Take the car or the cash? How to decide

The short answer

When a giveaway offers cash instead of the vehicle, the cash is usually the smaller number. In the live giveaways we track, the median cash option is 59% of the prize's stated value. But if you keep the vehicle you pay tax on its full value, you need cash to pay that tax, and you may not be able to sell it for anything like the stated value. Once you account for all three, the gap shrinks, and sometimes the cash comes out ahead.

The choice comes up often. 46 of the 77 live giveaways we track offer cash instead of the vehicle, so if you win one, there's a good chance you'll face it. The way to decide is to compare what each choice leaves you with after tax. Our tax calculator does that side by side: enter the prize value, any cash bonus, the cash option and what you think the vehicle would sell for.

How cash options compare to ARV in our data

Of the 77 live giveaways we track, 42 name both a prize value and a cash alternative for the top vehicle prize. Across those, cash offers run from 15% to 104% of the stated value, with a median of 59%. By type, the median is 61% for new vehicles (9 giveaways) and 59% for custom builds (19 giveaways). In 4 cases, the cash matches or beats the stated value.

These are the five largest cash options open right now:

One thing to watch: the stated value often includes cash that comes with the vehicle, such as a bonus for taxes, while the cash option replaces the whole package. So compare the cash option with everything you'd get, not just the vehicle. You can browse every live giveaway with a cash option.

The tax math: same rules, smaller number

Both choices are taxed the same way. A prize is income at its fair market value in the year you receive it, whether it's a truck or a check, and both show up on a 1099-MISC for a free-entry sweepstakes. The cash option simply means less taxable income. Because a prize stacks on top of your other income, the tax you skip by taking cash comes off your highest rates.

Here is a made-up example: a $90,000 vehicle plus $30,000 in cash, or $65,000 cash instead, won by a single filer in Illinois earning $60,000. These are our calculator's estimates, not a tax bill.

On paper the vehicle wins by $39,078. If it would only sell for $70,000, the gap drops to $19,078, because the tax is still based on the full stated value. Notice too that keeping the vehicle means a tax bill of $32,854, $2,854 more than the $30,000 that comes with it. Whatever the bonus doesn't cover comes from your savings or from selling the vehicle.

Some sponsors withhold from the cash. Dream Giveaway's rules split the cash alternative into a check for 75% and a 25% payment to the IRS on your behalf. That counts toward your tax, but it's a prepayment, not the final number: if your real rate is higher, you'll owe more when you file.

Resale value vs ARV: new vehicles and custom builds

The vehicle is worth what you could sell it for, or what you'd otherwise pay for the same one if you were going to buy it anyway. It is not worth the ARV just because that's the number on the rules.

For a new vehicle, the ARV usually tracks the sticker price. Once it's titled to you, though, it's a used vehicle to the next buyer, and a dealer buying it needs room to resell it. Get written offers from a few dealers and online car buyers before you choose, so you're comparing the cash with a real number.

For a custom build, the ARV often reflects parts and labor. Buyers pay for the finished vehicle, not the receipts, and fewer people are shopping for a lifted diesel or a restomod than for a stock pickup. Look up recent sales of similar builds at auction or in classified listings, and expect the range to be wide. If you'd sell it anyway, the cash option gives you a fixed amount instead of a guess.

What it costs to keep the vehicle

• The tax, in cash. Most sponsors don't withhold on a vehicle, so the bill arrives with no money attached. Plan estimated payments for the year you receive it.
• Insurance. 50 of the 77 live giveaways we track require proof of insurance before they hand over the vehicle. Get a quote first; a high-value vehicle can cost far more to insure than what you drive now.
• Title, registration and fees. Many of the rules we read put title, registration and license fees on the winner. Depending on your state, registering a prize vehicle may also involve sales or use tax, so check with your DMV.
• Getting it home. 10 live giveaways require you to collect the prize in person, and the rules generally leave travel costs to the winner.
• Extras the rules leave to you. Some rules also make the winner pay for optional equipment, dealer prep, freight or an emissions inspection. Read the prize section closely.
• Running it. Fuel, maintenance and storage for a vehicle you might not have chosen to buy.

When the car wins, and when the cash wins

Once you have after-tax numbers for both, these are the situations that usually tip the decision one way or the other.

The car wins when

• You would have bought this vehicle, or one like it, anyway.
• Real resale offers come in close to the stated value.
• The cash option is a small share of the stated value.
• The cash bonus covers the tax, or you can pay it from savings without selling.
• You can afford the insurance, registration and upkeep.

The cash wins when

• You'd sell the vehicle anyway, and the offers you get are well below the stated value.
• It's a custom build with a small pool of buyers.
• You couldn't pay the tax without selling it.
• Insurance or storage would strain your budget.
• You want a fixed amount instead of a resale price that could move.

A ten-minute way to decide

1. Find the stated value, any cash bonus and the cash option in the official rules. Each of our listings shows them.
2. Get two or three resale offers for the vehicle, or look up sales of similar ones.
3. Put the numbers into the tax calculator, including your resale estimate.
4. Take the after-tax difference and subtract what you'd spend on insurance, registration and getting it home.
5. Read the rules for how and when you must choose the cash, and whether the sponsor withholds from it.

If the two come out within a few thousand dollars, lean toward the cash. It's a fixed amount, it can pay its own tax, and it skips the insurance, registration and selling hassle. If the car comes out well ahead and you can cover the tax without selling it, enjoy the car.

For the tax side in more detail, including 1099s, withholding and estimated payments, read taxes on winning a car.