I personally love cars. I am familiar with all of my cars just like I know my wife.
So if you love cars and buy a new one every year then you can turn your passion for cars into a profitable business.
In this article we will tell how you can make money flipping cars in just 2 to 3 hours.
So keep on reading.
What is Car Flipping?
Car flipping is just like website flipping. You buy a website for a lower price then add value to the site and finally sell it at 8 to 10 times higher than the buying price.
Similarly in car flipping you buy cars at a very lower price then you invest some money sprucing up the car and finally sell it for a profit of 20% to 30% at least.
You can say car flipping is similar to “Buy Low, Sell High” business model.
The entire flipping process can be described in three stages.
Stage 1 is buying the car at a lower price.
Stage 2 is repairing the car so you can add value to it.
Stage 3 is selling the car at a higher price.
Let us keep it simple!
Minimum Cash You Need to Start for Car Flipping Business
You might be wondering how much money do I need to start my flipping business?
You don’t need much of an investment. If you have just $2000 to $4000 dollars for an initial investment then that would be fine.
In fact I started with just $1000 in my pocket.
Here I don’t recommend you to borrow money from bank or anyone else. This will take some pressure off your first car flip.
It is wise to start with smaller amount because it will mitigate any risk.
How Much Money You can Make with Car Flipping
As far as profit margins are concerned then per flip you can make up to 25% in profits.
So if you bought a car for $2000 (including the repair cost) then your target to sell this car must be at $2500. Thus making $500 in profit!
You can make more money from car flipping if you flip higher value cars.
Abiding the Law
Before you start flipping you must be familiar with laws and regulations in your state.
How many cars you can own in a year depends upon the state you are living in.
For example in California you can own up to 5 cars in a year. So if you want to flip more cars and your state allows owning only 5 cars then you can put other cars in your friends’ or spouse’s name.
If you want to flip cars in bulk like 20 to 30 then you may have to get a dealer’s license.
You must avoid any notification or penalty by following the rule.
In first stage you look out for a decent functioning car that you can buy at a lower price.
Step 1: What Kind of Car You Would Like to Flip?
First step of your flipping business would be finding right kind of car.
Common Cars Vs Luxurious Cars
Do you want to go for common cars worth between $1000 – $4000 or luxurious car worth over $50,000?
Luxurious cars can take some time to sell but the profit margin is very high.
However common cars have regular customers and they are easier to sell. Moreover your budget suits common cars over luxurious cars.
Ugly Looking Cars are Good
Remember ugly looking cars soaked in dirt are good because with some more TLC you can make it look like a new one.
These cars need just a nice wash and they look like a new one.
However don’t buy a car with awful paint jobs and tons of dents and body damage.
Choose a Car Depending Upon Season
If it is winter then there is no logic buying a convertible. It makes a lot more sense if you buy 4 X 4 vehicles for a snowy winter.
In summer you can buy a convertible. Just follow the trend.
Finally Go for the Sweet Spot
The sweet spot is within $1000 – $4000 price range.
It is easier to attract buyers for lower price range because most of the people don’t have cash over $5000.
Buyers don’t obsesses over imperfections if the price range is low however if the range is over $30,000 then they would like to look into every small details of the car before buying.
Moreover if you make any loss buying low priced cars then you can afford it. For example if you bought a $1000 car and you fail to sell it then you can scrap the car, cut losses and move on.
However if you buy it for over $5000 then you can incur heavy losses.
So look out for a car within $1000 – $4000 price range.
Diversify Your Investment
Finally diversify your investment. If you are ready to make an investment of over $5000 then diversify your investment.
Instead of buying just one car worth $5000 you can buy 3 cars worth $17,00 each.
This way you can always minimize your losses.
Step 2: How to Get Best Deals?
Once you have made your mind for buying a right kind of car now it’s time for finding the best deals.
Craigslist is the Place
There can be many places you can find a deal but for the beginners craigslist is the best place to start.
It takes a keen eye to spot a great deal. As a new flipper you have to learn the art of finding a great deal instantly.
How to Create and Post Ads on Craigslist?
You can create ads and post it on the craigslist.
An example is given below.
Ad Title: In the title you can write “I want to buy a car, I’ve CASH right now! So don’t trade your car, Sell it to me”
Ad Description: In description you can elaborate the Ad title little more.
That’s how you create ads.
Beating the Competition
Thousands of other flippers and dealers come to craigslist for buying and selling each day thus making it very competitive.
If you want to beat the competition then read following suggestions.
- Look for the latest postings.
- If a phone number is listed then call and talk.
- Be willing to drive for an hour if it is necessary.
