What Is Flipping Cars and How Do You Flip Cars?
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What Is Flipping Cars and How Do You Flip Cars?

By Michael O'Connor | September 15, 2021

What is Car Flipping?

Car flipping is similar to other types of flipping that people do with homes or other buildings. It is essentially the act of purchasing a vehicle and then selling it quickly for a higher asking price. This can be done by buying cars that are undervalued or adding value to them by doing much-needed repairs or modifications.

Car flipping could be a good option for anyone who has the patience for time-consuming searches or the expertise to make repairs. If you have a keen eye for a good deal or if you love working on cars, you could easily find some success.

If you are interested in starting a side business or finding a way to make a little extra cash, buying and flipping used cars could be a good option. There is a high demand for quality used cars no matter where you live. Knowing how to navigate the marketplace can help you set up a successful car flipping business.

The used car market has always been an interesting and exciting place to make money. A passion for cars and a mind for business are two good qualities to have for anyone looking to get into the used car business. Understanding the ins and outs of the industry can help you decide if a car flipping business is the right side hustle for you.

Difference Between Flipping a Car and Selling It

While most people will sell a car at some point in their life, flipping a car is a much different process. When you are selling a used car simply to make room for a new vehicle, you don’t generally have to worry about things like profit margins or detailing. Generally, you are only hoping to have a smooth, hassle-free sale of the vehicle and to get the current market value for it.

When flipping cars for extra money, though, there are many other things to think about. You need to know what the market is like for used car sales in your location as well as the pricing and values of used vehicles where you are trying to do your flipping. You should also have some skills and knowledge of things like upholstery cleaning and basic vehicle maintenance.

Benefits of Making Money Flipping Cars

There are quite a few benefits of flipping cars to make some extra money on the side or even as a full-time job. One of the main benefits is that it is not very time-consuming. You could potentially sell a few cars a month without investing a lot of time on your end. This makes it a great option for people who already have a full-time job but are interested in car sales as a side gig.

One of the other advantages of flipping cars is that it can be incredibly rewarding. If you are interested in restoring cars or working on them, you will have ample opportunity as a car flipper. The more you add to a vehicle’s asking price with your own work or the work of another professional, the more satisfying the final sale can be.

How to Flip Cars Without a Dealer’s License

The first thing you will want to do when considering car flipping as a side business is check the laws in your state. Every state has different limits on the number of cars you can sell in a year without having to apply for a dealer’s license. For example, in Indiana, the limit is 12 per year. In California, it is just five. This can give you a good idea of how far you want to go with your car flipping business.

If you want to sell more cars per year than your state allows, you will have to get a dealer license. If you want, you could also partner up with a used car dealership and have them sell your cars for you as well as handle all your paperwork. While this is a convenient option, it will cut into your profit margin since the dealership will take a portion of the proceeds and you will have to pay sales tax. Your state’s limits on car sales will dictate whether or not this extra cost will be worth it.

Before Buying a Used Car for Flipping

While you might be excited to get started on flipping cars, there are some things you should do before you buy your first car. Being as prepared as possible will help you navigate the landscape of car flipping successfully and set you up to make as much money as possible. It will also keep you from making some common mistakes.

Set Your Budget Low

Setting the budget at a lower price for your first car flip is one of the best things you can do to keep your risk down. If you shoot too high for your first sale, you could end up eating the cost or getting stuck with a car you don’t want. The higher the sale price is for a vehicle, the harder it will be to sell.

Set the budget for your first car flip somewhere in the price range of $1,000 and $1,500. With that, you can try to make a profit of $500 to $1,000. Keeping your asking price around $2,000 immediately increases your chances of making the sale.

Know Its Resale Value

Knowing the value of vehicles is incredibly important when you first start trying to sell cars. Use tools like KBB or Edmunds to find out the average asking price of any vehicle you are thinking about buying and flipping. Any big-name vehicles like Hondas, Toyotas, and Fords will have very accurate values. This will not only give you a good idea of what you should be selling the car for but also what price you should be buying it at.

It’s important to keep in mind that the published prices of used cars are subject to a lot of changes. Just because the Blue Book price is one number, that doesn’t mean you have to sell it for that. If the car is in exceptionally good shape or if you have put a lot of work into it, you could price it a bit higher for a better profit margin.

Get a Vehicle History Report

Before you buy any used car, you should always get a vehicle history report. Request the VIN from the seller and get a report from AutoCheck or Carfax. If you are purchasing from a car dealer or online, you can usually get a report for free. You can also run a check for free using SaferCar.gov and the National Insurance Crime Bureau.

