How to Make $1000+ Each Time Flipping Cars
Flipping Cars for a Living
Many people have created a home-based business buying and selling cars. You don't need a huge capital outlay to start this business, or even great mechanical knowledge (although naturally, this would give you an advantage).
In this article, I'll talk about:
- Where to look for cheap cars to buy
- How to check out a car's mechanical condition
- Frequently asked questions about flipping cars
- How to detail cars yourself and prepare them for sale
Places Where You Can Buy a Cheap Car
Buying a cheap car is actually fairly easy. Look for cars in these places:
- Local car auctions
- Newspaper classified ads
- Supermarket community boards
- Private cars parked on the side of the road with a "For Sale" sticker on them.
Do I Need a Dealer's License to flip cars?
The laws on how many cars you can sell each year do vary from state to state so you are best to carefully research this in your state first. For example in California you can only flip five cars per year, however in Indiana you can sell twelve cars per year before you have to get a dealers license.
A way around this is to approach a licensed dealer and see if you can negotiate with him to do the paperwork on any cars over and above the state quota. Of course this is likely to cost several hundred dollars but if you're making $1000 or more per sale, well you're still ahead of the game. Another way is to do the same idea with family and friends, so basically you're using up their annual quota before you require a dealers license.
Every state requires prolific auto sellers to sign up as dealers. Obtaining as well as maintaining a dealer license is a time-consuming, paperwork-laden affair. It's pricey as well. Between certificate charges, guaranty bond charges, and also various governing costs, you can anticipate to invest at least $1,500 to get lawful.
If you rent business space for your operation, you need to budget hundreds or thousands monthly for rental fee or overhead. Fortunately, small-time flippers who technically certify as dealerships can usually skate by without formally setting up shop, offered they don't breach regional ordinances by obstructing their backyards as well as roads with extra vehicles.
Getting a dealership certificate isn't sensible or sensible for casual flippers. Nevertheless, if you appreciate car flipping sufficient to make a legitimate side company out of it, the business economics may operate in your favor.
Dealership permit requirements differ by state. In Vermont, you can sell up to twelve car flips each year that are possessed however not registered by you" before you need to request a supplier license (per DMV.org). Some other states have reduced thresholds. To stay clear of civil or criminal fines for marketing vehicles without a supplier certificate, contact your state motor vehicle windows registry before going any better.
What to Look for at Car Auctions
Car auctions are my favorite place to find cars, as they are fast and the cars can be very cheap. They also often offer repossessions or dealer trade-ins.
At car auctions I pay special attention to dirty-looking cars. Everyone avoids a dirty car because they think it's an old wreck. It might be, but it could also have belonged to an older person who left it outside under the trees and couldn't be bothered to clean it.
I bought a six-year-old Honda a few months ago for $250 at auction. I was the only bidder even though there were a hundred potential bidders in the room. The Honda was sitting amongst the other cars, but had a flat rear tire and its dark blue paint looked incredibly dull, flat, and tired.
When I opened the passenger door, the inside was full of old McDonald's wrappers and a ton of other rubbish. At least there wasn't any bad smell. It turned out to be a repossession. The dealer must have taken one look at it and been so disgusted that he sent it straight to the auction.
I started the car up and went through my checklist (see below). I couldn't find any fault with it. I couldn't drive it away because of the flat tire, but I knew that if I could get this car cheap enough, it was going to turn a great profit. One final check was wetting one of my fingers and running it across the paint. The shine came back.
So, I got the car towed to my garage at home and got to work. I changed the tire. Then, I cleaned and vacuumed the interior thoroughly.
I then started on the outside, which I had to buff and polish. Then I cleaned the engine, door jambs, trunk, rims, and tires. I had a fantastic-looking car.
Hondas of this age sell for between $7,000 and $8,000. I can never be bothered to hold out for the higher end of the range, so I sold it quickly for $6,500 by advertising in our local newspaper.
A middle-aged couple bought it and were totally happy. They wanted a Honda for its safety record and reliability. Frankly I didn't really care. I just wanted to move on to the next car.
But be very wary of where the car has come from. One of my first car flips was a Mercedes that looked great and went well. I very proudly parked it outside my home but then the exhaust began a leak a few days later and I took it to my local garage for what I assumed would be a basic repair. They put it up on their hoist and called me in to take a look. There was some dangerous rust around where the rear suspension bolts up. I had to have the entire suspension removed and the offending rust cut out and replaced. I guess I could have sold the car on but my conscience wouldn't let me sell a car that i know is unroadworthy to anyone as i'd feel responsible for any accident if that was to occur.
So I ended up losing $700 on that car, one of my first car flips. But I came away with a huge lesson. That is don't judge a book by its cover. Take a very close interest in the cars history. This car had spent its early life in New York which in the winter, puts salt on the road, as many cold states do. Salt of course plays havoc with metal and especially metal you can't see. So lesson learnt was take a lot of time with a torch to take a long look underneath the car as well.
