How to flip a car for profit

Flipping cars can be fun, educational and profitable - you just need to know how. In no particular order, here are the topics we will cover today:

Know your location

While location may not be everything, it can have a huge impact on the prices of vehicles. I'll use where we are as an example. We are one hour's drive away from a capital city, which has about 9x the population of the town we live in. As such, there's about nine times as many cars for sale there - which has the impact of driving down prices. Most people where we live won't drive an hour to look at a car and only consider local purchases, despite the higher prices - which can sometimes be substantially higher. If you're willing to drive an hour to pick up a car (and have confidence enough in buying based on photos and a conversation) that can be turned to your advantage.

The reverse situation can sometimes be worked to an advantage, as well - the more remote the location the less buyers there will be, and sometimes this means that going out of a big city will produce cheaper prices. Get to know your local and extended area and figure out just how far you are willing to go for good prices, wherever they may be.

Location can play a really big part in where you leave your car by the side of the road with a sign, too. As an example, we put a cheap car by the side of the road in a moderately wealthy suburb for a week - with no enquiries. Moving it to the suburb next to the university the following week, however, brought instant results with a number of enquiries on the first day - all students looking for cheap transport to get to uni and back. Use your local knowledge to figure out which demographics are likely to be passing through any given area, and match that up to your car's likely audience.

Know your market

This is one of the most important points, and it's something you can do in your downtime - browse eBay, Gumtree, Craigslist, local classifieds, carsales.com.au - whatever tools are available to buy and sell cars. Browse and browse some more - and if possible look at the prices that cars sold for, not just what they are listed for. You need to go into a flip knowing the potential profit and how easy or hard it will be to move it on. If there's a car of that make and model sold every day locally it shouldn't be hard to move on - whereas if there are a dozen sitting online for months unsold it's a different proposition entirely.

Know your makes/models

This is another research-heavy point, just like the previous one. You need to know the difference between a Corolla and a Camry, how much each is worth and who the potential buyers might be for either. If you're doing some of the mechanical work yourself - and in this guide we are assuming that you are, as stated above - things like engine type and layout can make a substantial difference to how easy they are to work on. Over time you'll probably develop a preference for working on some types of engines, which can make your flipping approach a bit more refined as you focus on certain models. If you're not doing the work yourself, finding an inexpensive local mechanic who does good work on the models you're interested in flipping will be extremely important - and the models you are considering might be strongly influenced by the available mechanics.

The more in-depth your knowledge here, the better off you'll be - as an example, say someone advertises a really cheap Corolla locally with no photos. You turn up and lo and behold, it's a really cheap mid-80s Corolla. Except that it's an AE86 Corolla with a cult following that the owner is unaware of, or of the potential value there. You hand the man his money, take the car and turn it around for ten times what you paid him the following week. That's going to be an uncommon example, but they do happen - and the more you know, the better able you will be to capitalise on those sorts of situations.

Know your mechanical skills

How handy are you? Assuming you're at least doing some of this work yourself, you will be limited by the tools, knowledge and time available to work on cars. Also, what is your mechanical time worth? If you buy a car with a blown head gasket for a thousand dollars less than what a working one is sold for and then buy a gasket set for $100, that sounds pretty promising... until it takes you four weekends @ 8hrs/day to replace the head gasket and you break $500 of other parts in the process, leaving you at about $6.25/hr for your time. Of course, if you can do the head gasket in a single day and don't break anything unexpected you're looking at over $100/hr, so we come back to the original point of know your skills.

Another thing to be aware of is what tools are required for any given job; to use the head gaskets again, replacing one on an early 90s Corolla is a very different proposition to replacing one on a late 90s BMW 5-series engine - you need more specialised tools for the BMW! Sometimes it's worth flipping a vehicle at zero profit after tool purchases just so you'll have the tools for next time, but make sure you do your research first so that you know what you're getting yourself into.

Knowing in which area your skills lie is an important facet of this, too - if you have experience at (or are simply a dab hand at) pulling dents and painting cars but dislike working in an engine bay then buying cars with damaged exteriors might be your style of flip as opposed to buying cars with broken engine components.

Time

What time of year is it? Pre-Christmas is a great time to be buying cars, as people have less money to spend and need more money so typically are more easily negotiated down on price - and there are probably less competing buyers due to the circumstances. Got a local university or college campus? Pre-first-semester might be a good time to make available cheap student cars for new students who need a ride. How about the local tax time? People getting income tax returns can be flush with cash and looking to upgrade their car, so the market will likely change then too.

