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Flipping Cars For Profit

There is something taboo about flipping cars for profit and quite honestly buying and selling cars operates on the same principal on how to make money with any flip, buy low and sell high.  Of course, there are a few caveats but this step-by-step guide goes over everything one needs to know about flipping cars.   

Flipping Cars For Profit

How much money is required to get started?

This post concentrates on used cars you can buy between $1,000-$4,000.  Now I know this is certainly a large investment and not many people have the startup capital to do this.  And if you don’t, start saving up.  Now you might be thinking why?  Is it really worth it?  The answer is yes because a car flip can net anywhere from $1,000-$2,000 profit.  We are talking about a 50%-100% profit margins in the thousands.  Again let me reiterate, unlike flipping a dollar store item or a book for a few dollars…you are making thousands in a single shot from a flip.

Where do I go to find cars?

When flipping cars in the range of $1,000-$4,000, you’re going to be doing all the buying and selling on Craigslist.  Why?

First, places like Autotrader.com and Cars.com charges people to post ads to sell cars.  People with inexpensive cars for sale simply won’t be paying to list them.  Why would they when they can list their car on Craiglist for free?  Because of this, there is a huge inventory of cars under $4,000 on Craigslist.  Second, a large number of people selling on Craigslist are less tech savvy and don’t even know about KBB or even Carfax.  This is crucial because you’ll be utilizing this lack of knowledge to your advantage.

To get started, simply navigate within Craigslist and go to the “cars+trucks” section under the “for sale” category.  There are a few options I recommend you to select when searching.  First, check “By-Owner only” because you don’t want to deal with dealers.  Unfortunately, some shady dealers still do hide their listing under “By Owner only” but more on that later. Second, check “search titles only” and lastly search by lowest price.

Private sellers vs dealers?

Now as for private sellers (“by owners”) vs dealers, ONLY deal and buy from private sellers.  There are a lot of dealerships and private dealers that act like private sellers and will not indicate who they are in the posting.  There are some tells which indicate if the car is a dealer’s car.  For example, if they removed the license plates, have a weird looking license plate, and if the listing is too professional looking.  To be sure always ask up front if they are a dealer or private seller.

Why don’t you want to make deals with dealers?  First is because of taxes.  When you buy from a dealer, you are obligated to pay full retail tax on the car.  Second, your dealing with a pro and you aren’t going to get a bargain because of it.

What am I looking for?

There are hundreds of car brands, models, and styles out there so this may be difficult for someone starting out (Be sure to check out the Bonus Offer at the end of the post).  Picking which brand or model or year is based on your own preference and over time you’ll get more and more familiar with what you have selected.  Once you feel like your comfort level reached a certain point then feel free branch out.  For example, say you’re familiar with Toyota 4Runners since you’ve been driving them all of your life.  Then it’s a good idea to start out looking for 4runners due to all the legacy knowledge you’ve picked up over the years.  What legacy knowledge you might be asking?

For example, say if you’ve owned a 2003 Toyota 4Runner V8 and you’ve gone through a timing belt change at 100k miles and you’ve consistently replaced your rotors around 30k miles.  You now know as the car approaches 100k miles, some people are going to sell their car cheap because there aren’t too many buyers looking to dump 1-2 k in to do a timing belt change nor rotors.  Because of your legacy knowledge, you now have a few great negotiating points you can utilize.

How do I determine the right price?

This might be the most important section out of this whole post so pay attention!  How do you determine what a car’s true value is?  If you’ve ever traded in a car, you probably heard of “auction” prices or Black Book pricing.  These are tools that normal people do not have access to.  “Auction” pricing and Black Book pricing are more or less what a dealer is willing to pay for your car EVEN if you don’t buy theirs. This is how CarMax operates as well, although generally, they go a bit lower than even what “auction” price is so they can still net some profit.  Let me show you how you can determine that value yourself utilizing Kelly Blue Book.

Now, this method is not 100% but it is very close.  And the reason I know it’s close because of the dozens upon dozens of cars I’ve flipped over the years.  After you’ve found a car, head over to Kelly Blue Book and then click on “check my car’s value.”  Next enter the year, make, model and mileage.  Next, you’ll be prompted for your zip code, the style of your car (sedan, coupe, etc..) , the options and condition.  Fill those out honestly and select “fair” as the condition.

Finally, you’re prompted with a screen that tells you what your “trade in range” is and they give you a price right in the middle of the range.  The reason why I asked you to select “fair” as the condition because it drops the price to the point where it’s very close to what “auction” pricing would be.  But wait you’re not done.  Just because you know what the “auction” price doesn’t mean you should be buying at that price.

What you’re aiming to buy the car is $500-$1,000 below that “fair” trade in price.  Let that sink in for a bit.  You are aiming to buy cars below “auction” pricing.  Woah, you might be thinking this is nuts!  Trust me it is possible to do so on Craigslist.  I’ve gotten cars so low on Craigslist that even dealers have come to me to buy my cars. There are two reasons for this, one is to protect yourself in case something goes wrong.  For whatever reason, if you can’t sell the car you can always bring it to CarMax and break even or even make a few hundred over what you’ve paid.  Two is if you can sell the car, you’ve built enough margins where one flip can net you $1,000-$2,000 dollars.

