How to Make Money Flipping Cars – Fix Up & Sell Cars for Big Profit

Fixing up undervalued assets isn’t the only option to earn money, even if property flipping is very common. You can also make money flipping automobiles if you have the correct attitude and skills.

In this blog, I’ll explain how to make money flipping cars, the components of a profitable car flip and offer a practical strategy for skilled amateurs who want to turn their hobby into a side business. I’ll include hints and warnings along the route that have proven helpful to profitable flippers so you don’t unnecessarily fall into avoidable traps.

Getting Started: Understand the Procedures & Locate Cheap Automobiles to Purchase

Four words sum up the principle behind successful automobile flipping: “buy low, sell high.” In reality, it’s more difficult. Car flippers that are successful need to:

Understand the fundamentals of state and local automotive laws, such as when frequent sellers must get dealer licenses and how long it’s OK to keep a car unregistered.
Learn where to look for cheap automobiles for sale and how to get them legally and swiftly.
Recognize the used automobile industry in your area.

Is Flipping Cars Legal?

Although most states have restrictions on the number of used automobiles you can flip or resale in a year without obtaining a dealership license, it is still lawful to do so. Even though you may have sold a car before, flipping and reselling are two very different things.

Comply with the law

First and foremost, you must comply with the law by ensuring that you meet all standards and possess the proper dealer license.

Requirements for Dealer Licenses

Each and every prolific auto sellers are required by the state to register as dealers. It takes a lot of effort and paperwork to apply for and keep a dealer license. It’s also expensive. To get legal, you need a budget of at least $2,000 for license fees, surety bond fees, and other regulatory costs.

You must set aside hundreds or thousands of dollars per month for overhead and rent if you rent commercial premises for your business. Fortunately, as long as they don’t break any local laws by blocking their yards and streets with extra cars, small-time flippers who are technically dealers may typically get away without actually opening a shop.

For casual flippers, getting a dealer license is neither reasonable nor practicable. But if you find car flipping enjoyable enough to turn it into a respectable side gig, then you need to learn how to make money flipping cars.

States have different standards for dealer licenses. According to DMV.org, in Vermont, you are exempt from applying for a dealer license if you sell up to “12 vehicles per year that are owned but not registered by you.” The criteria are lower in certain other states. Consult your state motor vehicle registry before proceeding to prevent civil or criminal fines for selling cars without a dealer license.

Locate Undervalued Vehicles With Little Work

The next step is to understand where to look for cheap cars and how to acquire them. Typical choices consist of:

Open Auctions

Public auctions most likely provide the best value if you’re not a licensed dealer. Dealer auctions, when fewer people purchase items, only authorized dealers have access to possibly better deals.

Cars are usually included in the inventory of public auctions:

Lenders repossessed
Governments seize property due to unpaid taxes or other liens
Drivers accused of major offenses have forfeited
Abandoned on a public right-of-way, and the driver denied any involvement

Public auto auctions take place every week or even more regularly in large cities. Governments usually auction off repossessed cars at least once a month, even in less populated areas.

The public auction industry also includes private businesses. Manheim, for example, offers a nationwide network of car auction houses that serve both the general public and dealers. Since auction companies deal on volume and sellers typically don’t care about earning top dollar, public auction deals are typically better than private party sale prices.

Craigslist

Craigslist is your next best option if you’re uncomfortable with public auctions and don’t mind paying a small premium for private party sales. There is never a scarcity of cars for sale on Craigslist because posting classified sales advertisements is free and the website does not take a share of the sale price.

eBay

A more upscale and well-regulated counterpart of Craigslist is eBay Motors. Lower-priced automobiles tend to sell quickly here, but the medium and upper tiers of the market have an even better assortment than Craigslist. This isn’t the place to discover extremely motivated, one-off sellers because there is a significant cost for successful postings.

Newspaper Classifieds

You may now find newspaper classifieds online and in print. If your search for an automobile is limited to your hometown, look through the listings in your local newspaper.

Around Town

“For Sale” signs on automobile windshields are becoming less common as online auto sales platforms gain popularity. However, they are not entirely extinct. Look for cars that are on the market that are significantly less than their fair market value when you’re out and about.

Understand the Market for Used Automobiles

A competent car flipper never makes a purchase without a well-defined goal. You can begin the next flip or use the gains to increase your personal savings as soon as you get your current flip off the market.

Low-mileage, fuel-efficient sedans, wagons, and small SUVs from mass-market manufacturers like Ford, Chevrolet, Toyota, and Honda are typically the most “flippable” vehicles. There is never a scarcity of these vehicles because their amounts are known. Because of the climate and topography of your area, there may be opportunities that are exclusive to you. “Curveball” autos with odd features that merely seem desirable should be avoided.