If you're not a licensed dealer, public auctions most likely offer the most bang for your buck. (Supplier public auctions, which have fewer buyers as well as potentially much better deals, are open only to certified dealers.) Public auction stock commonly consists of cars and trucks repossessed by loan providers, confiscated by federal governments over unpaid tax obligations or other liens, waived by vehicle drivers charged with significant offenses, as well as abandoned in public rights-of-way. In significant metropolitan areas, public car auctions occur weekly and even a lot more often; also in much less populated locations, federal governments usually auction off repossessed vehicles at the very least as soon as per month. Companies are also in the public auction business—for example, Manheim has a nationwide network of vehicle auction houses that cater to suppliers and also the public. Public auction deals are typically far better than personal party sale bargains, because public auction residences deal on volume and also sellers usually do not care regarding getting top dollar.
How to Negotiate When Buying From Individuals Through Craigslist, eBay, and Newspapers
When flipping cars some great buys can be had from all of these sources. My preference is local newspapers and supermarket boards, because I can easily contact the seller and start negotiating.
Buying a cheap car through these sources requires a little luck and a little pushiness. If you don't like the idea of confronting and negotiating with someone, then stick with car auctions. But face-to-face negotiations give you information you can use. It's easy, once you've met the seller face-to-face, to work out the reason for the sale. Are they elderly and can't drive it any longer? Do they need the money? If so, it's possible there is nothing major wrong with the car.
I very rarely buy on the spot unless it's a bargain. What I tend to do is go away and say I'll think about it. I leave my number with them and hope they'll call me first and then I'll know their desperation level.
If I don't hear back from them, I call back three days later. If the car's gone, I don't care. Rule one here is don't get emotionally involved. Remember you don't want a car. You want to make money, and a car is just a money-making tool.
But never let it slip during negotiations that you are a car flipper. If people suspect you're buying their car to sell as a car flip, they'll make the sale as difficult as possible, no matter how desperate they are to sell.
Also remember that an elderly person or couple selling a car may have owned it since it was new. Remember that this car may have been their baby, their pride and joy. If it's been pampered, compliment them on its great condition and what great owners they must have been.
Don't tell such owners that you're buying the car for your daughter's graduation present or something like that. If they think a teenager is going to drive it, they may visualize its wheels being torn off. Better to say you're buying it for your mother who has done so many great things for you over the years and deserves something back.
After you've got them on your side, it will be easier going through the mechanical checklist below to find the odd unknown fault and start the process of getting the price down. For example, "Ah, Mr, Hannity, I'd love to buy your car, as you've kept it in such pristine condition, but I really don't like the sound of that light tapping noise on the top of the motor." (Tappets, by the way, are an easy cheap fix.) "I'm buying this as a gift for my mother so I just don't want her burdened with the expense of a major mechanical repair. Look I know you're asking $6500, which is a fair price for this year and mileage, but considering that tapping noise, I'd be prepared to offer you $5000 so I can get that that noise fixed properly myself before I give it to my mother. What do you say?"
On the subject of what to pay and what to sell a car for, I tend these days to stick to under $5000 for purchasing and don't sell for over $7000. Reason is that you're not providing any guarantee with your car so $7000 is about the most in that regard that anyone is going to fork out in cash. People that you're selling to know that the car they're buying from you they won't be able to buy less that $8000 plus at a dealer so they see your car as a bit of a bargain but they also know the dealer's car will likely be subject to a warranty period and also they can get finance. So $7000 is reasonably affordable for them at that point, but if you get too greedy they'll brush past you and go off to the dealer.
As soon as you have actually done complete due diligence, cut to the chase.
If you're purchasing at a public auction, bid on the automobile when it shows up. Stay unemotional: The quickest method to ruin your margins is to enter into a bidding war that presses the sale price past your top dollar. If various other prospective buyers desire the vehicle much more, let them have it. There will be plenty more to bid on, no doubt.
In a private sale, attempt to drive the vendor to their bottom dollar. This is where recognizing just how to spot motivated vendors can be found, even without a clear "OBO" in the listing. Ask the seller why they're parting with the vehicle. If you're fortunate, they'll disclose (possibly indirectly) that they're trying to raise money or require to sell quickly because of a long-distance relocation-- sure signs that they're willing to budge on price.
While it's harder to ignore a private offer when you're face to face with the seller, the very same "unemotional" logic applies here: It's better to abandon a buy than be stuck with a bad deal. You'll discover a far better car flip somewhere else.
Know Your Flip
An excellent car flipper never ever gets without a clear end game. The sooner you get your present flip off your hands, the sooner you can start the following flip-- or make use of the profits to pad your personal savings.
In many locations, one of the most "flippable" cars and trucks are low-mileage, reliable sedans, wagons, and also small SUVs from mass-market makes, such as Ford, Chevrolet, Toyota, and Honda. Because they're recognised vehicles, these automobiles have no shortage of possible purchasers.