So why do you need to buy cars for $500-1000 below “fair” trade in price or a.k.a “auction price”?  There are two reasons for this, one is to protect yourself in case something goes wrong.  For whatever reason, if you can’t sell the car you can always bring it to CarMax and break even or even make a few hundred over what you’ve paid.  Two is if you can sell the car, you’ve built enough margins where one flip can net you $1,000-$2,000 dollars.

How do I find the right seller?

So how do you go about finding sellers that are willing to sell you their car at below “auction” pricing?  You need to identify users who are either desperate or simply don’t know what their car is worth.  This is relatively easy to determine without ever showing up nor calling the seller directly.

The golden rule of thumb, do this all by text.  The reason is you don’t want to be wasting your time driving to all these sellers without knowing if the deal can be done.  You want to determine that prior to arrival.  Over the phone, things can get heated due to your offer.  Once things are heated, the deal goes out the window.  That’s why you want to stick with text.  There is a lot less emotion from both sides and you can be talking with several sellers at once.  Texting also allows you to have a long negotiating process that lasts several hours or even days.

Once you’ve texted the seller, see how responsive their response is.  Generally the faster the response the better.  Start the conversation with little talk, ask about the condition, if there are any issues, large repairs that have happened recently, etc… unless they respond that there are major issues like the transmission won’t shift or there are loud noises from the engine, their response isn’t that important. The questions are meant to get them comfortable and to show you have interest.  Then lead to the questions about how flexible they are with the pricing and how soon they want to sell the car. This is where it starts to get fun.

Generally, most people will say they have little wiggle room or they have other interest.  It doesn’t matter if that is true or not.  Now it’s time for you to tell them directly what you want to pay for the car and see how they react.  If they end the conversation then you know they are not the right kind of seller.  But if they continue the conversation on with a lot of back and forth that’s generally your tell that you got them on the hook.

Your base of argument always comes down to that you can pay with cash fast.  You tell them that outside of any major thing not disclosed by them, that it’s a done deal. Keep emphasizing that, by selling to you, the seller can sell the car quickly and have little problems with the transaction.  Go back and forth as long as needed and again if they keep the conversation going with you, that means you have a really good shot of making it happen.

Eventually, after they cave in and agree, pat yourself on the back.  You’re on your way to a big payday.  But before you get too happy, there are a few things you still need to do.  Ask the seller to give you the VIN (Vehicle Identification Number) number of the car so that you can do a CarFax.  Then schedule a time to go see the car.  If they are desperate enough, a lot of times you can ask them to meet you at your house so that you don’t even need to drive anywhere.  This makes it easier for you since you don’t have to bother someone giving you a ride.

Do I need to get a CarFax?

Yes absolutely!  Carfax is a car history service that shows you if the car has a clean title, the exact miles of the car, all the service Carfax is a car history service that shows you if the car has a clean title, the exact miles of the car, all the service done at dealerships and when the car has been in for emission check.  First and foremost check to see if the car has a clean title.  That means to make sure it does not have a rebuilt or salvage title.  If the car does not, leave right away.  

DO NOT BUY A CAR WITHOUT RUNNING A CARFAX.  If you do, it is the surest way for you to lose money.  Sign up for the unlimited plan, it is much cheaper than paying for every VIN check.  50% of the cars listed on Craigslist has mileage issues due to odometer swaps or roll back.  Carfax will ensure you don’t buy a car that has 100k more miles than what is listed. Carfax also shows you when certain important service was done like the timing belt replacement and if the car has a legit title.

Now after you run a Carfax and the car is clean, then proceed to go check out the car.  If the Carfax comes back with something fishy or not right, for example, the miles are off, then move on.  Remember that the “value” of the car greatly diminishes if the car has an unclean title or tampering, you don’t want to mess with them.  

How do I inspect a car?

After you show up at the seller’s place (or if you convinced him to meet you at yours), make sure you test every little thing on the car.  Every power window, every button, every feature, every light, etc.. Trust me buyers are going to be picking out every flaw from you when you try to sell it later on so this is your opportunity to do the same.  There are a lot of things that can be hidden but there are a few obvious things you can look for.  Visually inspect the car for rust, dents scratches…and then move on to under the hood and driving.

  1. Check the oil level – Make sure it’s not low or dry.  And also inspect underneath the car.  Are there oil stains?  If there is then that means the valve covers have bad gaskets.   This is not a deal breaker but make sure it’s not leaking like crazy.  A few drops is not preferable but tolerable.  
  2. Check the transmission fluid – Check it from the dipstick and make sure it is pink and should not have any metal particles or shavings in it.  If there are that means trouble.  Stay away.
  3. Listen to the engine – there should not be any knocking or shrills. If there are, see if the knocking gets worse as you accelerate.  If there is then stay away.
  4. Feel the shifting – when you’re driving pay attention to how the car shifts. If it seems the car is shifting weird in any way then there may be transmission issues. Stay away.
  5. Check everything that has power in the car – this includes all the windows, wipers, heated stuff like seats & mirrors, seats, locks, sunroof, radio, instrument panels, headlights, taillights, interior lights.  Every little thing adds up to repair.  Make sure you know what you’re getting.
  6. Ask about service records – some guys keep really good records and that’s great.  For those that don’t, you can find a lot of this info from Carfax.  The most important for most cars is the 100k mark where the timing belt and water pump should be changed.  But not all cars have a belt, some use a chain which lasts over 200k miles.  Do your research on google first to see if the car you want to buy requires a belt change and see if the owner can provide some kind of proof if it was replaced.