Purchasing: Procedures and Checklist

Follow these steps to lock in a fantastic price with little work, whether you’re buying at a public auction, contacting Craigslist posters, or just driving about town looking for motivated sellers.

1. Establish Your Purchase Budget

You must establish a budget for your flip, just like you would for any major purchase. A functioning auction car with moderate to high miles and numerous years of service under its belt, ready to fetch approximately $500 to $800 after fees, is what seasoned flippers advise starting with at least $2,000. Within reason, greater budgets translate into higher profitability.

2. Obtain Money

You will most likely need to scrape together enough money to cover your budget before you begin purchasing.

If this is your first time flipping, think about putting aside a little more money, maybe half of your purchasing budget. When you’ve mastered the burning car and are prepared to pay more for a larger profit margin, that will be helpful on your second flip.

3. Determine the Fair Market Value

Finding excellent bargains on undervalued cars requires a tremendous deal of homework. Use Edmunds or KBB to determine fair market private party sales numbers for typical make, model, trim, and year combinations before you go to the auction.

This isn’t as daunting as it may seem because most public auctions release their inventory ahead of time, so in a private party sale, you’ll have time to research potential deals, focus on them, and determine their value. You may do your research at your own pace if you’re utilizing Craigslist or another internet resource, stopping sometimes to check the car’s resale value when you discover one that catches your eye.

4. Understand How to Purchase

Do not enter the sandbox if you are not a skilled player. Examine the auction lot’s policies and procedures in detail before you go there. If you are unfamiliar with the procedure, more seasoned auction attendees will bully you or, worse, you will be inadvertently excluded from the event.

Additionally, you must understand the legal process of registering your vehicle and transferring title. Purchases made at auction will take care of this, but private party sales require careful thought. States have slightly different registration and transfer processes. Before moving on, when in doubt, check with your local motor vehicle register.

5. Examine the Interior Visually

As soon as you see a potential car in person, start looking for any flaws. Examine the interior

first for signs of damage to the instrumentation, safety features, upholstery, and flooring. Don’t worry too much about personal belongings and rubbish; you can take care of the former, and the private seller or auction lot will handle the latter.

6. Examine the Outside Visually

Next, examine the outside visually. Examine the vehicle carefully for more severe flaws, such as deep scratches, dents, dings, and rust (which typically shows up along the wheel wells unless the vehicle is in severe disrepair. You could have to spend a lot of money fixing these problems before you sell, depending on the car’s resale value and your prospective buyer.

7. Lift the Hood

Pop the hood once you’ve inspected the interior and outside. One important indicator of the car’s general condition is the general appearance of the engine compartment. Unclean engine compartments are bad for your profit margins.

8. Verify the VIN

Verify the vehicle’s VIN with SaferCar.gov and the National Insurance Crime Bureau if you’re purchasing from a private seller. They’re both free. The former can tell you whether the current owner legally acquired the vehicle and has current, reliable information on auto theft.

If “a specific vehicle [e.g., the car you’re trying to buy] has not been repaired as part of a safety recall in the last 15 years,” you can find out from the latter, a service of the National Highway Transportation Safety Administration. At Carfax, you can also get a vehicle history record that details any prior collisions as well as ownership or title changes.

9. Just bid or negotiate a final price.

After completing your due diligence, get right to the point. When the vehicle is up for auction, place your bid. Remain emotionless: Engaging in a bidding war that drives the sale price above your top dollar is the fastest way to obliterate your margins. If the car is more desirable to other bidders, give it to them. Of course, there are many more on the lot.

Try to get the seller to sell for their lowest price (or less) in a private party transaction. This is when understanding how to identify motivated sellers—even in the absence of a blatant indication like “OBO” in the listing—comes in handy.

Even if it’s more difficult to back out of a private transaction when you’re in person with the seller, the same “unemotional” reasoning holds true here: Abandoning a transaction in the middle is preferable to being trapped with a terrible bargain. There will be a better flip for you.

10. Give the car a thorough internal and external cleaning.

Cleaning the automobile is a must for anyone hoping to optimize their post-flip earnings, even if it isn’t officially a part of the purchasing process. Auction cars need extra care because they are sold as-is. You should:

Clear the interior of any rubbish.
Take out the floor mats, hammer them out, then vacuum them.
Vacuum the entire interior.
Remove any obvious stains from the upholstery, if possible.
Use a moist cloth to dust interior surfaces, such as moldings and equipment.
Use glass cleaner to clean the interiors of windows.
Remove small chips and scrapes from the paint.
Take it to a car wash.
Consider using an auto detailing service if the vehicle is truly wrecked or if you don’t have the time to undertake a comprehensive job. You must set aside $150 to $300 for this, however on more expensive cars, the time and trouble saved might be worth it.

