Considering Car Flipping? Here’s What You Need to Know

Houses aren’t the only thing you can flip to generate income. For some, flipping cars is a great way to get extra cash or even earn a living.

So if you’re thinking about venturing into the car flipping business, here are some things you should keep in mind.

Car Flipping Is Not Reselling

Car flipping is the practice of acquiring a used car for a low price and selling it at a higher cost.

In some cases, the seller will need to make a few changes or repairs to increase the vehicle’s value. Flipping cars is 100% legal, although it’s not done in dealerships. Instead, the transactions are done privately.

A common misconception about car flipping is that it’s no different from reselling. But here’s where they differ.

When you’re selling a used car, you’re usually doing it to make room for a new one. For this to happen, the seller will usually offer the used car at a lower price point. As a result, you’ll make less than what you paid for.

But if you’re flipping a used car, the goal is to make a profit out of the transaction. If you’re planning to do this for a while, you’ll even need to make a profit margin to keep the cycle going.

Familiarity With the Law Is Important

There’s nothing wrong with flipping a few cars to generate profit. However, the practice does have a set of rules that anyone looking to venture into it must follow.

Laws on car flipping vary from one state to another. While some states permit one person to flip several cars in a year without requiring them to register as a dealer, others simply won’t allow it.

Connecticut and Kentucky are some states that require a dealer’s license before you can flip one car. Vermont and Indiana, on the other hand, generally allow up to 11 cars a year without a license.

Keep in mind that each state has a different take on how many cars one person can flip in a year. Be sure to familiarize yourself with state laws before flipping your first car.

Having a Small Budget Will Eventually Pay Off

If you’re relatively new to the idea of car flipping as a profitable side hustle, there’s no harm in starting with a small budget.

Finding an undervalued vehicle and fixing it up to increase its value is the very essence of car flipping. If you’re just starting in the business, it’s good to take on a project that comes with little to no risk.

Also, starting small is a great way to assess the direction of your side hustle. This will give you an idea of what car flipping is really like and whether or not this venture is right for you.

Pros Come with Cons

Every business has its own set of pros and cons, and car flipping isn’t any different.

Flipping cars shows great potential in terms of profit generation. You don’t need to invest a ton of money to kickstart your first project, but the margins are quite high once you get the hang of the business.

Market trends also suggest a high demand for used cars. This is especially true during economic downturns.

Another upside to car flipping is that it’s quite flexible in terms of work schedule, making it a great side hustle or even a primary business.

A broader customer network is perhaps one of the best advantages of flipping cars. Not only are you expanding your customer base, but you’re also building connections with other dealers, repair shops, and parts stores, among others.

On the downside, car flipping can be time-consuming. Some repairs might take longer than others, and some models take time before they’re sold.

Licensing requirements can also be a hassle when flipping cars, as well as observing the regulations that come with the business.

Of course, flipping cars can come with financial risks that can do more harm than good. For example, undisclosed issues with the vehicle you recently purchased can cause you to go over budget due to repairs.

Expect Paperwork to Come Your Way

A good flipper is very thorough with vehicle paperwork. One of the things you need to secure is a copy of the vehicle history report, which contains ownership data and information on whether the vehicle has been in an accident.

Buyers will usually ask for the same history report to know whether or not they’re getting the vehicle in good condition.

In addition, selling a vehicle also entails getting a bill of sale and a transfer title, which needs to be taken to the DMV.

Car Flipping Requires Thorough Research

One of the keys to a successful car flipping business is good research. It’s a good idea to study listings and used car ads.

Aside from this, it also pays to study your market. Swing by online evaluation sites to get a good grasp of what buyers are looking for, and work your way from there.

Another thing to take note of before venturing into the car flipping business is profitability. If the cost between purchasing the car and selling it is too small, then you might not get too much out of the vehicle.

Car flipping isn’t exactly everybody’s cup of tea, and that’s perfectly normal. Some people find it worthwhile to take on a restoration project, while others don’t.

Car flipping requires dedication. And if you think you have what it takes, then you already have one foot through the door. And with the help of this guide, you’re well on your way to making your first sale!

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