In the world of “flipping,” there are a ton of ways to make some extra cash.
From flipping a smaller electronic at the local thrift store to a house, if you can buy it, you can more than likely flip it.
In today’s post, I wanted to talk about the wonderful world of car flipping, wherein you simply find a car that’s undervalued and turn around and sell it for a few hundred, maybe even thousands of dollars if you’re good enough.
And, the great thing about it is that you don’t need a ton of cash to start, either.
As with anything, it may take a while to learn the ropes, but if you research as much as you can before you jump, you will already be light years ahead of your rookie competitors.
So, sit back, grab a drink and let’s get you that first car flipping deal done.
In today’s post, I’m going to share some strategies I have used in the past when I tried dabbling in the flipping market. I learned a lot, so I hope this guide can help you learn about the market, too.
How to Make Money Flipping Cars
NOTE: Before you even think about flipping cars, some states have laws as to how many times a consumer can sell cars within the year. All states have different laws, so if you plan on selling more than three or four cars using this strategy, I highly recommend you at least research your laws first. Generally, searching for “your state + car selling laws” can yield some decent results.
How Much Money Should I Start With?
Of course, before I even get started, you’re probably wondering how much money you should have on hand if you want to start flipping cars.
In most cases, at least from my personal experiences, you will want to have at least $2,000.
Your cheaper, yet reliable cars, often go the fastest and usually priced less than $5,000. In the price range, you will find that a lot of your buyers will have cash on hand, making for a very easy sale.
It’s also a comfortable area where people aren’t looking for a pristine automobile that drives as if it just came off the lot.
As long as you can afford to invest $2,000 to $5,000 in the beginning, I don’t see why you can see profits in the $500 to $1,000+ range.
If you don’t have this much cash on hand, you could always consider a small loan, but in all honesty, I highly recommend you save enough to pay in cash before jumping. Loans are just a pain in the butt when it comes to your car title and the selling process.
Where Should I Begin?
Start with Craigslist
To start finding your first car to flip, your absolute best is Craigslist, hands down, and it’s for a variety of reasons.
For one, it’s 100% free, unlike Cars.com and AutoTrader.com that charge you just to post. If the price is free, that means anyone can throw a car for sale and see if anyone bites. Since we are targeting lower-priced cars here, most sellers in the price range often can’t justify the $20+ selling fee, and I don’t blame them!
And, secondly, it’s one of the largest classified websites on the internet, according to SimilarWeb, a company which provides web analytics services for businesses.
Being #1, it’s a no brainer. Free and exposure to the most eyeballs online?
It makes sense, right?
Now, I know. Craigslist is known for scammers, but you have to remember that Craiglist sees more than 80 million postings per month and a good chunk of these probably involve an interaction that’s considered to be relatively stress free.
So, yes, a few of these transactions do fall between the cracks and go bad, but if you’re afraid of this happening, you can always meet in a public area or even police station if you so choose. Most honest people won’t have a problem with this.
In the end, Craigslist sees millions of transactions, so using the law of averages, it’s safe to say you will be safe during your transaction.
Finding a Car on Craigslist
Craigslist is pretty self-explanatory when browsing for just about anything, but when you’re looking for a car that you want to flip, I always recommend you work with private sellers. And, this is for a few reasons.
For one, if you work with a private seller, you’re going to save on taxes since you will pay what the classified ad states. If you buy from a dealer, they need to legally tack on sales tax to your price.
Secondly, when you deal with a dealer, they probably aren’t giving you a deal. Sure, while you can buy at a market price, maybe a smidge less, there’s going to be no room for bargaining, especially after you factor in the taxes. Dealers know how to make a profit, so you won’t see any deals here.
And, third, dealers just suck in general. The sales pressure, the unnecessary add-ons they want to sell you and the slimy sales tactics. Why bother?
Now that you know that you only want to deal with private sellers, I will show you how it’s done.
Trust me, it’s easy.
Once you’re on Craiglist, look for the “cars+trucks” subsection beneath the “for sale” subheading.
On this page, you will then want to glance at the left-hand side and select the “owner” button near the top, as seen in the screenshot below:
In doing this, it’s going to show private owner listings only.
