Car Flipper

Car flipping is the practice of buying used cars, repairing or restoring them to increase their value, and selling them for a profit. Some car flippers do this on a full-time basis, but many people flip cars on the side to generate extra income.

Why people get into car flipping

People flip cars for different reasons. For many people, the activity is a:

• Flexible income stream: Flipping cars can be quite lucrative, even if you just do it on the side. It’s also an extremely flexible way to make money; you can flip cars whenever you have time for it and ease up on it if you get busy with other things.
• Enjoyable hobby: Car flipping is also just plain fun—for auto enthusiasts, at least. Gearheads and other people with mechanical expertise are often drawn to flipping as an extension of their existing hobbies.
• Professional development opportunity: Flipping cars provides a chance to develop your skills in car repair, sales, and negotiation. It can also open doors to future jobs in the automotive industry.

How is car flipping different from just selling a car?

“Flipping” refers to buying a car with the intention of improving and reselling it. It’s usually an ongoing gig. In contrast, when people talk about selling a car, they often just mean getting rid of your personal vehicle so you can buy a new one or because you don’t need it anymore.

Car flippers sink a lot of effort into the activity. They boost their profits as much as possible by repairing or upgrading their vehicles and doing market research to target in-demand models, and often advertise through the same channels that small businesses (i.e., car dealerships) use.

By comparison, if you just want to sell your car and move on with your life, you probably won’t do in-depth market research or get it detailed to improve its value. In all likelihood, you’ll sell it as-is and accept the first reasonable offer.

If you know what you’re doing—meaning you’re skilled at scouting out deals and performing your own repairs on used cars—you can realistically expect to make $1,000–$3,000 per sale.

Many flippers aim for profit margins of 50%–60%. That means that if you spend $4,000 on buying and repairing a fixer-upper, you should try to sell it for at least $6,000–$6,400.

Note that those are rough estimates. Your exact profits on each flip will depend on several factors, including:

• Purchase price: It probably goes without saying that the lower the purchase price of the cars you buy, the higher your potential profits will be. Strong negotiation skills will help you out here.
• Car condition: Cars in good condition won’t cost you as much in repairs. Brushing up on your mechanical skills can help you identify when a car needs relatively light work, and when one’s in bad enough shape that it’d be better to pass over it.
• Economic conditions: Gas prices and the general state of the economy affect people’s car-purchasing habits. When fuel prices spike, it’ll be harder to sell gas guzzlers, and so on.
• Registration fees and taxes: Each sale will come with vehicle registration fees, sales tax, and other costs that will cut into your profits.

As you’ll see in the next section, generating a profit with car flipping comes down to minimizing your purchase and repair costs while maximizing your earnings on each sale. Put another way, you need to buy low and sell high.

Flipping cars might seem as easy as snatching up a cheap clunker, fixing it up, and putting it back on the market. However, to make this side hustle worthwhile, it pays to take your time and research the pitfalls you need to avoid at each step in the process.

Here’s how to start a profitable flipping side hustle the smart way:

1. Conduct thorough research on car flipping

Before you begin, you’ll need to get acquainted with the basics. You need to be familiar with:

• Evaluating your local used car market
• Setting a budget for yourself
• Performing mechanical and cosmetic repairs
• Negotiating with buyers and sellers

To learn how to flip cars, many people start by spending a while on online car flipping communities, such as the subreddit r/carflipping.

You can also learn about do-it-yourself vehicle repair and sales techniques by watching car flipping content on YouTube. Check out these channels:

• Buddy’s DIY
• ChrisFix

In addition to these, there are plenty of (paid) courses on websites like Udemy that purport to teach you how to flip cars successfully, including this 3.5-hour course from Jeremy Fisher.

It’s up to you whether you spring for any courses like this; there’s nothing wrong with doing so, but it isn’t necessary. Many successful flippers learn the ropes by watching DIY videos on YouTube and experimenting on a couple of beaters in their garage.

Legal restrictions on car flippers

Importantly, before you begin, you also need to familiarize yourself with the local legal requirements for auto sales.

Each state sets its own limits for how many cars you can sell in a year without needing a dealer’s license. You’ll want to stay within that limit, as dealer’s licenses aren’t cheap.

You’ll also need to look into what you’ll pay in sales tax on each transaction, as well as the local DMV requirements for the registration and transfer of title for used cars.

2. Set an initial budget

Before you buy any cars, you need a budget. Armed with your research, list the expenses you expect to be associated with each flip, including the:

• Registration fees you’ll have to pay
• Maximum purchase price you can afford (including taxes)
• Maximum repair costs
• Projected marketing costs, if any

Leave a little cushion for unexpected expenses. You may miss hidden flaws when you buy used cars, particularly when you’re still finding your feet, and fixing them will eat into your earnings.