If you reside in an affluent location, it maybe worth your while to look for underestimated luxury vehicles and also rarer variations of mass-market versions. Since they're harder to find, customers are often ready to pay decent amounts for them. However, you need to see to it your market has enough buyers who can afford-- or care enough to pay extra for-- such cars.
Furthermore, your area may create particular niche possibilities not available to everybody else. In a snowy, mountainous location, you'll have lots of four-wheel-drive cars to select from-- and great deals of buyers going to pay good cash for them. In summery environments, you'll likely clean up with convertibles.
Watch out for "curveball" cars and trucks with unusual features that might seem attractive. As an example, numerous buyers do not want or require aftermarket exhaust systems or huge spoilers. Even features that when added appeal, such as manual transmissions, can be albatrosses in certain sections of the automobile market.
"Make certain you recognize with your potential buyers' wants as well as needs before you buy an automobile because that will certainly be tough to sell," says Tristan Jones, proprietor of Phoenix-based Mobile Vehicle Dr. Translation: Obtaining less than you want for your flip is tough; having a flip that you can't offload is much worse.
Get to Know Your Neighborhood and Beyond
When car flipping another thing to look out for are cars in your neighborhood and not just your neighborhood but cars in outer neighborhoods. Do a regular scout around the streets and take note of cars that might be sitting stationary for long amounts of time. These cars may have been abandoned for some particular reason, and the reason could be useful to you.
Here's an example. I noticed a fairly late model Honda Accord in a quiet street about five miles away from us, sitting on the road in exactly the same position every time I went down there. When you cruise around you just get a feeling for cars that never move. After a few months of seeing this you also start seeing a little deterioration appearing. Might be grass clippings from the next door neighbor cutting his lawn and sticking to the side, or, a tire getting flatter. You'll pick up the signs if you're alert to them.
Anyway, after three months of observing this car, I knocked on the doors close by to ask who the owners were. My excuse was that my sister was looking for a metallic Charcoal Accord and there were a very rare color. Would the owner like to sell. Well the first person to answer the door referred me to Bob in the house two doors down.I knocked on Bob's house and Bob's wife answered. I told her my story and next thing I've been asked inside and we're all having a soda in the kitchen.
Well it turned out that Bob had recently lost his license due to poor vision. His wife couldn't drive and they were relying on their daughter now for everything. Yes, he would be interested in selling the car. I asked him how much and he came up with a price far too high. I'd already calculated a price in my head that allowed me to make a quick $3k profit. So, I came back with a lower figure simply saying my sister had a budget and she'll just keep looking if she can't buy what she can afford.
Bob relented at this point and the deal was done.
I went to see my sister, who by this stage wasn't surprised to know she was going to be the owner of yet another car. I grabbed some cash and we went straight over to Bob's, signed it off, parted with the cash and my sister gave him a delighted hug and drove off in his car.
Here's a tip. With a transaction like this, complete the deal as fast as you can. I once did a similar deal, came home to grab the cash and my brother in law had just made a surprise call. We had a few beers and then I thought I'll just go back tomorrow morning. Well that's what i did and the guy's son was waiting for me saying the deal's off and don't try and screw my old man.
There's no way out of a situation like this, especially if you value your front teeth.
In no way would I completely rob anyone because of their situation of their car. All I'm offering is the same as a dealer would be offering. But when some people hear this ( I bet you've heard it yourself, just as I have, in earlier days, if you've ever bought a car from a dealer with a big smiling face, then taken it back for a trade in twelve months later. Suddenly the big beaming, friend for life face has been replaced with someone very grim. Words come out like, 'Hmn the market's very slow for cars like yours right now, we could only offer you....' And believe me whatever that figure is, it's a shock. But the reality is that the dealer might have your car taking up real estate for months. He's got bills to pay and so isn't cheating you, he's just being real.
So think of yourself as a dealer. Be firm because for various reasons you might be sitting on this flip for months too.
Funny thing was with Bob's Honda was that although I had taken it for a run and it tested okay. It was a little sluggish, but car's owned by older people can be like this. They drive them very slowly, have a foot on the brake at all times ( brake pads can be very worn) and only drive them for short distances. Generalization? Yes. But true 90% of the time. In Bobs case I followed my sister to her place in it and could see from behind a problem straight away that was about to cost me $300. There was a lot of condensation coming out of the exhaust. I'd had exactly the same problem with a lovely low mileage Jaguar I'd bought off an older guy too. All those things they do, driving short distances, barely having enough time to warm the car up, not revving the car out, result in condensation (water in the exhaust system). Water collects in the muffler and it will rust out. So by the time we got the car to her place it was pretty noisy as she's blown a hole in the muffler. A $300 repair. I'd completely forgotten to check on this. It wouldn't have made a scrap of difference, I'd still have bought the car anyway.
Now, why I was looking for $3k profit in this was because I knew I'd have to involve my sister and she'd be tagged on the paperwork. For that I give her $1k always, and I keep whatever the balance is. She's happy. I'm happy.
