Make Money Flipping Cars – Step by Step Guide

If you have a thing for cars and love to buy a new one every year then why not turning your passion for cars into a money making business?

In the following article you will read how you can make huge amount of money in just 3 to 4 hours by flipping your used cars.

So keep on reading!

What is Car Flipping?

Car Flipping is just like flipping a website. Basically, here you buy a website for a lower price then add some value to it and finally sell it at 8 to 10 times higher than the buying price.

make money flipping cars

Same thing you do with your cars.

Here, you buy old cars (or if you own an old one) for a very lower price, invest some money sprucing up the car and then finally sell it for a profit of 25% to 35%.

Basically, Car flipping is “Buy Low, Sell High” business model.

To put it simply entire flipping process can be described into 3 stages.

Stage 1: Buying a car at a lower price.

Stage 2: Sprucing Up the Car so you add some value to it.

Stage 3: Selling it at a higher price.

As simple as that!

Minimum Cash You Need to Start for Car Flipping Business

You might be wondering how much do I need to start my flipping business?

Don’t worry because you don’t need much of an investment to get started. Just $3000 to $5000 would be fine.

In fact, you won’t believe I started my flipping business with just $1500.

I wouldn’t recommend you to loan money from bank or anywhere else to start this business. This statement will definitely take some pressure off!

It is prudent to start your first car flip deal with a small amount so that you can mitigate the risk involved.

How Much Money You can Make with Car Flipping

As far as profit margins are concerned then you can easily earn up to 25% in profits per flip.

If you bought a car for $2500 (including all the repair cost) then you must target to sell it for over $3000.

Thus you make a profit of $500. $500 for first car flip deal is not that bad.

However you can make even more money if you flip high value cars like BMW, Mercedes or Lexus.

Abiding the Law

Before you start flipping business you need to be familiar with the laws in your respective states.

The number of cars you can own in a year will depend upon the state you live in.

For instance, in California you can own up to 5 cars in a year. So if you desire to flip more cars but your state allows only 5 then what you can do is put other cars in your friends’ or spouse’s name.

If you are looking to flip cars in bulk like 20 to 30 at a time then you may have to get a dealer’s license.

You much avoid any penalty or notification from the state by abiding the law of the land.

Stage 1

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 is finding a right kind of car to flip.

Common Cars Vs Luxurious Cars

Do you want to go for common cars worth between $2000 – $4000 like Honda, Toyota or Luxurious cars like BMW, Mercedes worth over $40,000?

car types for flipping

Luxurious cars can take some time to sell but the profit margins are very high with fewer buyers.

However, low end cars have regular customers and are easier to sell. Moreover you budget suits common cars rather than luxurious cars.

Uglier the Car the Better it is

Remember an ugly looking car soaked in dirt and mud is really good because with some TLC you can make it look like a new one.

What the car needs is a nice wash and it will shine like a diamond.

However, don’t buy cars 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

Sweet spot would be between $2500 – $4000 price range.

It is easier to attract buyers for a lower price range cars because most people don’t have cash over $5000.

Buyers don’t obsess over the imperfections if the price is low. But if the price is over $20,000 then they would be keen to look into the finer details of the car before they buy. This can make very hard to sell your car.

Moreover, if you make any loss with a low priced car then you can afford it. However if you buy a car over $10,000 then you can incur a heavy loss.

For example, if you bought a car for $2000 and fail to sell then you can scrap the car, cut your losses and move on. But for a car priced at $10,000 it is harder to do the same.

So look out for a car within the price range of $2000 – $5000.

Diversify Your Investment

You need to diversify your investment. If you are ready to make an investment over $10,000 then diversify it.

Instead of buying just one car for $10,000 you can buy 4 cars worth $2500 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, it is time to find best deals.

Craigslist is the Place

There can be many places you can find a right deal but for the beginners Craigslist or other alternatives is the best place to start.

It takes a keen eye to spot a great deal. As a new flipper you’ve to learn this 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. I’ve given an example below.

Ad Title: In 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.

So this was a brief example how you can create ads.

Beating the Competition

Thousands of other flippers and dealers go to Craigslist to do the same thing that you want to do. So competition is very tough.

If you want to beat your competitors then take a note of following suggestions.