Creating a budget (and sticking to it) will make you less likely to make a bad investment and end up in the red.

3. Find cars to flip

You can find cars to flip in many of the same places that you might list your own vehicles for resale, such as:

• Facebook Marketplace
• Craigslist
• eBay Motors
• Local newspaper classified ads

Alternatively, you can go the straightforward route: buying a used car from a used car dealership. However, it can be harder to get good deals this way than when you go directly to individual sellers.

Public car auctions also offer cheap cars. These often feature surplus vehicles and cars that were seized by the authorities, and they often offer a wider range of models than you’ll find elsewhere. Just make sure to steer clear of salvage vehicles, which will require far more repairs than your budget probably allows for.

How to pick your first car

When it comes to determining the value and market demand for a particular model, you have a few key resources at your disposal:

• Kelley Blue Book: The go-to vehicle evaluation resource for the better part of a century, the Kelley Blue Book offers comprehensive online tools for looking up the current market value of a vehicle (updated weekly).
• Edmunds: Edmunds provides free up-to-the-minute valuations based on local car sales in your area. It’s a good choice if you have a lot of information about a vehicle at your fingertips.
• JD Power: JD Power’s search tool also gives a pricing breakdown for dealership trade-ins based on a car’s condition.

Each of these sites offers slightly different information, and you should make use of all of them when researching. Establishing a base range of what people pay for certain models in your area is crucial when figuring out what constitutes a fair price (both for buying and selling).

4. Inspect and evaluate the cars you’re interested in

Inspecting a car before you buy it is essential. You can conduct an inspection yourself, or arrange a pre-purchase inspection (PPI) with a mechanic. Paying for a PPI will be expensive, and doing it every time will render this side hustle unsustainable, but it might be worth it the first time.

If you conduct the inspection yourself, expect it to take an hour or two. For a truly exhaustive list of what to look at, take a look at Popular Mechanics’ Used Car Checklist.

If that seems overwhelming, here are the most important issues to check for:

Engine

• Slow start up
• Noises or smoke while starting
• Oil level and quality (ask when it was last changed)
• Coolant stains on the radiator
• Milky or reddish coolant
• Battery corrosion
• Loose wires on the battery
• Battery losing charge
• Cracked texture or stiffness of rubber hoses and belts
• Signs of animals nesting inside
• Dirty air filter

Transmission

• Slipping gears (engine revving without acceleration)
• Difficulty shifting gears
• Low transmission fluid
• Burnt-smelling fluid

Suspension

• Uneven suspension
• Collision damage to car frame
• Loose suspension joints or wheel bearings

Brakes

• Squealing noise when braking
• Lack of pedal resistance when pressed
• Steering wheel vibrating or car turning when braking

Tires

• Multiples brands of tires (ask why the tires have been replaced)
• Heavier wear on the front tires (indicates lack of tire rotation)

Exterior

• Non-functional headlights or turn signals
• Paint scratches and dents
• Cracks or dents in the windshield or windows
• Non-functional windshield wipers
• Gaps in the body panels (could indicate poor replacement)
• Issues raising or lowering the windows or sunroof

Interior and trunk

• Poor range of motion when adjusting the seats
• Odors, especially smoke or mildew
• Stains, rips, or dampness on the carpets or seats
• Evidence of rust
• Roof sagging
• Water damage anywhere in the interior or trunk

If you’re not sure how to check for all of that, it may be a sign that you should spring for a PPI this time around and work on brushing up your auto knowledge before trying to go at it alone.

Common deal breakers to watch out for

Pay extra attention to the following signs:

• Oil that’s milky, black, very thick, contains metal flakes, or has a burnt smell
• Rust or corrosion under the hood or on the undercarriage
• Mildew, burning, or rotten smells anywhere in the vehicle
• Water damage in the car interior or under the hood

These are often signs of issues that will make a car too much trouble to be worth working on.

You should also look at the ground where the car is parked, assuming it’s been there for a while. Puddles of coolant, oil, or gasoline are all signs of serious internal problems.

5. Determine a fair price for the car

Once you have an idea of what shape the car is in, you can draw up estimates for repair costs. You’ll need to develop your knowledge quite a bit to do this accurately; in the beginning, you can also ask for quotes from local mechanics.

With the projected repair cost in hand, you can estimate your potential profit margins on the vehicle. Add your estimated costs to the purchase price for the car, then return to the budget you made in step one.

How much money will you need to sell the vehicle for in order to recoup your expenses? Given the market research you did in step two, is that price likely to attract a buyer, given the current trends in your area?

6. Negotiate and purchase the car

Assuming you decide the car is worth buying, the next step is to actually do it.

When it comes to negotiating, knowledge is power. Know the approximate market price for the vehicle going in, and adjust that based on its condition.