Depending on how serious the issues are, you will have to make a decision if you still want the car.  For me, if the issues aren’t too bad then I just live with it and still make the transaction.  If the issues are somewhat serious then I negotiate further.  But you got to know at what point to back out.  If you encounter a car with shifting problems and don’t have the time or money to deal with replacing the transmission then move on.

How do I make the purchase? 

If everything looks good and you’re comfortable moving forward, you need to focus on the paperwork next.  Make sure the buyer show you the title and you verify they sign the seller’s part in front of you.  Make them show you their ID so you know the car is from them.  If the title is already signed then just check the ID. The reason for this is you don’t want to be buying a car from someone who didn’t title it.  That means they are just flipping it as well and there are some legal ramifications behind this.

Along with the title make sure you get some sort of bill of sale written and signed by both parties.  That way you can drive the car home without a license plate and if you get pulled over by the cops you can explain why.  The bill of sale should have the description of the car, the sale date, sale price, and have the VIN number listed.  

If everything is good, shake hands and give them the money. Lastly, before you leave, make sure to get every key, service documentation, manual from the seller and then hand them the cash to complete the deal.

How do I sell the car?  

Now that you have a solid car for an unbeatable price, it’s time flip it for maximum profit.

Clean it up

Wash the outside and clean the inside.  Don’t spend money on detailing it, just use some elbow grease and get rid of all the gunk and food that accumulated over the years. Vacuum and if the carpets are too dirty to wash clean then buy some cheap carpet guards from Walmart and lay it over it.  You don’t have to make the car spotless (it doesn’t hurt) but make sure that the obvious is done to clean it up so that it’s in presentable shape.  An air fresher also helps.  

Take quality pictures

First impressions make a huge statement so make sure your posting pictures are quality and spot on.  Don’t showcase the flaws but also don’t hide it. The buyer will be inspecting the car in person so if you have a big dent on a door, then just be honest and present it.  Don’t try to be shady and cover it up.  Make sure the pictures shows the highlights of the car including any special options that the car may have.  Showcase the tires if they are new.  Make sure to draw the buyers in with your pictures.  

Research price

Find the average listing price for your car by looking at other similar cars being sold on Craigslist.  If you want your car sold fast, then list it on the low end. Don’t price your car at a premium unless you know for a fact that it’s better.  Use year, miles and features as the main points for price comparison.  if you bought the car below “auction” price you’ll make money even if you price it on the low end.  

Create the listing on Craigslist

Use a descriptive title with the year, color, make and model of the car and be as detailed as possible with the description.  Make sure you put up any service record you have and Carfax so that buyers are comfortable making the purchase.  Put up the quality pictures you took and explain about the flaws if there are any.  Of course put your contact info and asking price.  Again draw the buyers in with your listing.  

Don’t be afraid to list your number.  Most people on Craigslist do not want to deal with slow emails.  If you don’t want to pick up calls from random people then put in the auction that you want people to text only.  If they call you, don’t pick up and text back.  I do most of my negotiations this way.  But there will be people who only want to talk over the phone, so be prepared and get comfortable.

Negociate

When selling the car, you want to do the opposite of what you did when buying the car.  When negotiating, always try to convince the prospect buyer to come and do it in person. This is because you want people to make decisions based on emotions or impulse.  Try not to negotiate over text or the phone unless you have no choice.  Never get heated with negotiating, think of it like a game.  

Get ready for the sale

After you have scheduled a time for the buyer to come out and take a look at your car, make sure you get everything ready to make the process as simple as possible.   Have all the keys, service documents, Carfax ready.  Also have towels and rags around in case the buyer wants to do an inspection on the car.   Lastly, have the bill of sale ready so that it can be filled out quickly and lastly have the title ready.  Remember to make the process as easy as painless for the buyer.

Make the sale

If all is good, go ahead and make the sale.  Collect the money, sign the title and bill of sale and make the buyer do the same.  Shake hands and enjoy your massive profit from a single flip!

In Conclusion

Flipping cars for profit is definitely one of the most profitable ways to make money outside of flipping houses.  The investment is a little higher than what most people are comfortable with but the rewards make it well worth it.  Be sure to take your time and follow these steps carefully to ensure that you don’t rush to a mistake.  Of course, if cars are just not your thing, there are plenty of other things (Bitcoin, Clothes, Thrift Store Items, Dollar Store Items, more) you can flip for money.  

Bonus Offer

Because flipping cars can be quite daunting and some people will require some help getting started, I am offering a limited service for my loyal readers.  This service will be a hands-on engagement and get most of the grunt work of finding and negotiating cars to flip completed for you.  If you are interested in learning more, click on the learn more button.

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