  • Look for latest postings
  • If a phone number is given then call and talk to the person.
  • Be willing to drive for an hour if it is necessary.
  • If you spot a deal be ready to buy the car immediately. Offer the cash upfront!
  • Always stick to your computers and keep following the new postings.

Working with Technology

You also need to use tools like Google Alerts for following postings on Craigslist. Every time a new ad is posted you will receive a notification in your email automatically.

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 cars sittings in the front yard of a house in your neighborhood. Search entire your neck of woods and you will definitely find such cars.

Owners of such cars would be willing to sell very easily because they don’t know or want 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 in your area then you can ask them if someone’s looking to sell their car. However, dealers may charge a monthly fee for doing this.

Visit Auto Auctions

Public auctions can also help you in spotting a deal. You can attend such auctions and look out for potential buyers.

Referrals

If you have friends then ask them if they know someone who is ready to sell their car. You can offer them a commission for each referral they make.

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 cars.

If you’re going to buy a car from a dealer then you have to pay a fee and on top of it dealers are very difficult to negotiate and don’t bring asking price down easily.

However, individuals would rather be more than happy 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 had already been sold then it necessarily doesn’t mean that it has been sold.

Car is not sold until the seller receives the cash money and car is picked up from his or her front yard.

Usually sellers say this to get a better deal. This is an old trick! You shouldn’t fell for it.

What you can do is offer the seller $100 – $300 more and grab the car instantly.

Step 3: Scrutinizing the Car Before You Buy

A wise car flipper always inspects the car from all the angles for any fault. You examine the car’s functioning and all the legal aspects like the car is clean or stolen before buying it.

car Inspection

Get into the Details

You’ve to get into the fine details of the car’s exteriors, interiors, engine, transmission, batteries, radio etc.

You can’t just throw the money blindly and drive the car home. Later you will face severe problem fixing it and end up losing money.

Create a Checklist

Create a SOP (Standard Operating Procedure) before inspecting a car. Jot down a list of all the parts and items that you would like to examine in a car you are going to flip.

You can’t bank on your memory alone especially if you are a newbie. So create a checklist and don’t miss checking on any part of the car.

Never Ever Forget Title Research

Before digging deep into the physical aspects of the car you need to first ascertain about the possession. You’ve to do a thorough background check of the car.

Ascertain other previous owners because you shouldn’t end up buying a stolen car or car under 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 cars with a mileage of over 150,000 miles shouldn’t be bought. Always buy a car within the range of 125,000 miles.

Inspect the Transmission

Transmission is very important because if you end up buying a car with a faulty transmission then you’ve to pay an arm and a leg to fix it up.

You’re definitely going to lose money because repairing costs for transmission are very 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 enables you to bring the price down by $300.

Secondly it takes less than $100 to fix the car with a new battery. The value that it adds to the car is much high. You are going to learn this while you flip a car.

Certain Questions to Ask

Here is the list of questionnaires that you must ask the seller on phone or in person.

  • Is your car’s title clean in your state?
  • How many miles the car has driven?
  • Is the title in your name?
  • Does the car have any mechanical problems like faulty transmission?
  • Why you want to sell your car?

You need 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 might be a newbie and don’t care about reputation. But if you want to stay in this market then clean reputation is above all.

You can’t just scam people. You might be successful in selling a faulty car to a buyer once but your reputation will get damaged in a longer run if the buyer finds some major problem in the car.

So be careful and do the proper research before you buy a car because you don’t want to push a faulty car onto your customers.

Avoid Scams

Avoid scams by doing research on the background of the car.

You can ask the VIN (Vehicle Identification Number) and use the number at Safercar.gov to perform the background check.

Step 4: Things to Care for While Test Driving the Car

You can’t examine a car without test driving it for few miles.

Checking Engine for Transmission

Transmission can’t be examined by just looking the car from your naked eyes. You can’t take the owner by his/her words.

You’ve 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 driving the car make sure the radio is off so you can listen the engine attentively.

Music created by the car’s engine is more important than music coming out of the car’s radio. I mean to say you must be able read the engine’s sound just like you read themusic.

While test driving don’t talk to the owner and focus only on listening 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 it without test driving and finding performance of the engine and transmission.