Valuing a Car
Before you buy your first car, do a lot of market research on the car's value. Also concentrate on the market you want to be in, whether it be small cars, medium cars, or SUVs.
Look for only low-mileage cars in great condition. Steer well clear of cars that have been modified in any way, for example with extra spoilers or larger wheels than standard. They're very hard to flip. I also stay clear of convertibles. But I'm willing to consider cars with sunroofs. Though sunroofs can come with a minefield of problems, people love them in warm climates. You must check a car with a sunroof thoroughly: make sure it's fully functional, check for any rust, and most important of all, make sure it doesn't leak.
So, once you've set your sights on the type of car you're going to operate your business in, do your value research. Sites like KBB.com and Edmunds.com are great for current values. They also list what options were available as well.
Become a Specialist and an Expert
When I started out, I spent a lot of time studying at auctions to find out which cars created the most interest and got the best prices. I quickly learned that even though it was tempting to buy a Mercedes going for a song, other people were steering clear. The reason is that they perceive Mercedeses and other similar cars (Audi, BMW, Citroen, Renault, Peugeot) as very expensive to maintain and repair, and such cars are difficult to offload to a buyer. Actually, once you get more into car flipping, you'll find out how wrong this perception is. Most of these models cost no more than a Ford or a Honda to put back on the road, but I've still steered clear of them for resale, although I now drive a BMW myself and love it.
So stick to the types of cars you commonly see driving around on the road. I ended up concentrating on just five models of cars.
For car flipping become an expert on the cars you're going to flip. Take notes at auctions of different models, mileage, years and accessories and get a list together to become an instant expert as to what's good value and what isn't.
Study prices on eBay and Craigslist. There's also Kelleys Blue Book which is an app you can download onto your phone and use instantly to price vehicles.
Selling Your Flip
As you make your listing, never forget: An excellent auto sells itself. Leave the sales-y, hostile language to the professional dealers—they have sufficient credulous customers to keep them busy.
An excellent listing has the maximum allowed number of photos. If you're publishing on Craigslist, take pictures of the car from all four directions, taking care to obscure the license plate and any other identifying information. If you're posting on a board around town, offer at least one high-quality image.
Define the auto's fundamental characteristics, such as transmission. Highlight any significant features, like a sunroof or optional third-row seating. And describe its condition in general terms—good, great, excellent—together with any type of significant mechanical problems that the buyer should know about. Or, if you've had those issues repaired.
If you're posting on a board, you need to give out personal call information—at the very least your email, as well as preferably your contact number too. On Craigslist, you have the choice to post to a confidential messaging system. However, you're likely to close the sale quicker if you offer your phone number.
Learn About Car Repair
You don't have to know everything about what can go wrong mechanically. You will pick up this knowledge along the way. Plenty of books can help you with this, but Google and YouTube are even easier ways. Going online with the right search terms (for example: "how to remove a radiator from a Honda Accord") will quickly tell you if you are capable of doing the repair or not, what tools you'll need, and how much it's likely to cost. Also, on Google you can find enthusiastic car-guy forums that will give you prized information on any car issue that might need fixing, and even better how complicated and expensive it might be. You can find out before you even buy the car.
So, do your investigation based on what you know. Look for red flags. Below is a twelve-item checklist of potential mechanical issues you must investigate for any car you are thinking of buying. If your investigation reveals concerns you don't know how to resolve, you can walk away, or you can raise your concerns with the seller as a way of driving down the price.
1. Check the Oil Level and the Exhaust
Find the dipstick and you'll find an indentation at the lower end of the stick showing the recommended oil level. The oil should reach the mark, but no drama if's not. It may just need a top up.
Next check the exhaust for oil blue-colored smoke. You will want the car to be warm to get a definite result, so maybe do this halfway through your test drive or at the end of it. Get the owner or a buddy to start the engine while you walk around to the back of the car and check the exhaust for oily blue smoke.
Blue smoke indicates a worn engine. It generally indicates there's not a lot you can do with the car. If you can get it very cheaply and you have a reason to think you can sell it for a lot, you may be able to replace the engine with a good secondhand or reconditioned one, but also remember that an engine replacement will make a new owner suspicious. So best to avoid this if you can. You could get the original engine reconditioned, but this runs the risk of being very expensive and revealing even more unexpected problems.
2. Check the Oil Color
The lighter, the better. Light-colored oil means a recent oil change, and suggests the owner services the car regularly. Ask him or her for service records. If he can't supply a good set of invoices you should be wary. It's just possible the car has a worn engine, and the owner has just changed the oil which will hide to an extent the "blue smoke" (see above) that comes from a bad engine. However fresh oil won't completely hide the smoke; just give the engine more hard revs during the exhaust test to see if blue smoke comes out.