Now, dealers can be sleazy sometimes and slip their listings here, but you can usually weed them out by Googling the phone number to see where it’s linked to. You can also e-mail them, specially asking them if they are a dealership.
Usually, for me, I just take a look at the pictures as most owners will take a picture in their driveway, similar to this one:
While a dealer photo will look more like this:
Again, dealers can be tricky here, so be forewarned!
And, if you do get tricked, do me a favor and give the dealer a piece of your mind. It’s totally uncalled for to act as a private seller to swindle people into thinking differently.
Your Other Options (aside from Craigslist)
Craigslist isn’t the only option in town as you can find car deals elsewhere as well.
Not all auto auctions are created for dealers only as there are many open to the public.
And, in my eyes, this is probably the second best option, especially if you know what to look for in a car and buy one in good shape.
To find an auto auction in your area, generally a simple search such as “your city + auto auctions” can yield some great results. And, most of the time, these websites will list their inventory for the week, allowing you to see what you could bid on without even needing to visit the auction yard.
Like buying a car, these auction yard will encourage you to come in, personally check it out and take it for a test drive around the lot. Of course, this is recommended to ensure you’re looking a car worth something.
For example, there’s a pretty big auction yard near my home, always listing 20+ cars a week and when I take a look at the final sales price, it often falls in the flipping zone.
If you see something you like, take the same strategies I’m about to mention below and see if you can walk away with a potential flip.
Create an Ad
In reverse of what I mention, where you contact those who already are selling, consider creating an ad to target potential car sellers.
And, in the ad, create a catchy title, such as “Why trade into a dealer when I offer more cash for your car?”
Inside the ad copy, write something along the lines of “I’m looking to buy a car with no more than X miles. Sell me your car instead of the dealer as I can offer you more cash right now. Just send me the VIN and I will offer a cash deal now. ”
Yes, you will offer more than a dealer, at least most of the time, and the buyer will be quite happy, especially if you can offer them cash quick.
After you start to receive e-mails, apply the pricing strategy I’m about to list below and see if any of your potential sellers bite. Basically, you’re going to tell them the dealer trade-in value according to KBB and let them know that you will beat the lower range by a few hundred.
Some people may take the offer while others may tell you to pound sand.
In the end, though, you will be surprised as to how many people will show interest.
Yes, people still advertise in local newspaper ads.
So, next Sunday, pick up a paper and take a look at the print ad to see what’s available. In some cases, you may be able to view the listings online, too.
In a lot of cases, your not-so-tech-savvy crowd often resort to this method as this is the only way they know how to sell.
Drive Around Town
Not the greatest strategy, but drive around town and see if you can find any cars for sale.
In some towns, there’s often that one spot where it seems as if everyone puts their cars up for sale.
Stop by, take a look, and see if the numbers match up.
Lastly, Set up an Alert
The CPlus for Craigslist app is a great tool if you want to set up an automatic alert, targeting specific listings found on Craigslist.
So, if you wanted an alert every time someone posted a car less than $3,500 in your city, you could get a great jump start before most of the public does.
If you do download it, be sure to play around with the filters so that the app sends you great searches to take advantage of.
It really is a great tool if you want to set up an alert for anything found on Craigslist.
Finding the Perfect Car to Flip
What Kind of Car Do I Target?
Now that you know Craiglist is my favorite tool and you should look for private sellers, it’s now time to learn about what kind of car we are looking for.
Yes, there are more options to find cars, but I will get into these later.
Right now, let’s focus on how to find that deal.
Surfing Craiglist or any cars classified website can be so overwhelming as there are a ton of makes and models, making it hard to figure out where to start.
Plus, how the heck do you find a deal since a lot of people overly price?
Personally, I tend to stick to the cars I have driven in the past, such as a Toyota Corolla and Honda Civic. Do keep in mind, however, that if it’s a good car, it will go fast, so it can be hard to find a good deal.
If you’re unsure as to what car to start with, consider glancing at reliable used cars list or even doing a search on your own. For instance, this CheatSheet.com article notes 20 of the most reliable cars according to the Consumer Reports.
There’s really no right or wrong answers as to what car to target in the beginning, but I have found that four-door sedans often tend to be the hottest buy, but again, as long as you’re in that $2,000 to $4,000+ sweet spot, you really can’t go wrong with a sound car.