Step 5: Estimating the Value of the Car

Whether you are buying or selling a car, Step 5 is the most important step in a car flipping business. 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 dime extra to the seller once you’ve established value of the car.

used-car-valuation

KBB for Beginners

Dealers use “Black Book” to determine the value of a car. You can also use KBB or Kelly Blue Book to establish the value of the car.

You’ve to just fill in few details like the car’s name and model number, mileage etc.

KBB will give you an estimate value of the car. You can also go to sites like Edmunds, NADA etc.

Mastering the Price Range

Let us be honest here. You’re not going to master the art of estimating car’s value overnight.

You will be able to establish the right value only after years of experience on ground.

It is because a lot of variables are involved in establishing car’s value 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 and comparing price for the same car.

A same car can be valued differently. You’ve to know the difference between a Honda Civic worth $4000 and a same model of Honda Civic worth $5000.

Difference in value could be because of mileage, transmission and how well the car is maintained.

Always remember your profit lies in establishing the baseline. How low you buy a car is essentially how much profit you make.

Step 6: Negotiating So You Buy at a Lower Price

You’ve 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 $400 – $500 comfortably.

Offer them Cash

Best way to negotiate for bringing the Price down is by offering them cash.

If you are buying from a third party and offer them cash upfront then seller will accept on your terms quickly.

Moreover the seller will thank you getting the vehicle off their lawn.

While negotiating tell sellers that you have cash right in your pocket and sellers would be ready to sell the car for $300 – $400 cheaper.

Step 7: Finalizing the Purchase

You must get down to the seller’s house to finalize the deal even if it takes an hour long drive.

Know all the Legalities

While purchasing makes sure that you’re not buying a stolen vehicle. I told you how to perform background checks on vehicles 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 all the other necessary documents. Always look out for the buyer’s signature on the document.

Reason for Selling the Car

Always ask why he or she wants to sell their 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.

And Finally you buy the car at a lower price.

Stage 2

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 need to estimate an approximate overhauling cost first.

In reality, you’re not going to overhaul the car but fix certain items in it.

Fixing cost shouldn’t be more than 25% of the buying cost.

If you bought the car for $2000 then additional repair shouldn’t cost more than $500 regardless how bad the condition of the car was when you purchased it.

You or Hiring a Mechanic

You’ve to make a decision whether you’re going to fix on your own or hire a mechanic.

Hiring a mechanic could cost few extra dollars. If you are flipping more than one car in a week then 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’re also fearful of the fact that what happens if you don’t recover the money you have spent fixing it.

You got to be very smart while sprucing up the car.

Cars with Shortcomings are Good

Cars with problems are good because you can repair and add extra value to them.

Earlier we talked about the dead batteries. Similarly a car baked in dust is not at all bad as longs engine works fine.

If few hubcaps are missing 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 $20 only.

Similarly, you can clean all the seats and dashboard of the car. Fixing interior adds value to the car.

Fixing Headlights

Fixing cloudy headlights is the easiest and cheapest things to do. It won’t take more than 15 minutes to do it.

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 a cheaper rate.
  • You can always work yourself to save extra manpower cost.

Stage 3

At stage 3 you will finally sell the car. You have added value to it 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 fix up costs to set a right 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 vehicle.

If you’ve spent $400 – $500 on repairs then you must recover another $600 – $1000 on a sale.

So if you bought the car for $2500 and spent $500 on repairs then you must try to sell it for at least $3500.

You make a profit of $500 which is around 17%. Not bad for a newbie. Later on you can improve on profit margins.

What a Buyer is Willing to Pay

Now you’ve set a target price of $3500!

It may happen that the buyers are unwilling to pay $3500 for the car for many good reasons. You must set a cutoff point.

If a buyer is asking anything below $3000 then you should straightaway refuse to sell it.

You should try your best to sell for a higher profit margin. You can set whatever price you like 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 referring to. Usually they go to KBB.com for checking the price. You can do the same.

If you are planning to sell the car at $3500 then always list the car for $4000 on Craigslist. A buyer will ask for around $3750 and then you can counter offer them with $3500.

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 the same you did in Step 3.

Here you have to smart enough to sell the car immediately because a potential buyer may turn it down if he/she finds anything faulty.

If you agree on a certain price then get rid of your car as soon as possible.

