You’ve probably heard about flipping houses. But what about flipping cars? The formula is basically the same: find a car that’s not in the best shape, buy it for a great deal, fix it up, sell it once it’s back in tip-top shape, and make a healthy profit in the process. With a little automotive know-how and a good eye for finding vehicles with lots of potential, flipping cars is a great way to make a fairly significant income. Everything about flipping cars for profit will be included in this article. Here’s what’s covered:
- Is flipping cars illegal?
- How many cars can you sell in a year?
- How to flip a car/how to make money flipping a car
- Is flipping cars for a living realistic?
- How many cars can you sell in a year?
- How to get a dealers license without a car lot
So if you’ve ever wanted to get started and get profitable, here’s what you need to know. If you have any questions, comment below and your question will be answered. Let’s get started.
Is Flipping Cars Illegal?
Some websites will tell you that flipping cars, in and of itself, is illegal. This is not true if you follow your state’s rules regarding flipping cars for profit. Each state allows you to legally sell a certain number of cars per year before the state classifies you as an automotive dealer. Once the state sees you as an automotive dealer you are required to carry a state-issued dealer’s license.
How Many Cars Can You Sell in a Year?
The number of cars you can legally sell per year before the state qualifies you as a “dealer” varies in every state. Indiana and Vermont are the laxest states, allowing you to sell up to 12 cars in a calendar year without a dealer’s license. That’s one per month! Other states, like Oregon, consider you an automotive dealer as soon as you sell one car, used or new, for profit. Most states allow you to sell around five cars per year before being classified as a dealer. You need to research the laws in your specific state to ensure compliance.
As with most legal issues, there are loopholes to the laws surrounding how many cars you can flip in a year. Most, but not all, states give a grace period for how long you have to register your car once you buy it. This can range anywhere from two business days (Wisconsin) up to 60 days. If your state has a longer grace period for registration, technically you could purchase a car and resell it within the grace period without ever registering it under your name. You would still need to pay taxes on any proceeds from the sale of the car.
Another option is what’s known as an “open title sale”. Flipping cars is illegal in many states if you do it in this fashion. An open title sale is where the seller fills out the title as being sold, usually leaving the date blank, and the buyer information is left blank. The buyer can then go sell the car to a third party and retain the profit. This is not recommended but especially not for the seller, who is legally responsible for the car until the title has been transferred to another person or entity. So what could go wrong with this? Let’s say you sell your car in an open title arrangement. The buyer of your car (who is not on your title) has a wreck where he/she is injured, or even injures other people. Since you are still technically the title holder, this is completely your liability. Also, since the car is still in your name, you will be the one to receive registration renewals, traffic violations, and parking tickets. Many things could go wrong in between the time that you hand the keys and title over to the first buyer and the time that your buyer sells it to someone else.
You can also put the title in a friend or family member’s name (with their permission, of course) but this is not recommended either. It takes a little education how understand how to make money flipping cars.
How to Flip a Car
You don’t need to have a wealth of mechanical knowledge to flip a car, but it certainly wouldn’t hurt! If you are a decent negotiator you should be able to make a profit on your cars, and just like all sales, the more you do it, the better you should get! It’s said that when flipping cars for profit, the money is made on the purchase, not the sale. So buy low.
You have a couple of options to consider when flipping cars for money. If you are a good mechanic with access to tools, you may want to consider operating in a niche market of cars. One idea with this is selecting a make like BMW. Once most BMW’s start to get old, the maintenance can be expensive, pushing people to sell their car instead of taking on the cost of repairs. If you know your way around an engine, it could be quite profitable for you to operate in this niche. If you are not so mechanically inclined, you still have options. Many consumers buy small commuter cars (like Corolla, Camry, etc) to use until they can afford to upgrade. At this point the car is still fine, but they want to change vehicles. Depending on what area you’re in, it could be profitable for you to buy these commuters and sell them at a profit to people who maybe have 45 to 60-minute commute times to a big city.
So once you decide what cars you are aiming to buy, you need to find the first car to flip. Fortunately, in this age of technology, you aren’t just limited to the “Classifieds” section of the newspaper when car shopping. Craigslist and eBay are great options to check out what kinds of deals you can get for a car. Many people have had great luck getting cars – that can run! – for as little as $500.
Once you have your car, you need to decide whether you want to do anything to increase the value of the car. If you found a great deal on a vehicle that someone had to dump quickly because of a move or another reason, you may not even need to get the oil changed before you resell it at a profit. If you are mechanically inclined, you may have great luck purchasing cars with some mechanical issues that you can fix on the cheap, then resell the car for more than the original purchase price plus the costs of your parts and labor. Once you are ready to sell the car, you have a few options of how you want to unload it.