- If you spot a deal be ready to buy the car immediately. Offer them cash!
- Always stick to your computers and keep following the new postings.
Working with Technology
You can use tools like Google alerts for Craigslist postings. Every time a new ad is posted you will receive an email.
Moreover you can download CPro app to your smartphone and set up notification.
Look Out For Cars Sitting in Lawns
Some of the best deals can be found in the lawns.
Look out for the Cars sitting in the front yard of a house. Search your neighbourhood you will find such cars.
Owners of such cars would be willing to sell them much easily because they don’t know how to use computers for creating and posting ads.
If you offer them cash upfront then you can seal the deal right in their parking lot.
Work with Dealers
If you know dealers then you can ask them if someone is willing to sell their car. However dealers charge a monthly fee or it can be flat for just one time.
Visit Auto Auctions
Public auctions can also help you spotting a deal. You can attend such auctions and look out for potential buyers.
If you have friends then ask them if they know someone who is ready to sell their car. You can give your friends a commission for each referral.
Third Party and Not Dealers
Whether you are an experienced car flipper or a newbie always go for a third party.
Third parties are individuals who want to sell their car.
If you are going to buy a car from a dealer then you have to pay a fee plus dealers are very difficult to negotiate and they don’t bring their asking price down.
However individuals would be willing to sell their car a lot cheaper because they are in hurry and want cash immediately.
Dealers are sticklers. Third party individuals aren’t.
So always buy from a third party.
Reading the Mind of the Seller
If a seller is saying that the car is already been sold then it really doesn’t mean that the car is sold.
Car is not sold until the seller receives the cash and car is picked up from his or her front yard.
Usually sellers say this to get a better deal.
What you can do is offer them $100 to $200 more to the seller and buy the car immediately.
Step 3: Scrutinizing the Car Before You Buy
A deal can’t be called a good deal unless you inspect the car from all the angles for any fault. You will inspect the car’s functioning and the legal aspects like car is clean or stolen.
Get into the Details
You have to get into details of the car like exteriors, interiors, engine, transmission, batteries, radio etc.
You can’t just throw the money blindly and buy a car. Later you will have problem fixing it and end up losing money.
Create a Checklist
Create a SOP (Standard Operating Procedure) whenever you are inspecting a car.
Jot down a list of all the parts or items that you might like to inspect in a car you are going to flip.
You can’t bank on your memory especially if you are a newbie.
So create a checklist and don’t miss any item in the car.
Never Ever Forget Title Research
Before you dig deep into the physical aspects of the car you need to ascertain about the possession first.
You have to do a background check for the car. Ascertain other previous owners of the car.
You shouldn’t end up buying a stolen car or under the bank’s possession.
Miles is Very Important
Once you are through with the legal issues you need to start looking into the physical aspects.
The first one is the mileage. The car with a mileage of over 150,000 miles shouldn’t be bought. Always buy a car with a mileage within the range of 125,000 miles.
Inspect the Transmission
Transmission is very important because if you end up buying a car with faulty transmission then you have to pay an arm and a leg to fix up.
You are definitely going to lose money because repairing cost for transmission is quite high. (Read Step 4 for checking transmission)
Always Inspect the Trunk for Fluid Bottles
Inspect the trunk of the car for the junk fluid bottles. If you find fluid bottles lying in the trunk then you are absolutely right in concluding that the owner of the car is covering up for the fluid leak.
Dead Batteries are Good
Don’t write off a car just because it has dead batteries. Dead batteries are great because it helps you bringing the price down (up to $250 dollars).
Secondly it takes less than $100 dollars to fix the car with a new battery. The value that it adds to the car is much high. You will learn this while you are selling the car.
Certain Questions to Ask
Here is a list of questionnaires that you must ask the seller on the phone or in person.
- Does the car have clear in state title?
- How many miles the car has driven?
- Is the title in your name?
- Does the car have any mechanical problems like faulty transmission?
- Why do you want to sell the car?
You have to ask basic questions.
Due Diligence is Very Important for Your Reputation
Due diligence is very important because your reputation is at stake.
I know you are probably a newbie. But if you want to stay in this market then reputation is very important.
You can’t just scam people. You may be successful in selling a faulty car to a buyer but your reputation will acquire a bad name once the buyer discovers major problems in the car.
So be careful and do the proper research before you buy a car so you aren’t being forced to push faulty cars onto your customers.
Avoid scams by doing research on the background of the car.
You can ask for the VIN (Vehicle Identification Number) and use the number at SaferCar.gov to perform some background check.
Step 4: Things to Care for While Test Driving the Car
You can’t scrutinize a car without you test drive it for few miles.