For now, at least find a make and model to follow along with the template.
What’s a Good Price?
If you have a few makes and models in mind, great!
Let’s keep going.
If not, no problem, either, as there’s a deal out there waiting. Pick out a random car on your Craiglist ad that’s between $1,000 to $5,000 to start.
To find a good deal, it doesn’t take a brain surgeon.
Instead, all it takes is the free Kelley Blue Book website, KBB.com. And, yes, it may take some time to find a deal, too.
And, if you’re unfamiliar with KBB, it basically lets you know what your car is worth if you were to sell privately as well as how much your car is worth as a trade in if you were to send it into a dealer. It’s the leader in the automotive world and almost all buyers and seller use it to determine a car’s value.
This is the website almost every car buyer uses to determine the value of a car. It’s very trustworthy, period.
Seeing you want to flip the car and make a profit, you’re going to want to act like the dealer and always look at the trade in values only if you think you found a deal.
Since dealers need to make a profit, there’s a reason the trade-in values are much lower than a private value.
It’s because they need to flip it like you and make a few extra bucks. Why would they give you market value, right?
Now, let me show you an example as to what you’re going to want to look out for to ensure it’s a good deal.
Keep in mind that this is only the start of finding a good deal. More is to follow.
First, you’re going to want to head to KBB.com, click on “My Car’s Value” and then “Get Trade-in Value.” You want to act as if you’re trading in the car to see what it’s worth. This is all 100% free, so no need to whip out the credit card for numbers.
Once in, KBB will ask for the year, make, model, mileage and your zip code so that it can spit out a number for you. You should be able to find all of this information right on the classified ad. If not, it’s wise to either skip that particular car or email the seller for answers to your questions.
Checking out KBB, I went ahead and found a random car on Craiglist. It was a 2006 Kia Rio with 105,000 miles and decided to plug in the numbers and got the following information:
Seeing the car was listed for $2,900, this priced well above the trade-in value and even private party value, so it’s safe to say I will skip this one.
Again, it’s going to take some time, so don’t be surprised if you have to scroll through hundreds of listings before you find a gem.
It can get frustrating, I know, but remember, money doesn’t come easy!
As you continue to do this, you will get good at it, especially if you find a good make/model, but in the beginning, it can take a pinch of a learning curve as with anything. Remember to create that ad as well to see if people contact you with some interest.
At the end, when you’re looking at these trade-in values, try to find a car selling at least $100 to $300~ below the fair range. So, in this case, $300 to $400 would be an extremely good deal if everything else worked out.
And, one last thing.
If you did end up creating that ad, asking people to contact you, then, in this case, a $600 cash offer would be more than fair as long as the car was in good condition.
Contacting the Seller
Eventually, you’re going to find an ad that’s somewhat close to the KBB price as mentioned above. Even if it’s a pinch off, there’s always room for haggling, so don’t worry if the number isn’t spot on.
As for contacting the seller, I always recommend you do it via text only as it’s a great way to communicate on your own time, avoid any emotions and have everything in writing if something were to backfire.
Generally, I look for a fast texter.
So, if I text right now, I want a response as quick as possible. I’m not talking seconds, but a fairly quick response can indicate you’re working with a responsible person.
Once you initiate the contact, ask the basics:
- how is the condition?
- any issues in the past?
- anything I should know about?
- how long have you owned?
- why are you getting rid of it?
- any large repairs?
Don’t jump into pricing right away, but instead, learn more about the car to ensure it’s worth your time.
Making the Offer via Text
After making a bit of small talk, it’s now time to ask them how much wiggle room they have in terms of the fine price.
Let them know how interested you are in the car and you do want to pay cash after you perform your due diligence to make for a fast transaction. During this time, some buyers may get mad and ignore you, while some may say they are somewhat flexible. It really depends on the seller.
Again, as long as your price is within that KBB range, it doesn’t hurt to start the buying process if the seller says they are willing to wiggle a bit.
If the seller says they are willing to haggle, that’s a good sign!
And, if you want to follow through, your next step is to ask for the VIN so that you can do even more homework at home.
Always Get a CarFax
Now that you hopefully have the VIN, I now recommend you buy a CarFax report, all of which should only cost you a few dollars on eBay.