Presenting the Car to Buyers: What to Tell and What to Hide

While presenting the car to potential buyers make sure that you show all the nice things about it first. Like the title, mileage, transmission, interior, headlights, hubcaps etc.

Never tell them that the car has being sitting for a month now. Always avoid revealing negative points about the vehicle.

Fewer problems buyers sees in your car, the more they’d willing to buy the car at your asking price. It is that simple.

Right Type of Car to a Right Type of Customer

Demographics are very important. If the car you’re selling is compact and small then reach out to college students rather a family with 3 to 4 kids.

Office going people would prefer a sedan over a SUV.

A SUV with 8 to 10 seater is suited for a big family. Similarly a sports lover would love to buy a gas guzzling roadster.

So look out for right buyers for a right kind of car.

Don’t Come Off As a Salesman

Don’t come off as a salesman by pushing onto the customers!

You shouldn’t sound desperate while selling, 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 lookout for potential buyers.

Craigslist is the Best Option

Create ads and start selling on Craigslist. You must upload pictures with interiors and exteriors of your car. Take images of wheels trunk, engine under the hood, dashboard, seats, windshield etc.

Be honest and don’t upload fake pictures. Otherwise buyer’s will turn away thinking you’re just another fraud on the Internet.

Always give your phone number. A buyer that calls you is more serious that the one who just sends an email.

Update your postings everyday because no one reads ads older than 2 days.

Empty Lots

Business owners with a shop located on a busy highway are willing to rent lot spaces to sellers like you. You can contact them and strike a deal.

Use Bulletin Boards

Bulletin Boards can also be used to reach out to potential buyers.

Talk to a Dealer

Finally you can work an arrangement with a local dealer.

So these were few places to go to sell your car. A new flipper can stick to Craigslist only because it is free to get started.

Step 13: Negotiating to Sell at a Higher Price

Negotiate with your buyers can earn extra $200 – $300.

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 rely on the buyer.

Make it hassle free for the buyer so he/she would be willing to pay $200 extra.

Be Willing to Walk Away

If you are not getting the desired price for your car then walk out from the deal.

But if you struck a right deal then finalize the sale.

After your first successful car flip you can scale up and flip more cars snowballing your profits!

Finally, I will conclude by saying Car Flipping is all about buying an older car at a lower price, adding value to it and selling the car at a much higher price.

Your profit lies in how low you buy the car.

Best of Luck!

8 COMMENTS

  1. Hi,
    You have described the process very well but one main thing is not clarified. For transferring the title, DMV says that buyer and seller must go to the penndot office/agent with their IDs. And the buyer will have insurance proof to buy it. So how can you get insurance for every car even if it’s in spouse or friend’s name? And when you buy you pay tax + title transfer fees which will be added to the cost of the car. How to avoid this?
    I have already one car, now I am getting 2 cars in very good prices, I know I can make good profit on them, so how can I get them without having insurance and title transfer+tax fees all on my name?
    Thanks

    • There THREE serious legal issues with this info.

      ONE: “in California you can own up to 5 cars in a year. So if you want to flip more cars then you can put other cars in your friends’ or spouse’s name.”

      Contact your state and see if this “trick” of putting a vehicle in another’s name is legal if you actually own it and sell it.

      TWO: The author never mentions the cost of licensing and insuring the flipped vehicle. This can really affect the profit. Plus if you are buying and selling for profit and your personal insurance finds out, they may walk away from any claim if you need to make one. Plus the red flag is raised to the insurance agent when you buy and sell several cars in a year and they’ll refuse to use personal insurance if you’re operating a flipping business.

      THREE: “If youflip cars in bulk like 20 to 30 then you may have to get a dealer’s license.

      This is NOT a “may have to get a dealer’s license, it’s a legal requirement in EVERY state.

      Here is one states action on flipping cars: dol.wa.gov/business/disciplinary/disciplinarydealer.html

      The Krazy Kar Guy

  2. here I am from Ethiopia,Africa. and I Have no Initial money to start online business. But I need to do it .

    * can I do it?
    * is your system holds( done) for international like for African ?
    * with out any busyness card such like master card etc, can it possible to processes?
    * or Can it possible through cheek?

  3. Yeah this is just one of the easiest but best ways to make some easy decent cash .I need some paartners though ..so for anyone interested in South Africa I’d like to communicate with people who know what they want .

  4. 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

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