- You can list the car on sites such as AutoTrader, CarGurus, or eBay. These sites will advertise your car, walk you through all the necessary paperwork for selling your car, as well as offer fraud protection, all for some kind of a fee. These sites are an easy option, but the fees will usually outweigh the ease of use.
- The best option to make the most money is to list the car on sites such as Craigslist, your social media outlets, or word-of-mouth. With these options, you will be entirely responsible for filing all involved paperwork.
You Have a Buyer for Your Car, Now What?
The paperwork processes are different for each state. Most states just require a bill of sale (or a vehicle transfer form) and a release of liability (or a notice of transfer), along with an official title transfer.
States have slightly varied requirements on what must be included in a bill of sale. Usually you can write the bill of sale yourself, but there are online templates available to help you out. Usually the bill of sale needs to include the vehicles VIN number, vehicle description, date of transaction, amount paid, and buyer and seller name and address, respectively. This will need to be signed by both the buyer and the seller. As usual, check the DMV website in your state so you don’t miss important information.
The release of liability is there to protect you if anything happens to the car between the point of sale/ title transfer and the time that the buyer finishes their registration of the vehicle. It usually includes all of the same information as the bill of sale, plus the odometer reading at the point of sale. Again, each state has its own requirements. Your state’s DMV website will have the answers.
The title transfer is the easiest part. Usually there is a title assignment section on the back of your current title. You just sign as the seller and have the buyer sign as the buyer, and that’s done. It is recommended to accompany your buyer to the local county tax office to ensure that your buyer has officially filed for a new title. Filing paperwork is just part of how to make money flipping cars.
How Much Money Can You Make Flipping Cars?
You can make anywhere from a few hundred dollars to thousands per car, depending on your skill level with cars and your luck of finding low buys and high sells. If you are going to make less than $700 on the car, then it’s not really worth your time.
Let’s say you are a smooth talker, and you don’t fix up the cars at all – you just negotiate the buying price of the car down, and sell it for a $700 profit. If you live in a state like Indiana, you can do this once a month before being considered a dealer, giving you $8400 extra dollars in your pocket annually, before taxes (because you will need to list this as extra income on your taxes). Once you have a few sales under your belt, you could easily start making even more per sale. Not too bad!
Can I Make a Living Flipping Cars?
You can make a living flipping vehicles, but depending on what state you live in you may have to get your dealer’s license just to be able to sell enough to make it cover all your bills with a little leftover. Once you get good at flipping cars, there is no reason why you shouldn’t be able to flip 3-5 cars per week. At this point you would need your dealer’s license, obviously, but even if you are only making $700 per car, and averaging 4 cars per week, you could make $8400 per month if you took one week off per month. This gives you over $100k per year in income, before taxes, while still taking 12 weeks off per year. You could make almost $150k per year if you only took two weeks off and only made $700 per car at 4 per week.
How to Get a Dealer’s License Without a Car Lot
Because every state has different laws regarding dealer’s licenses, you need to read your particular state’s license application to know the exact requirements. Most states avoid the verbiage “car lot”, and instead opt for “established place of business”. Here’s how to get a dealer’s license without a car lot…
What is an “Established Place of Business”?
Again, each state may vary in the minute details of what exactly entails an “established place of business”, but the overarching theme of what is required is pretty similar. You [usually] need to have a separate business address to house your dealer license that is not your residential, permanent address. This location will need its own registered phone number as well as have signage for your business. Some states (like Colorado) require a certain number of bathrooms and/or parking spaces, and may require that your address only be used for dealer business.
Example of Full Requirements for a Dealer’s License:
Each individual state’s DMV website has applications as well as rules regarding your dealer’s license, and every state has its own level of difficulty that goes along with acquiring your dealer’s license.
For example, Georgia requires you to get a Used Motor Vehicles Dealer’s License. To do this, you need to:
- Fill out an application
- Have an “established place of business” (with pictures to prove you have met this requirement- may be subject to inspection)
- Purchase a surety bond of at least $35,000 (talk to your insurance company)
- Procure insurance on your business
- Attend a qualified pre-licensing seminar with a board approved education provider
- Submit fingerprints
It’s best to find someone who has already done this locally and ask for help. As you’ll quickly find out, flipping cars for profit has much to do with relationships.
Flipping Cars for Profit: Conclusion
And now you know how to make money buying and selling cars. Is flipping cars for money difficult? A little but it’s doable. Just keep referring back to this article until you’ve sold your first car. Then rinse and repeat. Enjoy flipping cars for profit!