Checking Engine for Transmission
You can’t check the transmission just by inspecting the car with your naked eyes.
Off course you can’t take the owner by his words that the transmission is just fine.
You have to drive the car for few miles shifting gears all the time. That is how you come to know about the transmission.
Listen to the Engine and Study the Sound it is Making
While test driving the car make sure the radio is off so that you can listen to the engine attentively.
Music created by the engine is more important to you than music coming out of the radio.
I mean to say you must be able to read the engine sound just like you read the radio music.
While test driving don’t talk to the owner and focus only on listing the sound coming out of car’s engine.
If the engine is making some odd sounds or while shifting gears it chokes then there is something wrong with the car.
Don’t buy a car without test driving and without finding out the performance of the engine and the transmission.
Step 5: Estimating the Value of the Car
Whether you are buying or selling the car step 5 is the most important step in car flipping.
Once you are done with step 1 through step 4, you will be able to establish the value of the car.
You are not going to pay even a penny more to the seller after you’ve established the car’s value.
Beginners Can Use KBB
Dealers use “Black Book” to determine the value of a car. You can use KBB or Kelly Blue Book to establish the value of the car.
You have to just fill in few details like the car’s name and model number, mileage etc.
Mastering the Price Range
Let us be honest here. You are not going to master the art of estimating car’s value overnight.
You will be able to establish the right value with some more experience.
It is because a lot of variables are involved in establishing car’s value. Variables like mileage, car’s model, engine and transmission, interiors, maintenance etc.
Become a Pricing Expert
You can become a pricing expert by spending more time on KBB.com comparing price for the same car.
A same car can be valued differently. You have to know the differences between a $3000 Honda Civic and $5000 Honda Civic for same model.
Difference in value could be because of mileage, transmission and how well the car is maintained.
Always remember your profit is in establishing the baseline. How low you buy a car is how much you make money.
Step 6: Negotiating So You Buy at a Lower Price
You have to buy the car from the seller at a price lower than the established value. You can further negotiate with the seller and save up to $200 – $300 easily.
Offer them Cash
Best way to negotiate is bringing the price down by offering cash.
If you are buying from a third party and offer them cash upfront then the seller will accept quickly.
Moreover the seller will thank you for getting the vehicle off their lawn.
While negotiating tell them that you have cash in your hand and they will be ready to sell the car for $200 – $300 less.
Step 7: Finalizing the Purchase
You must get down to the seller’s house to finalize the purchase even if it takes an hour long drive.
Know all the Legalities
While purchasing the car make sure that you are not buying a stolen vehicle. I told you how to check the vehicles whether it is clean or not in Step 3.
Titles and Check All the Documents
Don’t buy the vehicles until the title is in front you. Without clean title your car may be branded salvage.
Check for all other necessary documents.
Always have buyer’s signature on the document.
Reason for Selling the Car
Always ask why he or she wants to sell the car. If they are selling because there is a problem in the engine or transmission then don’t buy it.
Or maybe the car is stolen and the owner wants to get rid of it as soon as possible.
Finally you buy the car at a lower price.
In stage 2 you repair the car and add value to it. Here you might have to spend few extra dollars to fix things up.
Step 8: Start Preparing the Car for Sale
The car you just bought is sitting in your garage. You have to get rid of it as soon as possible.
Estimating the Overhauling Cost
Before you start fixing the car you have to estimate an approximate overhauling cost.
Actually you are not going to overhaul the car but fix certain items in the car.
Fixing cost shouldn’t be more than 25% of the buying cost.
If you bought the car for $2000 then additional repair should cost no more than $500 regardless how bad condition the car is in.
You or Hiring a Mechanic
You have to make a decision whether you are going to fix the car or hire a mechanic.
Hiring a mechanic could cost few extra dollars. So it is better to partner up with a mechanic and share profit whenever you sell a car.
Step 9: Fixing up the Car for Increasing the Value
Perhaps this is the most tiresome step. Here you incur extra cost fixing new parts to the car.
While fixing the car you are also fearful of the fact that what happens if you don’t recover the money you have spent.
You have to be very smart so spend smartly sprucing your car.
Cars with Problems are Good
Cars with problems are good because you can repair them and add extra value to the car.
We talked about dead batteries earlier in this article.
Similarly a car baked in dust is not bad as long as engine is working fine.
If few hub caps are not there then you can add new ones.
Interior Transformation is Necessary
The first thing a new buyer will look in a car is floor mats. You can always replace the older floor mats with new ones. A set costs only $20 or even less.