3. Check the Radiator
Remove the cap and rev the engine. If the water bubbles up with air, it's got a blown head gasket. Also check the water color. Ideally it should contain a lot of green- or blue-colored coolant. Otherwise it should at least look like clear water. If it's a rusty color, that will mean radiator trouble at the least. You don't have to walk away at this point as radiators are not necessarily an expensive fix. But only stay involved if you can negotiate a really good price on the car from the owner (by saying the engine has a major problem) and you think it would be practical to change the radiator. In some models it's a nightmare to get the radiator in and out. Type the model into Google with "radiator problem" and look at a few forums to see how members have responded concerning the difficulty of changing a radiator out.
4. Check the Water Temperature
Let the car idle for ten minutes and check the water temperature gauge on the dashboard. If it reaches the 3/4 mark, you need to check a few things (see below).
5. Check the Water Hoses and Engine Belts
If they need replacing, ask the owner to deduct that cost from the sale price.
6. Listen to the Engine for Stuttering or Ticking
Ideally there shouldn't be any loud ticking or stuttering. If there is, you will want to decide what to do about it.
Turn the engine on and have a listen to the motor while it's idling. There shouldn't be any loud ticking noises. Get someone to rev it up halfway and listen again. Make sure it runs on all cylinders while being revved.
If it stutters on the way up while being revved, it could mean that one of the spark plugs or spark plug leads (or these days, ignition coils) is failing. This isn't necessarily a bad sign. It may be that the owner is selling the car cheaply because he thinks the problem is worse than it is. If you are keen on the car, get a mechanic at this point to check the problem out. Coils are less than $100 each and it's likely you will only need one.
Ticking, depending on where it is coming from, indicate a tappet noise, which is something that you may be able to address. If the owner seems not very mechanically inclined, you can argue that a ticking engine is dodgy, when actually it may not be.
Get a large screwdriver about 18" long (carry one in your test drive kit) and use it like a stethoscope to try to locate the source of the ticking. When the engine is running, place the tip of the screwdriver on top of the engine—be careful to keep it well away from any turning blades or belts!—and put the other end to your ear. The ticking will sound a lot more pronounced. And this test looks very impressive to a bewildered owner.
If the ticking is at the top of the engine then it's likely to be a tappet noise. Tappets are usually easily adjustable by a half-decent mechanic. But if the engine has a lot of miles on it, the tappets may not be adjustable, and the noise could mean the camshafts need to be reconditioned or replaced--and then it's expensive.
If the ticking is lower down in the engine, there is likely a piston issue. Walk away.
7. Look for Oil Leaks
Back up the car and look at the ground where it was just parked. Oil drips may mean an expensive repair—depending where they're coming from. If the top and middle of the engine are dry, the oil is most likely coming from a sump leak, which is very easy to repair with a new gasket. Oil leaking from high up in the engine may mean a bigger problem. In any case, a leak gives you an excuse to drive the price lower.
8. Check the Transmission
Transmission issues can be tremendously expensive and complicated. Look for any delay in going into Drive, and for a smooth transition from Reverse to Drive.
Here's a story that might make you think more about transmissions. I recently bought a Volvo T5 sight unseen from another city, through Craigslist, and far enough away that I had to get a transporter for delivery. Photos of the car were excellent, the service history was good, the owner seemed nice, and the price was ridiculously cheap because as he said, it was his wife's car and she had just had a stroke and couldn't drive it any longer.
The car arrived and I found a few little issues—he hadn't photographed the missing clear coat on the roof, which looked pretty ugly, and it was messier inside than what the photos had shown. But that was all fine with me, as I often buy cars in that condition and can easily get them ready for sale.
But then when I took this car for a drive, it started well and drove well, but after half an hour I got into a bit of traffic and suddenly the auto transmission had a life of its own. It crashed through the gears and just picked whatever gear it felt like. Once out of traffic it was fine, but clearly the car just wasn't saleable in that condition.
I got on the phone and yelled blue murder at this guy, but I knew by his attitude and by his distance from my place that my complaints would get nowhere and I would be stuck with this car.
There are some makes, like Volvos of this era, that share transmissions with other manufacturers. The transmissions are sealed for life and cannot be easily repaired. Looking online after this experience, I learned all about this Volvo transmission problem, and was comforted to know only a fraction of Volvos had it. I just struck an unlucky one.
I just had to suck this problem up and sell the car for what I paid for it. The way to do this is by auction. Cruel, I know, to pass the problem on to someone else but in this situation the auction is a great middleman. You don't come face to face with the buyer and there's no come back. The auction mechanics will test a car like this out but they only give them 5-minute test drives so are extremely unlikely to pick up on a problem like this.
So several lessons here:
- When flipping cars, don't buy a car sight unseen; if you can't check it out yourself, spend the money to have it checked. The checkout should last half an hour and cover everything above.
- Be wary when buying cars at auctions yourself. 90% of the time they'll be fine, but if you don't check out the car yourself or have a mechanic go over it, you could be stuck with something you don't want.
9. Test the Steering
On an open road, check for play in the steering wheel.
10. Test the Brakes
Be careful when you test them. Remember you don't know the car or its characteristics, so check the brakes gently at first, especially if you're on a wet road. Apply more and more pressure as you gain confidence with them. If after a heavy stop it feels as though it's going a little sideways, this could indicate worn pads—easy to replace—or perhaps a worn shock absorber—not too terribly expensive to replace.
