If you are looking for how to make money flipping cars, you’re in the right place. Read this article to the end to find out all you need to know about flipping cars for profit.
Despite its popularity, you’re not limited to only flipping houses when it comes to making money repairing undervalued assets. If you have the right skill, you can also flip cars for profit.
In this article, I will reveal the different ways that you can use to make money flipping cars. I will share my personal experiences – my best flips and my biggest mistakes. So, if you’re considering flipping cars, I hope this guide will help you start your journey.
1. Know what the local used car market entails
Your job as a car flipper is to find a nice car at a low price, ensure you can fix the car quickly, and sell it for a higher price within a short period of time.
If you can sell the car for a high-profit margin, you will have funds that you can reinvest in your next vehicle. This way, you can grow your side business faster.
Generally, your aim as someone that flips cars for profit is to find low-mileage vehicles that are made by popular brands (like Toyota, Chevrolet, Honda, and Ford).
Also, the demand for efficient sedans, inexpensive hatchbacks, and compact SUVs is high. As a smart car flipper, you need to consider the climate and terrain when you are buying and selling cars. Sunroof cars and convertibles are ideal for warm climates. All-wheel drives are also suitable for areas that have lots of snow and hills.
Based on my experience:
There’s a higher demand for sedans and efficient vehicles in medium to big cities. Whereas, there’s a higher demand for trucks and SUVs in rural areas or small towns.
2. Find good and cheap cars
You can go to online public auctions like IAAI and Coparts to find good cars at an affordable rate provided you don’t have a dealer license. Public auction vehicles include vehicles that the government has confiscated for tax back payments, lender repossessions, and abandoned cars.
Car flippers can also find vehicles on Facebook Marketplace and Craigslist. These are great platforms for those that prefer to negotiate with private sellers instead of bidding at public auctions. The classifieds feature many cars that are ready to be flipped.
With Craigslist, you don’t have to pay anyone any commission on the sale price. However, there are lots of scammers on Craigslist. You need to be watchful and knowledgeable when you are searching for a good car or selling a car on the site.
Other places where you can find good cars to flip are Offerup, ads in traditional newspapers, “For Sale” signs on cars parked in the neighborhood, and “For Sale” adverts in town.
Don’t expect your local dealer to give you lower prices. Their prices have huge profit margins irrespective of the type of offer they are offering you.
Based on my experience:
The best strategy is to buy damaged (salvaged) vehicles from online vehicle auctions. If you are able to inspect your target vehicle before buying, this will significantly improve your success rate of flipping cars.
Personally, I linked up with a friend who has a dealer license. He helped me secure vehicles at the auction. Through him, I was able to gain access to a larger pool of inventory. He bought cars on my behalf for a flat fee.
After gaining some experience, I reduced my turnover rate by targeting repossessed vehicles. I realized that repossessed vehicles may attract slightly higher bids but were easier to flip.
A word of caution:
Avoid cars without physical damage or repossessed title, they usually have significant issues like engine or transmission problems.
3. Set your budget
When you are determining the budget for your first car flip, the pros will suggest starting with a maximum budget of $2,500 before fixing the vehicle. This amount is enough to buy a decent car at an auction with moderate mileage. You also stand a chance of making a profit of $500 to $1500.
Use cash to buy the cars. Auctions may accept credit cards. However, you don’t want credit card interest to tamper with your profit.
It is ideal to have extra cash on you when you are flipping your first car. Ensure you have at least half of your shopping budget with you.
Based on my experience:
The success of any flip lies in the cost price and not the selling price. When you buy a flip car at a significantly lower price, you will be in a good position throughout the course of the flip.
In addition to the bid price of your vehicle at the auction, your budget should consider the following costs when buying from an online auction:
- Sales Tax
- Buyer Fee
- Bid Fee
- Load Fee
- and Tow costs.
4. Value the car
If you are flipping cars for profit, you need to understand how to value a car. You need to do a lot of research before you enter car auctions or before you bid on cars that you see on Craigslist or other classified sites.
Platforms like Edmunds.com and KBB.com offer price guides and also have a list of various brands, models, years, and trims of popular cars. With this information, you will be able to find undervalued cars that you can flip to make a profit.
Search for cars that are in demand and less than the market price. Don’t go for cars with fancy spoilers or damaged exhausts. These cars are difficult to sell in general markets and do not yield good profits.
You don’t want to end up selling a car for a price that is less than what you intend to sell it for. You should also carry out detailed research so that you buy a car that is not selling at all.
Based on my experience:
Hondas are the best cars to flip.
Before I buy a car, I check Craigslist and Facebook Marketplace to see how much others are selling. Since I will be selling in these markets, I used current listings in my neighborhood to determine the best price to sell my car.
Oftentimes, cars on online marketplaces sell for lesser prices than KBB estimations. The demand and supply of your vehicle, your location, vehicle specifications, and the condition of the vehicle all determine how much buyers will be willing to pay to buy your car.
