Is car flipping profitable?
Yes, as long as you know what cars are within your budget. If you know what you’re doing and stay within your budget, car flipping can be extremely lucrative. If you put $1,000-$5,000 into lower-end cars, you may be able to profit anywhere from a few hundred to a few thousand dollars. Investing $5,000-$15,000 can yield a higher profit margin (about 10-30%), as cars will typically be in better shape at that price. Lower-end cars will typically require more repairs, which can eat into your profits. Search for good deals on used cars to find used cars below market value and increase your profits.
What is car flipping?
Car flipping is when you buy a used car and quickly sell it for a higher cost. When you flip a used car, you typically buy it from a private seller or online through websites like eBay, repair and detail it as needed, then quickly flip it at a higher cost in order to make a profit. It’s a good side hustle if you’re willing to invest your time into learning the used car market. It’s best to have some basic knowledge about cars before getting into car flipping, that way you’ll have a better idea of labor and repair costs before buying.
What to Consider When Flipping Cars
Used Car Market Get familiar with the used car market before you start to flip cars, as car prices fluctuate frequently. Consider the market value of certain cars compared to others, factors that play into costs (mileage, age, etc.), and what types of cars will sell best in your area. Knowing the used car market can help inform your budget and what types of cars will net you the highest profit.
Local Laws If you’re in the U.S., some states only allow you to sell a certain amount of cars per year. In states like Kentucky and Connecticut, you aren’t allowed to sell any vehicles for profit unless you register as a dealer. In Vermont and Indiana, you can sell 11 cars per year, but in California, you can only sell 5. Learn your local laws before you start to car flip to avoid fines or any legal troubles.
Cost To properly flip a car, you have to keep track of all the costs so you can actually profit from the flip. Do your research on used car costs and how much you’d have to put into them for repairs. Know the cost of specific cars, how different repair costs factor into your budget, and look for any add-on costs that the seller may have tacked on.
Sales Tax Be aware of the tax obligations that come with selling a car in your state. If you make a profit from flipping a car, you may have to pay capital gains tax like any other profitable investment. Speak to a lawyer or accountant to figure out what taxes you’re responsible for depending on your state.
Time Investment Car flipping can be extremely time intensive, as you have to learn the market, buy and sell the cars, market listings, and repair any issues left by the previous owner. Some car repairs are intense and can take hours or days at a time. So, when you’re considering car selling, remember that it will take up a lot of your time. Car flipping without specific goals and guidelines can make it even more time-consuming than it already is.
How to Flip Cars
Track down a car to buy. Use online websites like Craigslist and Facebook Marketplace to find a used car. Compare the price to the typical market value to see how good of a deal you’re getting. Factor in any potential issues, repair costs, or towing costs. Once you’ve found the car you want to flip, act fast, as used cars usually sell quickly. If you find a car that’s a really good deal, there’s often a reason. Check listings to see if the car has any issues, like a failing transmission, fuel leak, or check engine light.
Inspect the car in person. Head over to see the car in person with an OBD-2 Scanner. Inspect the outside of the car for any cracks, dents, or scratches. Check the tire tread to see how worn the tires are. Inspect the inside to see if there are any stains or issues. Check under the hood and underneath the car for any mechanic issues, like leaks or damaged parts. Use the OBD-2 Scanner to check the car’s computer for warning codes that tell you any issues that may not be noticeable on the surface. Bring an external battery pack to check for any issues on a car that isn’t running. If you aren’t confident in your inspecting skills, bring a mechanic or take the car to a shop for an inspection. Inspecting the car is essential for avoiding costly repairs down the line.
Take the car for a test drive. Once you’ve inspected the visuals of the car, take it for a test drive to get a feel for how it handles on the road. When taking a test drive, Hamby says to check your alignment by driving 15-20 mph on a flat road. As you’re driving, take your hands off the wheel to see if it pulls right or left. If so, find out whether it needs an alignment or if it’s something bigger. To check the balance of the tires, Hamby says to take your car out on a freeway and drive at 60 mph to see if it wobbles. If so, the tires may be out of balance.
Negotiate the price and buy the car. Depending on the person selling the car and whether it has any glaring issues, you may be able to negotiate a lower price. Point out any issues, how much you’ll have to put into the car for inspections, gas, or other services, and try to negotiate a lower price. Once you’ve agreed on a price, have the seller sign over the title and buy the car. People often sell their cars because they don’t want to pay for the repair costs and you can typically negotiate a lower price. Hamby says when buying from a private seller, send the money however they receive it. It’s best to pay with cash, but a cashier’s check is usually recommended for anything over $2,000-$2,500.
Make a list of what needs repairing and include time spent and costs. Once you’ve bought the car, make a list of everything that’s wrong with it to keep track of what you have to do to get it ready to sell. Include a section for the amount of money invested and the amount of time spent on the car, as they will be crucial for calculating the final costs.
Get the car fixed. Once you’ve mapped out all of the car’s issues, start to get everything repaired. Light repairs, like changing a headlight or replacing a spark plug, can be done at home, but you may want to enlist the help of a mechanic for more extensive repairs, like a transmission swap or radiator replacement. Make sure to keep track of the repair costs, whether you’re paying a mechanic or buying the parts and doing them yourself. After any leaks or engine issues are repaired, get an oil change to slightly increase the value of the car.
