplies).
• Selling a donated vehicle can generate cash proceeds for your mission.
• Donors may qualify for a tax deduction, which can be a motivating factor.

Burdens

1. Administrative overhead – Your nonprofit is responsible for paperwork, IRS forms, and compliance.
2. Storage and maintenance – If the vehicle doesn’t sell right away, you may be stuck with costs.
3. Liability concerns – Until the title is transferred, your organization is responsible for insurance, taxes, and risks.

IRS Requirements for Donated Vehicles

• Form 1098-C – Required if the donor claims a deduction over $500. This form confirms whether you keep the vehicle for use or sell it.
• Form 8282 – If you sell the vehicle within three years, you must file this form with the IRS and send a copy to the donor.

Donor Communication

Even if not legally required, notify the donor about how you plan to use—or sell—the vehicle. This avoids misunderstandings and preserves donor trust.

Four Factors to Consider Before Accepting a Nonprofit Vehicle Donation

1. Mission alignment – Does your nonprofit actually need the vehicle?
2. Capacity – Do you have staff, space, and systems to manage it?
3. Proceeds vs. effort – Will the likely sales value outweigh the administrative burden?
4. Policy clarity – Does your organization have a written policy on how vehicle donations are handled?

Selling Nonprofit Vehicles

Whether it’s a donated RV, an old church van, or an asset that’s simply no longer needed, nonprofits are permitted to sell vehicles. The key is to do it transparently and in line with IRS rules.

Best Practices for Selling a Nonprofit Vehicle

1. Determine fair market value – Use Kelley Blue Book, NADA guides, or an appraisal.
2. Document the transaction – Keep thorough records: advertisements, offers, bids, sales receipts, and appraisals.
3. Board oversight – For high-value assets like vehicles, involve the board in approving the sale.
4. Allocate proceeds appropriately – Treat funds from the sale the same as cash donations. They must be used to advance your mission, not discretionary spending.
5. Transparency with donors – If it was originally donated, make sure the donor understands how you handled the asset.

Buying Vehicles as a Nonprofit

Sometimes nonprofits legitimately need to buy a vehicle—whether for ministry transportation, delivery of services, or staff use.

Key Considerations

• Mission fit – Can you clearly tie the purchase to advancing your mission?
• Total cost of ownership – Budget not just for purchase price, but also for insurance, maintenance, fuel, and eventual replacement.
• Board approval – Significant purchases should always go through your board for oversight.

Related Party Transactions: Buying or Selling with Insiders

This is one of the trickiest areas. Leaders often ask: Can we buy a car from a staff member’s relative? Can we sell our church van to a volunteer?

The answer: Yes, but only with extreme care.

What is a Related Party?

• A staff member or board member
• Their family members
• Volunteers with significant influence

The IRS Standard: Arm’s Length Transactions

Every related party transaction must be handled “at arm’s length”—as though it were between two strangers. That means:

• Fair market value must drive the price.
• No special treatment like “friendly” payment plans or discounts.
• Full documentation of how you determined value and terms.

Failing to do this can trigger IRS scrutiny for private inurement (insiders benefiting from nonprofit assets) or self-dealing—both of which carry steep penalties.

Best Practices for Related Party Transactions

• Always research and document fair market value.
• Record the process showing the transaction was handled objectively.
• Involve your board for transparency and accountability.
• Avoid repeat patterns of doing business with insiders, as this raises red flags.

Governance and Oversight

Vehicles are among the most visible assets your nonprofit may own, which makes them a reputational risk if not managed well. Protect your organization by:

• Developing a written vehicle policy that covers donations, purchases, sales, and related party transactions.
• Involving your board in decisions about high-value vehicle transactions.
• Maintaining paper trails that prove transparency and compliance.
• Training staff to understand IRS reporting and documentation requirements.

Putting It All Together

Vehicles can help you carry out your mission—or they can create headaches if handled poorly. The difference comes down to clear policies, good documentation, and strong governance.

• Accept vehicles only when the benefits outweigh the burdens.
• Sell assets transparently and at fair value.
• Buy vehicles only when they fit your mission and budget.
• Treat related party transactions with extra caution.

Handled wisely, vehicle decisions can strengthen your reputation for stewardship and integrity.

Moving Forward with Confidence

Vehicle decisions may feel complicated, but you don’t have to navigate them alone. With the right systems and policies, your nonprofit can steward these high-value assets in ways that protect your mission and build donor trust.

If your board or leadership team needs guidance on creating or strengthening financial systems, start here: download 5 Steps for Nonprofit Leaders to Thrive. It’s a free resource with practical tools to help you build clarity, protect your team, and lead with confidence.