In addition, Toyotas are usually optimally priced at the auctions. There are many times, they are even overpriced.
Also, I stay away from Nissans due to their poorly-made CVT transmissions. I found out the hard way that fixing those transmission costs more than the whole vehicle. Lastly, they are also not as valuable or desirable as Toyotas or Hondas in any used car market.
Read Also: How To Make Money Flipping Domains
5. Know how long the vehicle has been parked
When you ask questions about the car, you will know the value of the car and the amount of investment it might require.
Car flippers understand that a car that has not been driven in a long time can experience some malfunctions once it starts running again. Such a car may also need to be maintained before you sell it again.
You should not ignore this information when you are looking for an older vehicle with low mileage. This could signify that the car needs extra work.
Based on my experience:
If you consider how many cars you can flip in a year, you are better off keeping your money than getting stuck with a non-driveable car.
Please be careful. Always go for “Run and Drive” cars that are easy and inexpensive to fix.
6. Inspect the interior and exterior of the car
When you are checking the car from a private owner or at the auction, ensure you check the car’s exterior and interior.
On the outside, look for rust, check the wheel dents and arches, dents in roof rails, and the lower fenders. It can be expensive and time-consuming to repair rust.
More so, pay attention to how clean the car is. Wet your finger with water and run it through the side of the car. If the dirt cleans easily, the appearance of the car will be improved by a good wash.
When you are checking the interior of the car, look for damaged upholstery, stained floors, and poor lightening. You should also sniff for smoke, bad smells, and pet odors.
If you want to flip a car on the low end, then you shouldn’t go for cars that will make you spend money on neutralizing bad smells.
Based on my experience:
I stay away from cars with significantly bad interiors such as torn leather seats, melted dashboards, and leaking sunroofs. I also stay away from cars with known or visible electrical issues. These issues can significantly lower your final sale price.
Bad car interiors are usually a turn-off for most buyers. In fact, you may find it hard to sell cars with visible bad interiors. Eventually, you may be forced to sell at a lower price than the market price just to keep things moving.
Lastly, avoid cars with rust. You can buy cars from the southern part of the US where there is little to no snow. Consequently, stay away from cars that seem to have been submerged in water.
7. Find out how it looks under the hood
To determine the value of the car, confirm how it looks under the hood. Car flippers know that a car that has a dirty engine bay may require expensive maintenance that can affect profit margins.
For instance, contaminated oil can be repaired by changing the oil. However, a sign of leaking oil can signify expensive repairs.
You should also check the belts while the engine is off. Worn belts should be replaced; this can cost hundreds of dollars. Ensure that the radiator is not leaking and the water is at a normal temperature.
Overheating or a radiator that leaks signify that the car needs to be fixed, which means a lower profit margin. You should also check the hoses. It can cost at least $200 to replace a radiator hose.
Based on my experience:
If you are interested in selling cars, you will excel if your knowledge about cars is above average. Consequently, learning how cars work and having basic maintenance skills could save you from a bad deal or thousands in repair costs.
Here are some basic skills that can save you money.
- Understanding engine sounds and skips
- Understanding the different types of exhaust smoke colors
- Knowing how to check the engine oil level
- Understanding oil leaks
- Understanding dashboard lights
- Listening to transmission shifts
- Scanning vehicles and learning how to read problem codes
- Learning how to change tires, brakes, batteries
- Learning to ask important questions from sellers.
8. Confirm the vehicle history
Once you find a car that you are interested in and the price is within your target range, check the history of the vehicle before you test drive it. By making use of the 17-digit Vehicle Identification Number (VIN), you can know the car history with SaferCar.gov and the National Insurance Crime Bureau.
Use the first website (which is sponsored by the National Highway Transportation Safety Administration) to confirm if the car has been repaired as a result of a safety recall within the last 15 years. The second website can be used to know if the current owner bought the car legally. It will also provide updated information on car theft.
You should also use the VIN and buy a Carfax or AutoCheck vehicle history report. The report will let you know if the vehicle was involved in any accidents and if there is a change in title or ownership.
Based on my experience:
Checking vehicle history for cheap used cars is somewhat irrelevant. People who buy cars that are worth less than $5,000 are not really concerned about the vehicle history. They just want a good reliable car with no title issues.
9. Test drive the car
When you are testing a vehicle, pay attention to the way the transmission works. If the car uses an automatic transmission and delays by more than two seconds before it shifts and engages, that is a bad sign. The car will soon require a new or converted transmission.
It is also important to check the brakes while test driving the car. While on a clear dry road, get on a good speed and step hard on the brakes.
If the brakes are good, the car must stop quickly, smoothly, and in a straight line. If the car has a crooked or shaky stroke, then the brakes have worn out and they must be replaced. Although this may not destroy the deal, it will still tamper with your profit margin.
Based on my experience:
You will be in a better position if you can test drive a car before you make any payment. Despite the fact that you will not be able to ascertain all the issues that may be present, a test drive gives you a better understanding of what you’re getting yourself into.