Once again, calling attention to a car's shaky or precarious stop is a great way of driving the price down.
If you are flipping cars, it's a good idea to build up a good relationship with your local car dismantler. The more you buy from him, the better prices you will get, and you will also get better parts. Shock absorbers from low-mileage junked vehicles can be very cheap. Brake pads, on the other hand, are cheap enough new, and that's a part I wouldn't get from a car broker.
11. Look for Rust
Look under the car, and check the floor of the trunk, where water often collects. But also have a good look at the side sills, the long plates under the doors. Check for any signs that they might have been filled with fiberglass. One sign of a bad rust repair job is a scratchy finish (caused by a heavy grade of sandpaper) which has then been painted over.
If there's any sign of fiberglass filler on the sills, walk away. You can almost guarantee that this will be the tip of the iceberg for rust repairs, and if rust is being repaired with filler, it's going to be a bad job. Any good repairer will have replaced rusty panels completely instead of filling them, or fixed them by cutting out rusty patches and welding in a metal patch.
Rust can be your car's biggest problem. If it is in a visible area such as the sills, then it's going likely in hidden places like suspension pick up mounts, where it is downright dangerous.
Look at the car's history to see how likely it is to have picked up rust. Dry areas like California are known for rust-free cars. But cars from areas like New York can get rusty, because they put salt on the road in winter to eat away at the snow, and the salt eats away at the cars too.
12. Find out the History of the Timing Belt
I've left this for last because in many ways it's the most important of all. A timing belt drives the camshaft(s). This is almost always true of Japanese cars of a certain age, though most large American-built cars have timing chains.
Timing chains are better than timing belts, because they almost never break and can be expected to last the life of the motor. However timing belts do break. Mechanics strongly recommend replacing them at about 60,000 miles. By this time they are quite worn and fragile. Not replacing them can result in them breaking and causing catastrophic engine damage. Replacing timing belts is a costly job because many other parts need to be moved around or replaced when replacing the belt.
Whether the timing belt has been replaced should be your number one question when buying a used vehicle. The answer should be supported by written evidence of when and by whom the replacement was done. If you're not satisfied with the answer, walk away. This is an engine item that even the mechanically uninitiated are now understanding. When you go to sell the car, you will most likely get the same question about the timing belt yourself, so you will want written evidence about the timing belt history.
1. Do I Need a Dealer's License if I'm going to be flipping cars?
In many U.S. states, the Department of Motor Vehicles allows individuals to buy and sell three cars a year. Find out if this is the case in your particular state.
There are two ways to get around such a restriction.
After you sell the first three cars in your name, ask a family member or good friend if you can buy and sell cars in their name. They should get part of the profit.
After you’ve bought and sold six or seven cars, then you’ll have a nice little business on your hands. I can tell you from my own experience that when you involve others, they’ll want a piece of the pie. If you started off offering your sister 20% of the profit, after she sees a few successful, easy sales go through, she may want 50%.
So, once you've sold six or seven cars and built up your confidence, become a licensed dealer.
This doesn’t cost a massive amount of money and is fairly straightforward. It gives you independence to operate freely and legally to buy and sell as many cars as you like throughout the year.
You can still operate from your home or wherever you like, and you don’t have any overhead like a general car dealer does. What you do is buy into a dealer organization on a Co-Op basis. It will cost you about $500 per month, but for that you get some real benefits. You get an LLC (Limited Liability Company) plus insurance (to help if your car is stolen or a prospective buyer crashes it). You also get a dealer plate; if you buy an unlicensed car, this plate gives you the right to legally travel on the road with it until registered. Plus you get an auction pass to attend Dealer-Only Auctions.
2. How Much Should I Spend on a Car I Plan to flip?
The first time out, set yourself a budget of $1,000 to $1,500. Try to make a smaller profit of $500 to $1,000. This will give you lots of experience and will not be a huge risk.
If the deal starts looking unprofitable, due to a mechanical issue that your inspection didn't pick up, you should be able to at least get your money back, as long as you've bought the car cheaply enough.
3. Should I Insure a Car I Plan to Sell?
Yes, I always take out insurance. It might only be for a couple of weeks, so it won't be expensive. It's best to cover your asset. You just don't know what's around the corner. What if a test driver has an accident? Shop around for cheap insurance quotes.
4. How Do You Know if a Vehicle Has Been Stolen?
Go to the National Insurance Crime Bureau. You can check up to five vehicles a day here. Have the VIN number ready. This number is like the car's birth certificate. It was given to the car when it came off the assembly line and remains with the car until the day it dies.
Don't accept the owner's word for what the VIN is; check it yourself, physically, on the car.