This CarFax is going to tell you a lot about the car and is a good indicator as to whether or not the car is worth buying. It will alert you of the following:
- if the car was in an accident
- if any damage was reported
- how many owners
- service history reports
- how the vehicle was used (lease, personal, rental, etc)
- last odometer reading
- year purchased
- type of owner
- length of ownership
- title history
- detailed history
For me personally, here’s what you’re going to want to look out for on the report:
- look for no accidents
- try to target one-owner vehicles (this isn’t that big of a deal, though)
- always try to buy a personal car (people are afraid of rentals)
- a car with detailed service records is always a plus
- always, always make sure the title is 100% clean
This little investment can save you a lot of headaches in the future as the seller cannot fudge these numbers, so it’s very important you don’t skimp on this part.
It’s only going to harm you in the end if something were to go wrong, so be sure to at least invest a few dollars and get it.
If you made it this far, you’re well on your way to a potential flip that could make you a few hundred, maybe a thousand+.
But, while it’s fun to get excited, you still need to physically inspect the car to ensure it’s in tip-top shape. Sadly, sometimes a car is priced low because there’s something wrong with it.
Now, there are a few things you can do here.
If you know of a trusted mechanic, see if he or she would like to tag along and take a good look at the car for you. Doing this will cost you, but again, it’s the cost of doing business.
If you feel you know cars, that’s fine, too, but I highly recommend, at a minimum, you check out the following:
- always check the oil levels
- check the transmission fluid
- start the car listen to the engine sounds
- test drive and feel the car as it shifts
- always make sure everything works in regards to the power (locks, radio, sunroof, headlights, etc)
I’ll be honest. I don’t know too much about cars, the main reason I usually have a mechanic check out the car to help me save a headache, but again, there’s nothing wrong with checking the car on your own. It’s just so important you physically inspect the car.
For future reference, this Nationwide Insurance checklist is something to download and bring with you to make sure you don’t forget anything during the inspection process.
And, if there’s problem, it’s not the end of the world because some repairs can cost a few hundred bucks. It just depends on what you’re looking at here.
Making the Purchase
If you find a car that’s priced quite aggressively and the inspection comes clean, then, congrats, it’s probably time to make the deal.
Now, as mentioned earlier, cash is king, and if you want to flip cars, I highly recommend you have cash on hand to be successful as a lot of private buyers won’t want to deal with the headaches of a car loan. Plus, with a car loan, the title is in the bank’s name, making for yet another hurdle when you want to sell. Trust me, it just isn’t worth it.
If everything does look good, there are a few things that you will want to focus on as, yes, there are a lot of scammers out there who may want to take your thousands and run.
In short, here are some things to look out for:
- always make sure the name on the title matches the person you’re working with (always ask for seller’s ID)
- always ask for a detailed bill of sale that includes the sale date, the price and VIN to protect you
- receive all documentation (manual, service records, etc) that’s related to the buyer to complete the deal
As long as everything looks great, then it’s safe to hand over the cash in exchange for the title and consider yourself a new car owner.
From there, you can head to your local DMV office immediately to put the car in your name.
Selling the Car
Once you have the car title transferred over, it’s now time to flip that car and make your profit, but before doing so, you’re going to want to do a few things.
Tidy it Up
No one likes a dirty car.
Make sure you clean the exterior and interior, making it look like new again.
You don’t need to necessarily pay a detailer, but just make sure the car is clean enough that it isn’t scaring away potential buyers. Here’s a good cleaning checklist for reference.
Take Good Pictures
You probably know that old cliche, “a picture is worth a 1,000 words.”
Well, good pictures can sell cars.
Craigslist, AutoTrader or just about anywhere you sell online will always have room for multiple pictures, and it’s to you to take advantage of this.
Take pictures of the outside, inside, dashboard and every in between to basically give the buyer a tour without having to leave their home. Again, just make sure it’s clean before taking the pics.
Figure out a Price
Following this guide, I’m hoping you at least purchased the car using the trade-in value above so that you can potentially flip it to make $500, $1,000 or even more.
To figure out a good price as to what to sell it for, I usually search AutoTrader.com, put in the same exact specs and take a look at all of the cars in a 250-mile radius to see what they are selling for.
And, just because the car is the same doesn’t make yours better or worse.