Similarly you can clean all the seats and dashboard of the car. Fixing interior adds value to the car.
Fixing cloudy headlights is the easiest and cheapest thing to do. It won’t take more than 15 minutes to fix the headlights.
Yet they make a huge difference in the car’s appearance.
Fixing small things like cloudy headlights, floor mats, hub caps, batteries etc makes a huge difference in car’s appearance. At the same time fixing cost is very low.
Few Tips for Inexpensive Repairs
Here are few tips for fixing cars at a much lower cost.
- Partner up with a mechanic for fixing the car.
- You need to order the parts and other accessories from one given place.
- Always avoid fixing engine or transmission because it can cost you dearly.
- Visit websites like Car-Part.com to get parts at cheaper rates.
- You can always work yourself to save extra manpower cost.
At stage 3 you will sell the car. You have added value to the car and now you have to sell it.
But before selling you have to establish car’s value.
Step 10: Set a Price for the Sale
You are going to add up buying cost and the fix up cost to set a selling price.
Profit margins are very important while setting a price for the final sale of the car.
Reassessing the Value After Repair
You have to sit down with a calculator and add up all the cost that has gone into buying and repairing the car.
If you have spent $200 – $300 on repairs then you must recover another $500 – $1000 on sale.
So if you bought the car for $2000 and spent $300 on repairs then you must try to sell this car for at least $3000.
You make $700 in profits which is around 30%.
What a Buyer is Willing to Pay
Hence you have to set a target price of $3000 for selling the car. It may happen that buyers are unwilling to pay $3000 for many good reasons.
You must set a cut off point. If a buyer is asking anything below $2500 then you should refuse to sell it.
You should always try to sell for higher profit margins.
You can set whatever price but real selling price is what a buyer is willing to pay.
Use the Same Guide that Buyers are Using
For setting a price you can use the same guide what buyers are using. Usually they go to KBB.com for checking the price.
If you are planning to sell the car at $3000 then always list the car for $3500 on Craigslist. A buyer will ask for $3200 and then you can counter with $3000.
That is how you sell the car at a higher price.
Step 11: How to Sell the Car & Make Money
A buyer for your car would like to inspect the car just like you did in step 3.
Here you have to be smart enough to sell the car because a potential buyer may turn down your car if he finds anything faulty.
Presenting the Car to Buyers: What to Tell and What to Hide
While presenting the car to buyers makes sure that you show all the nice things first.
Like the title, mileage, transmission, interior, headlights, hub caps etc.
Never tell them that the car has being sitting for a month now. Avoid revealing negative points.
Always remember fewer the problems that your buyer sees, the more they’d willing to pay for the car.
Right Type of Car to a Right Type of Customer
Demographics are very important. If your car is compact and small then reach out to the college students.
Office going people would prefer a sedan.
If it is a SUV with 8 to 10 seats then try to sell to a family with 3 to 4 kids.
Similarly sports lover can afford buying a gas guzzler.
So look out for the buyers according to the type of car you are selling.
Don’t Come Off As a Salesman
Don’t come off as a salesman. Don’t push onto the customers!
You shouldn’t sound desperate while selling the car. Otherwise buyers may get an impression that there is something wrong with the car.
Step 12: Where to Sell the Car
Here are some of the places you can look for buyers.
Craigslist is the Best Option
Create ads and start selling on the craigslist. You must upload pictures of your car. For example images of interiors, exteriors, wheels, trunk, and engine under the hood.
Be honest and don’t upload fake pictures. Otherwise buyer’s will turn away thinking you are just another fraud.
Always give your phone number. A buyer that calls you is more serious than the one who sends an email.
Update your postings everyday because no one reads ads older than 2 days.
Business owner with a shop located on a busy highway are willing to rent lot space to sellers like you.
Use Bulletin Boards
Bulletin boards are another way to reach out to potential buyers.
Talk to a Dealer
Finally you can work an arrangement with your local dealer.
So these were few places to sell your car. However for a new flipper stick to Craigslist because it is free.
Step 13: Negotiating so you Sell at a Higher Price
Negotiate with your buyers and earn extra $100 – $200.
Come Prepared with all the Paper Works
In order to make your buyers happy come prepared with all the papers like title, receipts, service records etc.
Bring your own forms and don’t depend upon the buyer.
Make it hassle free for the buyer so he or she would be willing to pay $100 more.
Be Willing to Walk Away
You can always walk out.
Finalize the sale and start looking out for another car to flip. Snowball your profits!
Go through all the steps from 1 through 13 once again.
Car flipping is all about buying an old car at a lower price, adding value to the car and selling the car at a higher price.
Best of Luck!