You can find the VIN in the following places:
- lower left corner of the dashboard, in front of the steering wheel
- inside the driver-side doorjamb
- in the rear wheel well directly above the tire
- in the front of the car frame, near the container that holds windshield washer fluid
- the front of the engine block
- underneath the spare tire
5. How Do You Know if a Vehicle Has Been in a Bad Accident?
It's sometimes difficult to tell, but once you start knowing your cars you may be able to spot a few things:
- When you drive it on a straight road, the steering wheel should not be at an angle. If it is, the problem may be something that can be fixed with a simple wheel alignment (less than $100), or it may be that you don't want the car because it was in a crash and badly repaired, and no longer runs straight on the road. If you suspect this, you could have someone drive behind you and watch your wheels. If the damage was very bad they may see the front wheels poking out from in front of the back wheels while driving in a straight line.
- Another sign of a crash is poorly done repainting. Have a look at the top of the trunk and the hood. Check for paint with signs of "orange peeling." This looks exactly as described; it's paintwork that is dimpled like the skin of an orange and not a factory flat surface. It's possible the crash may just have been a low-speed supermarket parking lot accident and nothing to worry about. In any case, a good paint repairer will have that orange peel flattened out in no time.
You can use all your concerns about the car's history to drive the price down.
How to Clean Your New Car Flipping Investment and Save Your First $300
So there it is in your driveway and chances are it's looking pretty shabby. Now here's where you can save a lot of money by cleaning and detailing this newly bought car yourself. You can take it off to a car detailer who'll charge you at least $300 to do the following, or you can do it yourself and save that money.
Let's presume it needs a thorough clean: top to bottom, inside and out.
Cleaning Supplies You Need
Go down to your closest car store that stocks car cleaning gear and buy the following:
- Two 3-gallon buckets
- A garden hose and end sprayer if you don't already have one
- A large sponge
- A bottle of car shampoo
- A piece of genuine chamois for a drying cloth, or a synthetic one if they don't have the real thing
- A couple of hard toothbrushes
- A dish wash brush
- A can of engine degreaser
- A can of mag wheel cleaner
- A can of window spray
- Black tire spray
- Can of matte black spray paint and masking tape
- A mid-priced vacuum cleaner (if you don't have one already) complete with small nozzles to get into tight places.
- A can of car polish
- A can of cutting polish
- A bag of rags
- A can of vinyl cleaner
Once you have everything on the list you'll have all you need to totally clean a car. But generally you'll only need some of those items.
Cleaning Your Car and Engine Inside and Out
Pick a cool or cloudy day to do this, or do it in a carport where the body of the car won't get too hot. Cleaning a hot car is hard work.
The engine. Open the bonnet when the engine is cold and give the entire motor a dousing of engine degreaser. Be really careful about this. It's an excellent way of making a motor look like new again, but some states are very firm about not having the degreaser leach into the storm water, so over to you if you want to do it or get caught. If you have thick oily grime in some places let the degreaser sit on those areas for a few minutes then get the garden hose sprayer and wash it off. If spots are still lingering then get a hard toothbrush, spray those areas again and start working away at them while the degreaser is still wet. Then completely wash all the degreaser off the engine.
The wheels and tires. Next get a bucket. Dedicate one bucket just to cleaning wheels only, and dedicate another bucket to just shampooing the body. You get a lot of grease and muck off the wheels which can get transposed to the body if you just use the one.
Fill the bucket halfway with clean water and a little car shampoo. Then get the mag wheel cleaner and thoroughly give the wheels and tires a good dousing. Let it rest to do its work for five minutes and come back with the bucket of soupy water and your dedicated hard brush for cleaning the wheels and tires. Give them all a huge scrub making sure you get to all the fiddly bits around the wheels. Keep adding fresh soapy water all the time to do this.
Next come back with the garden hose and with a good pressure spray all that soapy water off he wheels and tires. If they were dirty you'll be amazed the difference in color and look once they're washed.
The body. Get your "body" bucket, put a couple of capfuls of car shampoo in it, and fill the bucket about halfway with clear water. Pick up your sponge, dip it deep into the soapy water, and scrub the body down with the sponge. Start on the roof and work your way down.
Then thoroughly wash the body clean, with the garden hose sprayer, from the roof down. They'll likely be a lot of soap that's drifted into areas like roof gutters and hood and trunk seams, so thoroughly wash all that out until its gone.
A tip: Don't use a high-pressure cleaner on your car. Feel free to use it on a pickup or large SUV covered in grime and mud, but not your car. The pressure wash will look like it's taking a lot of mud off your car, but wait until it dries and there will still be a film of dirt there. Furthermore, pressure can force water through vulnerable areas like windows not quite shut, or sunroofs.
Now, pick up your chamois and thoroughly wet it and rinse it out with your hands. Drying the car off with the chamois is the most laborious job of all. There will be so much water on the car that you'll be rinsing that chamois a lot. To save time and energy, use the chamois first as a 'sweeper' to just sweep as much water off the body as you can before getting to the job of drying every drop off the car.