Make sure you compare the car to see how it stacks up. For example, if your car has a clean CarFax and the cheapest car option in your area has an accident on record, then it’s safe to say your car is worth more.
Let’s take that 2006 Kia Rio example I mentioned prior.
If I hypothetically was able to snag a good deal, I would browse AutoTrader and here’s what I would find in a 250-mile radius from my home:
As you can see from the results, it would be safe to say I could get at least $3,700 or so if the car had 85,000~ miles.
Aside from the AutoTrader strategy, use KBB as well, but just make sure you look at the private selling value instead of the trade-in.
At least from my experience from selling, I have always been able to get at least the lower end of the trade-in value at a minimum.
Using this strategy is a good indicator of the market value, so I do recommend you at least take the lowest selling vehicle and assume yours will sell close to it.
Create the Listing
Now that you have the car cleaned up, you took pictures and have a price in mind, it’s time to create your listing.
Like buying your car in the first place, you will want to start with Craigslist, with a clear description of the car. Include the make, model, color and be as detailed as you can with the description. If something is wrong, be sure to list it! It’s okay to be honest.
Also, take the Carfax you purchased earlier and be sure to include this as well since most buyers will want to know about the vehicle’s past. You already purchased it, so there’s no reason to re-invest in one.
In your posting, just get to the point, aggressively price it and take quality pictures.
In doing so, you should start to get some leads.
Make the Sale
As long as your car is priced aggressively and isn’t falling apart, you should start to get some action.
Yes, some people will send you offers that are insulting, while some will want to come to see it. I always ignore the low ballers, but it’s up to you as to how you want to deal with them.
In the opposite direction of haggling for a low price, you’re going to want to do the opposite here, ensuring you’re getting the best price possible. Even if takes you a few weeks, you want to be patient here ensuring that you’re making as much money in your flip as possible.
In short, don’t be desperate and be honest. Being nice can take you quite far as well. Honestly, the goal here is to just be human and avoid being the stereotypical car salesman.
Once you do find a buyer, it’s then up to you to make sure you either accept cash or a cashier’s check and that’s it.
As a safety precaution, I always recommend you at least meet the buyer at their bank so that you can see them withdrawal the money or receive the cashier’s check. That way, you know it’s 100% legit.
From there, you can sign off on the total and enjoy your flip!
In this section, I just wanted to address some questions many people have in regards to the process. Again, I’m not an expert as I just dabbled in it, but I have learned a lot about the process.
Do you put the title in your name?
100% yes. Always put the title in your name as soon as possible. In some cases, you may find that your state offers an expedited service that can get you the title much quicker. Failing to do this is known as “floating the title” and is 100% illegal, so be forewarned!
What about insurance?
Be sure to check with your insurance company as all policies will vary. Specifically, you will want to know if they cover transporting newly purchased vehicles. In some cases, most do.
What about the sales tax?
The sales tax will depend on your local state laws since every state/city has its own rules, but yes, plan on setting aside at least 5 to 10 percent of your sale for taxes. Since you’re probably selling a lower priced car, this percentage shouldn’t eat into your margins too much. If so, it may be time to look at a new strategy.
What cars are easy sellers?
As mentioned, there is no right or wrong answers, but some of the eBooks I read online stated that four-door sedans tend to sell the quickest.
How many cars can I sell?
I mentioned it in the beginning, but it’s so important to check your state laws as most states don’t let you sell more than five cars in a year. If you do, they will consider yourself a dealer and you must get a dealer license for tax purposes.
Do I need a dealers license?
This kind of touches upon the last answer, but in short, you only need a license if you plan on selling a certain number of cars. Again, check with your local laws for more information.
As a non-dealer, flipping cars can work, but it’s going to take work.
Finding a good deal will always take some time, and when you do find one that seems to be a gem, it’s either going to go fast or there’s often something very wrong with the car.
Talking with a friend, he said that when he posted an aggressively priced car, dealers would call within minutes, offering cash in hand, even offering to tow away for free. So let it be known there’s a lot of competition out there.
In the end, if you get good enough at it, there’s no reason you can’t make $500, $1,000 or even $2,000 on your deal.
Just make sure you follow these steps closely, don’t rush into a deal and always make sure the numbers make sense before handing over your hard earned cash.
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