Get the car detailed. Once all of the mechanical and cosmetic issues are fixed, get the car detailed. Take it to a car wash or wash it yourself and get the interior cleaned to remove any dirt, grime, or stains. Make sure to factor this into your repair costs.
Determine how much you’re going to sell the car for. Review the typical market value for the car, then determine how much you’ll sell it for based on factors like repairs, demand, and how quickly you want to flip the car. For example, if the car is typically valued at $9,000 used but you bought it for $2,000 and spent an extra $2,000 on repairs, you may want to sell it for $8,500 or lower to get it off your hands and still make a profit.
Get the car ready to sell. Hamby says when getting ready to sell a car, know the basic information about the car and the key selling points. Take good photos of the exterior and interior, have the vehicle identification number (VIN) on file, have a Vehicle History Report, disclose the mileage on the odometer, have the title, and use the Bill of Sale as a receipt. Once the car is ready to sell, list it on an online marketplace with title details and a thorough description. There is usually a section on the title for Odometer Disclosure. If not, use a 262 form or any other applicable forms for your state. You can find them on your state’s DMV website.
Determine the profit. Add up the amount you spent to get the car repaired and detailed, then subtract that amount from how much you sold it for. The result is how much you profited. Make sure to check with your local laws to determine whether or not you have to pay sales tax on the sale. To determine your hourly rate, divide the profit by the number of hours you spent working on the car and preparing it to sell. The result is your hourly rate.
Where to Find Cars to Flip
Find used cars on online marketplaces and websites. Hamby says some of the most successful used car sites are repofinder.com, Craigslist, CarGurus and AutoTrader. Facebook Marketplace and eBay are also great places to find used cars online, just keep an eye out for scams and avoid sending money online.
Check newspaper classified ads. Flipping to the classified ads section of your local newspaper is a great way to find a car to flip. The classified ads section is typically aimed towards old people, with many elderly drivers listing their car because they’re ready to get rid of them. Many of these listings are under market value, which can help you get a larger profit if you decide to flip.
Visit car auctions. Going to car options for used cars is a great way to find affordable cars to flip. Usually, auctions are put on by police departments or banks to get rid of impounded or repossessed vehicles. Although you may have to get extra work done to make sure the vehicle’s profitable, as cars are auctioned as is, you’ll still be able to make good money depending on the car. You’ll have to put down a deposit on the day of sale if you decide to buy a car at an auction. Use eBay Motors’ auction option to find good deals on used cars in your area and further out.
Head down to the dealership. Believe it or not, you can find a good deal on used cars at the dealership, especially when they’re having clear-out sales or trying to open up space. Car dealers are also able to tell you all of the things going on with the vehicle upfront, which can influence the car’s final costs.
What cars are the best to flip?
Chevrolet Camaro The Chevrolet Camaro is an iconic modern vehicle that typically holds high value in the U.S. and overseas. Depending on the age, model, and condition, you can flip the Camaro for a $20,000-$30,000 value.
Toyota RAV4 The Rav4 is a durable SUV that has small repair costs and common parts across the market. If you’re looking for a quick and relatively easy way to get into car flipping, go with the Toyota RAV4. It’s important to know that the RAV4 depreciates 39% after 5 years, with a 5-year resale value of $18,081. So, the older the Toyota RAV4 you want to flip is, the lower the profit margins will be.
Ford F-150 The Ford F-150 is a highly sought after expedition vehicle. It sells well, has parts that are common across the market, and offers a fair profit margin. Depending on the year and condition of the F-150, you can make a good amount of money off of it, especially if you market to middle and upper class buyers.
Toyota Camry Toyota Camrys are famous, affordable, reliable cars. If you get your hands on one of these and fix it up, you’re looking at a fair profit margin. They’re fuel efficient and have fairly cheap maintenance, so repair costs won’t eat into your profit margins as heavily as with other cars. Even if you get your hands on a 1999 Camry, it can be valued between $475 and $2,064.
GMC Yukon The GMC Yukon is a great car to start with if you’re just getting into car flipping. Yearly repair costs barely peak over $500 and it has a fair value depending on the model. The 2016 GMC Yukon is valued between $21,158 and $42,429, and depending on the buyer, you can walk away with at least a $5,000 profit.
How to Know If Car Flipping Is For You
As a car flipper, you must dedicate your time to learning about cars to be successful. You must be willing to study the used car market and know what you’re getting into. If you aren’t willing to learn about the mechanics of cars, how to source parts, and how much specific cars are worth based on their conditions, car flipping may not be for you. But, if you have a lot of mechanical knowledge and are willing to put in the time and effort to make a profit, you may find success in car flipping. Car flipping requires a lot of knowledge about cars and the used car market to yield a consistent profit. Car flipping requires a lot of time and energy, as you may need to dedicate hours to repairing different vehicles.
Final Thoughts
Car flipping can be lucrative if you’re willing to put the proper time into it. Flipping cars requires knowledge about the used car market and enough mechanical knowledge to know what to look for during inspections. If you don’t have proper mechanical knowledge, you can enlist a mechanic to help you during flips. It’s important to know the laws of your state before flipping cars, as some may require you to have a dealer’s license. As long as you’re willing to put time and effort into looking for deals on cars and learning the best practices to flip them, you can be successful.
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