Ultimately, it will help you decide if you should go ahead to make an offer or not.
Read also: How to Make Money Driving
10. Make good offers
Whether you want to buy the car at an auction or from a private seller, be relaxed and don’t attach any emotion to the process. At auctions, ensure you know the bidding rules on time and don’t be involved in a bidding war that will make you spend more than your budget.
Don’t be stressed if you miss a car. There are more cars waiting. If you want to buy from a private seller, know why they are selling. The answer will give you an idea of how low your offer can be.
Make a cash offer that is less than the asking price. Be ready to walk away if the price is not affordable for you.
Based on my experience:
There are thousands of cars at the auction. For every one good deal, you think you missed, there are a dozen more incoming. You will always regret overbidding on any car no matter how great that car seems.
11. Prepare to flip the car
Once you have bought the vehicle, you need to prepare the car for flipping. Carry out a full diagnostic check of the vehicle systems and do the necessary repairs.
Don’t make the mistake of selling a car that is not safe for someone. You can, however, ignore cars that do not threaten the car’s safety and do not add to the value of the car.
You can detail the car depending on its brand, model, condition, and budget. This will improve its outlook and can make you sell at a good price.
Based on my experience:
Before you start flipping cars, please get an affordable mechanic and collision repair expert. Avoid car repair experts without a workshop.
Before putting the car for sale, make sure you put the title in order. If you bought a salvaged car, ensure you take it for inspection.
I don’t advise you to jump titles. I leave this decision to your discretion. Make sure the title and any other accompanying legal documents are available.
12. Price and sell the car
You can set a fair list price that is as low as you want by using the Edmunds and KBB websites. Consider the condition of the car and use your zip codes for values. Set up ads in places that can reach your target customers.
Display the vehicle in a safe place and don’t drive alone. It’s also advisable to accept cash only and give the buyer a sales contract and receipt and signed title.
Based on my experience:
Facebook Marketplace outshines other marketplaces. Other marketplaces including Craigslists are full of spammers and scammers.
Buyers always want to negotiate a good deal for themselves. So I always make sure I add some extra amount to my target sale price. In the end, the buyer is happy, I am happy.
Read Also: Weekend Hustle
How to determine the cost price of a flip car
I created an excel sheet to help you determine the best estimate before buying a flip car. This budget sheet uses the IAAI pricing.
Heads up! This is for informational purposes only. Auction fees and tax rates may change or differ.
What you should look out for before buying a flip car
- Buy repossessed or Insurance salvage Cars
- Buy vehicle models from year 2007 and above
- 4+ ratings on Edmunds is good.
- No more than 2 replaceable damaged parts (use the 360 view available on online auctions)
- Must be “Run & Drive” (Verify with engine running video)
- No known expensive commong problem for year model
- Go for vehicles with less than 150k mileage. The lower the better.
- Search the VIN on Google Images to see if there’s any prior damage or auction sale
- Buy within 60 miles radius
- Avoid vehicles with the check engine light on
- Set preference for dark fabric or clean or untorn leather seats
- No windscreen crack
- Avoid cars with peeling paint
- No dashboard crack
FAQs
Is flipping cars profitable?
Lots of car owners prefer doing business with private sellers, thereby avoiding dealership and car dealers. This gives those that are interested in selling cars a good profit margin.
The most profit I made in one flip was $2,500. I flipped a 2007 Honda Pilot EXL with 139k mileage. It was a repossessed car. I only changed its serpentine belt and resold it within a week.
On the other hand, I made a terrible loss of the same amount of $2,500. I bought a non-salvage, non-repossessed vehicle, non-insurance 2009 Chevrolet Traverse vehicle. I broke my own rule and paid dearly for it. It had an engine problem. I bought an engine and yet the car still didn’t work properly. I had to cut my losses and move on.
What are the best cars to flip for profit?
Honda and Ford vehicles are the best cars to flip in the US. Meanwhile, Trucks and SUVs are the best to flip in rural areas whereas, sedans and hybrid vehicles are the best vehicles to flip in urban areas.
The best cars that you can flip for profit include expensive, exotic, and classic cars; these cars always sell for good profit margins. But they are risky for those flipping cars for the first time.
The older and cheapest cars are the safest form of investment. They are affordable and high in demand. Buyers looking for these types of cars also purchase quickly.
Is flipping cars for profit legal?
Yes, it is legal to flip cars for profit. However, you should still research state laws. For instance, in California, you are only allowed to sell up to five cars per year, irrespective of the selling price and the condition of the car.
This is good enough for most flippers, especially those doing it as a part-time hustle. If you want to sell more than five cars per year, you need to get a dealer’s license.
When is the best time to buy cars for flip?
The best time to buy cars during the year is from November to January. The best time to sell flip cars is the beginning of tax season.
Conclusion
In this article, we have considered how to make money flipping cars and as you can see, it is a fun and rewarding venture.
If you are willing to carry out some detailed research and also exercise patience with a positive attitude, you can create a flexible source of income from flipping cars.
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