Most sellers won’t tolerate pointless haggling, but it’s perfectly legitimate—and, in fact, essential—to argue that quality issues, such as worn-down tires, lower the car’s value and merit a discount. You can bring your repair quotes into play to prove that you should pay less to make up for the work you’ll have to do.

Completing the sale

Once you finalize the deal, you’ll need to take care of a few documents before you can drive away.

Before you sign anything, get a vehicle history report. This will contain basic information, like how many times the car has changed hands, as well as the vehicle’s repair records, reported accidents, and any manufacturer recalls it’s been subject to.

Next, the seller will need to fill out a bill of sale to inform the state that the vehicle is being sold and that you’re the new owner. You and the seller will take it to the DMV, where they’ll transfer the car’s title and registration to you.

Not all states require a bill of sale, but it’s the best way to document what shape the car is in at the time of purchase so you can prove your case if the car is handed over in poor condition. It also releases the seller from liability if you get into an accident right after buying it.

Note that if the seller hasn’t kept up with their registration, there may be late fees to pay; make sure they assume these instead of passing them off onto you. If your state has sales tax, you’ll need to pay it at the same time that you transfer the title.

7. Repair and restore the car

With the negotiations out of the way, it’s time to get down to the nitty gritty of repairing the car. Prioritize the most vital parts, like the engine, brakes, or transmission. This will add the most value to the car, and neglecting them poses safety risks.

Thoroughly cleaning the vehicle is a must. While you’re at it, swapping in new floor mats or seat covers will make the interior feel newer. Basic paint repairs will do the same for the outside, as will replacing the tires. Both are relatively low-cost ways to boost any used car’s appeal.

8. Market and sell your car

Setting a price for your newly renovated car involves retracing your steps. Consider the final costs of purchasing and repairing the vehicle, and do another round of research on the price of similar models in your area.

Don’t undercut yourself. Pricing your car cheaply can translate into a quick sale, but you’ll lose out on profit. With that said, don’t lean into the opposite error, either; setting your prices too high will scare buyers off and drive them into the arms (and garages) of other flippers.

Where to sell a used car

You can sell to individual buyers using the websites you used in step three, such as Craigslist and Facebook Marketplace. You can also try selling your car to a website that operates a broker for dealerships (such as Cars.com) or that operates its own (CarMax).

Alternatively, you can sell your car to a dealership in person; even dealers who usually traffic in new models sometimes accept used cars in good condition. This is the best choice if you don’t want to spend time marketing, negotiating, and meeting up with potential buyers. It’ll get you the fastest possible sale.

Marketing tactics for online car listings

If you choose to list your car online, keep these tips in mind:

• Write an effective description: Besides the basic details of the model, highlight any repairs or refurbishments you’ve performed and the car’s mileage. Be honest if there are any flaws you need to disclose, but don’t linger on them; focus on the car’s positive features.
• Take high-quality pictures: Snap photos of the full exterior and interior of the car (including under the hood) so that buyers can judge its condition for themselves. If you have access to a decent digital camera, use it instead of your phone; the difference in quality will set you apart from the competition.

Negotiating with buyers

Remember that at the negotiating table, buyers will be using the same tactics that you did when you acquired the car to begin with.

Leave some wiggle room for negotiation so they feel like they’re getting a good deal, but don’t lose sight of your bottom line. Push back on lowball offers by pointing out the condition of the vehicle, and don’t be afraid to walk away if it doesn’t seem like you and the buyer can reach a mutually satisfactory deal.

Flipping cars comes with certain risks. Some, like market volatility, can’t be controlled. Others, like sellers failing to disclose defects to you, can be avoided through your own due diligence.

Making sure you’re legally protected

As a flipper, you need to take charge of your legal protection. As mentioned, when buying or selling a vehicle, always get a comprehensive bill of sale that specifies the odometer reading and all of the other important aspects of the car’s condition.

It’s also important to have an understanding of implied warranties. Unless a car is sold “as-is,” the buyer can assume that it’s still covered by these. The warranty of merchantability (often referred to as the “lemon law”) means that anyone who sells a car promises that it will perform its basic functions. In other words, they can’t sell you a car that doesn’t run—even if they never claimed that it did.

However, if you buy a car as-is, you can’t make this argument; you’ve agreed to buy it in its current state, whatever that is. Both when buying and selling vehicles, ensure that all parties are on the same page about whether the car is as-is or under an implied warranty.

Acquiring insurance

Make sure that your auto insurance policy will protect you from liability when you test drive vehicles owned by someone else.

If you make car flipping into a full-time business, you may also want a garage liability policy. This is often obtained by car dealerships and mechanics to cover damage to merchandise or injuries to customers in the course of regular operations.