11. Establish Your Repair Budget

These crucial elements will determine your real repair budget:

What is the car’s problem?
Your desired margin.
The make and model of the vehicle.
Average Repair Prices in Your Region.
Obtain Repair Estimates and Select Your Shop

Once your budget has been established, look into reputable repair shops in your neighborhood.

Where, When, and How to Sell

It’s time to price, list, and sell your car, in that sequence, once you’ve cleaned it up and taken care of any urgent mechanical or maintenance issues. Prior to flipping your car, choose a realistic list price as well as the “bottom dollar,” which is the lowest amount you will ever take. This will help in educating you on how to make money flipping cars by not going to such a low price, so you can make a profit selling.

Determine Its Value

To determine the fair market worth of your flip for private sales, use a minimum of two car pricing tools. The most popular tools among flippers are KBB and Edmunds. Make sure you’re getting values for your home ZIP code and be brutally honest about the state of your car. For better or worse, small changes in location or state can have a significant effect on your ultimate sale price.

Decide on your lowest price.

Set your bottom dollar after that. This is your reserve price, or the safety net that ensures a sufficient profit in auctioneering terminology. It shouldn’t be more than 10% less than the manufacturer, model, and condition of your flip’s fair market value. Your bottom dollar guarantees that you won’t be taken advantage of if you’re willing to haggle with purchasers.

List Your Car

Next, decide on a suitable location for your car flip and make an eye-catching listing.

Choose the Proper Location

It’s not always the best option to flip anything quickly and profitably on Craigslist. High-end or specialized vehicles frequently sit on Craigslist’s race-to-the-bottom boards.

Do a comprehensive search for comparable cars that are up for private party sale in your area before creating your listing.

Place your online and offline advertisements appropriately: on college campuses for automobiles that are affordable for students, at professional coffee shops for professionals, and at the neighborhood YMCA or community center for working parents.

Make a Listing

Remember this when you’re creating your listing: A good car sells itself. Professional dealers have enough gullible customers to keep them busy, so let them use the pushy, salesy rhetoric.

An excellent listing contains as many images as the format permits. Take pictures of the automobile from all four sides if you’re posting on Craigslist, being careful to blur the license plate and any other identifying details. Include at least one excellent photo if you’re putting on a board around town.

Describe the fundamental features of the vehicle, including the type of transmission. Emphasize any noteworthy features, such as an available third row or sunroof. Additionally, list any significant mechanical problems that the buyer won’t notice along with a general description of its condition, such as good, very good, or superb.

You must provide your personal contact information when listing on a board, at the very least your email address and, ideally, your phone number. On Craigslist, you can choose to negotiate a system for anonymous messaging. However, if you divulge your numbers, you’re probably going to seal the deal more quickly.

Handle Buyers and Complete the Purchase

You should immediately begin receiving inquiries from potential buyers if your car is advertised in the appropriate locations and has a fair pricing. This is how to handle them.

Check the Payment

Cash is king when it comes to private party auto sales. Make sure your buyer is paying with cash or a bank check before you meet them. If a stranger offers to let you keep the title until the check clears, which is unlikely, don’t accept their personal checks.

Examine and Get to Know Buyers

Once you have confirmed that the buyer intends to pay with cash, engage in some conversation. Here, the objective is not to kick tires or (less often) set you up for a robbery or scam, but to make sure they’re serious about buying.

Establish a time and location for a meeting if you feel at ease with the buyer. Keep in mind that there are other people that are interested in this car. There’s always another buyer out there.

Engage in negotiation (or not)

The subject of negotiating is surprisingly contentious among experienced vehicle flipping. There are two types of flippers: some proactively encourage their purchasers to engage in negotiations, while others adamantly decline to do so.

Price your vehicle 10% to 15% above fair market value for private party sales if you’re willing to haggle. Astute purchasers will attempt to discredit you, but that’s okay because you make sure your price allows you plenty of flexibility.

Last Words

Flipping vehicles for a living is a difficult job, in case it wasn’t obvious. Ideas that promise consistent returns throughout time, sometimes years or decades in the future, can be found there. By giving you real-time alerts for postings on marketplaces like eBay, Craigslist, OfferUp, and Facebook Marketplace, tools like Swoopa can help you stay ahead of the competition. Start your flipping journey now!

However, flipping second hand cars can be the ideal “active income” endeavor for you if you enjoy the thought of (literally) getting your hands filthy. Why not try it out and see what happens?