These reports will tell you the entire recorded history of the vehicle. They pull information from the DMV, insurance companies, and other agencies that have dealt with the car throughout its existence. This will tell you whether the car has been in any accidents, what kind of work has been done on it, and how many previous owners it has had. You should also be sure to get a bill of sale for any car you buy.

Test Drive It

The most important thing you can do when purchasing a used car for flipping is to test drive it. Chances are, whoever is buying the car after you will want to test drive it as well, so this is a chance for you to find any issues. It will also help you get a feel for the interior and see what kind of shape it’s in.

When test driving a vehicle, take note of any major issues with acceleration, braking, or steering. These are going to be the most expensive areas of the vehicle to fix. Knowing whether you are dealing with any problems with these functions will help you decide whether the car is worth trying to repair and flip or if the cost will be a deal-breaker.

Where to Find Undervalued Used Cars

The key to a successful car flipping business is to buy used cars that are undervalued. The further below the Kelley Blue Book price a vehicle is, the higher your profit margin will be when you sell it. There are many places where you can find undervalued cars with varying degrees of repairs that need to be made.

Auto Auctions

Auto auctions are a great place to find cars that are well below the standard asking price. The cars sold at public auctions are usually going to be either government-owned vehicles or cars that have been repossessed. Because of this, they will usually be far below the market value and perfect for flipping.

Finding a good car at an auto auction takes some skill and a good deal of experience. Make sure you take a look at what is being offered before you go. Many auctions will list the cars in advance online. Also, you may need to pay for a vehicle in cash, so make sure that you are prepared to do that.

Craigslist

Craigslist is an online marketplace that is available in most cities in the United States. People sell all kinds of items on Craigslist and their automobile section is usually full of undervalued cars. As with any used car sale from a private seller, make sure you do your due diligence and get a vehicle history report as well as a thorough visual inspection before buying.

eBay Motors

eBay Motors is another great place to buy cars online. Unlike Craigslist, eBay Motors isn’t regional, so you can browse thousands of vehicles for sale all over the country. Plus, you have the feedback function of eBay to help ensure that you are dealing with reputable sellers.

Newspaper Classifieds

While it may seem outdated, newspaper classified ads are a perfect place for finding undervalued vehicles. Newspaper classifieds sellers tend to skew older and many times people are just trying to get rid of cars that they no longer have any use for. This means you are much more likely to find vehicles that are in good shape for less than their actual value.

Facebook Marketplace

Like Craigslist, Facebook Marketplace is a regional online listing for used cars and other items. One of the benefits of Facebook Marketplace is that you can see the profiles of people who are selling vehicles. You also get Facebook’s Purchase Protection on many of the things that are sold in the marketplace to protect you from scams.

Preparing a Car for Flipping

Once you have purchased your first car for flipping, there are a few things you should do to get it ready. If there are no significant issues that you can detect, at the very least you can get it looking as showroom-ready as possible.

Get it Inspected

If you haven’t already, getting the vehicle thoroughly inspected by a mechanic you trust is a good idea. This can let you know if there are any hidden issues that could prevent you from selling the car and also help you price it accordingly.

Do Any Necessary Repairs

If there are repairs that need to happen, make sure you get them done before you list the car. Prioritize repairs as much as you can. This means that if there is anything that should be done but that won’t affect the functionality of the car, you can either skip it or make the repair for as little money as possible. The important thing is that you make any repairs that you need to list the car as honestly as possible.

Get it Detailed

Don’t underestimate the power of good detailing for a vehicle. You might be surprised how different a car looks after it has been thoroughly cleaned and detailed by a professional. This will immediately raise your chances of selling the car and make it much more appealing to potential buyers.

Take Good Pictures

Good photographs are essential for making a sale of a car. Either get professional photos taken or take them yourself using a high-quality camera. If you plan on flipping more cars in the future, investing in a good camera can go a long way towards making sales.

Where to List a Car for Flipping

Listing your car is an essential part of the flipping process. The more places you list your car, the more likely you are to sell it. It is highly recommended that you list the vehicle in multiple places and that you keep it as local as possible. This cuts out the cost of travel and the amount of time it takes to get the car sold.

You should also park the car somewhere visible with a “for sale” sign with a phone number that is easy to see. If you have taken the time to detail the car, it will have the visual appeal needed to attract buyers. This is one of the best ways to passively sell the car with minimal effort on your part.

Final Thoughts

Flipping cars is a great way to earn some extra money and get some experience in the car business along the way. By taking the time to make sure you are complying with all the state laws and working efficiently and honestly, you can expand your business as much or as little as you want. The key to a thriving car flipping business is patience and knowledge. If you have the capacity for both, you can set yourself up for success.