Time also plays a factor in terms of how desperate the seller is to sell, or how quickly you need to move the vehicle on. Length remaining of on-road registration can play a big factor here as does the cost of re-registering a vehicle once it has expired. If the car's registration is about to expire the seller may be desperate to sell before then, giving you good leverage to get the price down. Length of registration may also influence your ideal selling timeframe, too - and this may also conflict with the time of year that it's best to sell in, so it's a good idea to keep the bigger picture in mind when looking at the car as you don't want to be in the same position of having to sell urgently for less than you're hoping for.

Assessing

Get good at diagnosing vehicles and the cost to fix them. Look specifically for things that a potential future owner (e.g. the person who will buy it from you) might care about - if it is due for registration renewal in a month or two they will probably care about tyre tread, lights and other things that are assessed at that time. If it's an expensive import they might care more about the exterior appearance than if it's a runabout Camry.

Learn as many on-the-spot quick tricks to diagnose issues as you can - there's a few of those in the "how to buy a car" article, read up there.

Negotiating

See our selling article.

Availability

Your availability will influence how quickly you can snap up great deals on Gumtree or Craigslist - if you can drop everything and drive 30 minutes to grab a car that's just been listed for a crazy cheap price you're in with a chance, whereas if you're working flat out until the weekend and only get time to look at cars then there's a good chance you'll miss out. Being able to turn up very quickly with a handful of cash is very important.

On a different note, availability of parts is an important factor if you're buying cars which need mechanical or bodywork done. Make sure that any parts you might need are readily available from the appropriate place - not everything will be a good idea to buy from a wrecker, and some models are surprisingly hard to find in wreckers. Also consider how long it will take to acquire the parts - some parts for older Japanese cars are still available here, for example, but it might take three weeks or more for them to arrive from Japan. That might not be ideal for your flip.

Legality

This one will vary hugely depending on which country you live in, and likely which state within that country. In our state we can sell up to about a half dozen cars a year before a motor vehicle dealer's license is deemed necessary... which comes with it's own set of costs, rights and responsibilities. It's worth finding out what the terms are in your local area.

Some countries also have laws with regards to where you can legally advertise cars (e.g. where you can leave them by the side of the road) - something to read up on as well as a fine could eat up all of your profits!

Costs

Does it cost money to transfer the car into your name? Do you need to pay for any inspections before or after the sale? How much will it cost to advertise it when it comes time to sell? How many tools will you need to buy to do the repairs, or how much will you need to pay someone else to do them? Get quotes beforehand!

Also check that the car isn't stolen or has money owing on it - as with many of these, the correct way to do this will vary from country to country so find out how to do it where you are. That could put quite a damper on your plans to profit.

Also consider whether you'll insure it for the time you own it, and how much that will cost. Leaving it by the side of the road unattended for days could make it a tempting target for thieves - but the more costs you incur whilst owning the vehicle, the less your profits. It's a risk/benefit call you'll have to make.

Start small

Want to learn how to do this but don't want to throw money away on poor decisions? Start small! Small as in under $1,000. Find very cheap deals where the owner needs to move the car on in a hurry and has listed it on eBay with no reserve, then snipe the auction. Be the first caller to a car that was listed on Craigslist at a well-below-market price and snap it up. The less you outlay initially the less risk there is to your wallet, and the less it will matter when a few decisions result in more learning than profit.

Things to avoid

You'll almost certainly want to avoid anything that involves major mechanical work, unless you can confidently pull it off in a reasonable timeframe. Be very wary of cars that aren't startable for inspection due to no battery/no fuel/no key etc. - that can be a warning sign that there's something majorly wrong with it that the seller is trying to hide. Even if the seller gives a reason why it won't start or doesn't run correctly, don't take them at their word - they may not necessarily be lying, they may simply be incorrect.

As an example, someone locally was selling a car which was of a model known for it's transmission problems - specifically where reverse gear starts slipping, meaning that the revs rise and you get little backward movement. The seller simply said that it "felt like the brakes were sticking on when going backward" - not that it was or wasn't a transmission problem, but it felt like the brakes were sticking. Nice wording there, suggesting that the problem might simply be that the brakes need a good clean out as opposed to an expensive transmission problem. Approach these sorts of things with an open and critical mind - you're better off being pleasantly surprised that it's a cheaper problem to fix than you expected rather than disappointed that it's much, much worse.

If you're just starting out, I'd suggest avoiding anything with complex problems to fix or issues in multiple systems - e.g. engine issues, transmission issues and suspension issues all in the one car. The more problems you can immediately identify the more likely it is that the end cost to you is higher.





Follow us on Facebook!

Follow us on Instagram!


Through 2016 website donations covered a mere 3.89% of the cost of keeping this website online... please consider donating to keep the site going.