Polishing the paintwork. Take another look at that paintwork. Now that it has dried, does it look a little faded? Well that's where your car polish comes in. I prefer Turtle Wax but the other top brands (Mother's, McGuires) are all as good as each other.
Get a dry rag with a good dab of polish and run in up and down strokes on a piece of the faded paint. Then get another dry rag and polish that bit off. Does it look better or the same as the paint next to it? If it's better, then start doing the whole car. Take care around where doors shut, where the hood goes down, where the trunk closes, and around rubber parts. When the polish dries, it can get into all those areas and leave a white polish mark. Just go over it with a dry cloth and it will all come off.
Also, don't polish the car all in one go. Once the polish is dry it's difficult to get off, so, do one side of the roof, then polish off, then the other side, then do one complete door, then another, then half the hood, then the other side. This way it's much easier to take off and you'll get a better overall finish.
But! If you put the polish on an area and then take the polish off, and the result is no different from the faded paint next to it, then you're going to have to use the cutting polish first before your final polish.
This, believe me, is a real drag without an electric buffer but can be done. You're best applying the cutting polish with a wet cloth and putting it on in even smaller areas. So divide the hood up into four areas and cut the polish on one quarter, then use a dry cloth to polish off, then do the next quarter, and so on. You'll find that the areas that have been in the sun the most-—the roof, trunk and hood—will be the worst. The sides are unlikely to even need cutting polish.
The interior. Get inside and give the seats and carpets a thorough vacuum. Remember to wind the seats back fully in both directions to get underneath them properly.
While you're inside, get the window spray and clean the windows. Don't let the spray dry on the window or it will make it hazy. So spray then immediately and wipe them off until they are dry and clean. Clean all the windows on the inside, remembering all the side ones too.
Then get the vinyl spray, spray it over areas like the dashboard, and wipe it off.
Hidden spots. One last job: Open all the doors, the trunk, and the hood. Polish all the exposed areas along the sides that will be dirty, including the door jambs.
Phew! You're done, and man I bet it looks good!
Finally, flipping car parts
About twelve months ago I bough a bad car flip. All my fault. I was in a hurry and didn't carry out my usual complete point by point check. The car was a ten year old Honda Accord and on the surface looked good. The guy I bought it from wasn't very forthcoming but he readily agreed to a very low offer, which did raise some alarm bells, but as I said I was in a hurry, so paid him cash, exchanged paper work and away I went. I have a corner of a warehouse where I store my flips, and I didn't get around to this one until a month later.
On starting it up, the exhaust was rattly, so I jacked it up, put my overalls on, grabbed my tool kit and took a look underneath. I was pretty horrified to see quite a lot of rust. So then I took a look in the boot and sure enough underneath the covering were some holes that had come right through. Then I checked under the passenger side and drivers side carpet and same thing. But now the giveaway was having my nose down this far was that I could smell the moisture. So take note of this as another big one to put on the check list.
So as far as I was concerned this Honda was a write off. I'll never sell an unsafe car to anyone. So I had a choice of taking it to a junkyard, but then decided to actually part the car out myself. I advertised it as parts on Craigslist. I was amazed at how quickly parts were sold. Also I separated as much as I could to get as much value as I could. So, when someone wanted to buy a door, they got exactly that, just the door. They didn't get the window or mechanism, not even the door handle. The handles alone I got $35 each for. The transmission I parted from the engine. So all in all it took six weeks to get rid of the entire car in a hundred pieces but I made more than if I had of done a car flip.
So these are my tips for buying cheap cars and hopefully developing a nice home business from it.
Use the comment section if you've got any questions. Best of luck.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Questions & Answers
Do you title a purchased car in your name first? Or can you just give the buyer the original signed title you got from the auction?
No, you should title it in your name if you want to create a long-term business.Helpful 38
I want to get a permit or license that will allow me to sell cars for profit, via advertising on Craigslist. Is there a license like that?
You'd have to a get a dealers license, or, otherwise register them through family and friends. All states have different limits. For example in Texas you can only sell 5 a year. But have a look online for dealer licenses they're not that hard to get.Helpful 27
I’ve seen that sometimes in auctions the cars won’t have original wheels even if it’s a new model and low miles. Why is that? Do they sell them? Are there any other parts I should check to see if it is original that they remove for resale?
That's likely just a personal choice of the past owner (wheels) nothing to worry about there. Yes, they're likely to have sold them or done a trade with the wheels dealer. No, if it's a fairly new car there shouldn't be any other swap outs. If it's a performance car it may have been "chipped" which means the computer has been tampered with to give it greater horsepower. Generally, the past owner is very proud of that and will advertise it as such. Stay clear of those cars. They're likely to have been thrashed.Helpful 24
Does it matter how many miles are on the car as long as it checks out fine with the things you listed in this article?
The lower the mileage the better. When on-selling the mileage is one of the first questions you'll be asked.Helpful 18
Is it a good idea to purchase a car then replace old parts with brand new material in order to sell it?
No, I'd be looking for good second-hand parts at less than half the cost of new ones.Helpful 14