Living off just one income has become increasingly difficult in recent years, but people need money to live, which is why so many people have turned to “side-hustles” as a way of earning some extra cash. These small tasks (usually stemming from a hobby of some type) allow individuals to supplement their income from the comfort of their own homes.
Although there are millions of ways that people can earn a little extra moola every month, some have turned to flipping cars as a means of extra cash, but is flipping cars profitable?
Flipping cars is an effective way to earn a little extra income. However, due to different state laws, a dealer’s license may be needed in order to sell enough vehicles to earn a living.
Continue reading to find out more about this side gig, its income potential, and whether it would be worth your time.
What Does “Flipping Cars” Mean?
There is a good chance that you have seen at least one of the many house-flipping shows on cable TV. You know, the ones where people (usually a couple) buy an older house and renovate it before selling it for a profit. Car flipping works in much of the same way—individuals buy a car, add value to it somehow, and then re-sell it for more than they paid for it.
The biggest difference between simply selling a car and purposefully flipping cars is the pursuit of profit. People often sell cars when they want to make room for a new vehicle, and they will typically sell the vehicle as-is. However, when flipping a car, individuals purposefully buy cars with the intent of re-selling them and will often have to make repairs to the vehicles before putting them on the market. The average person will sell a couple of cars during their lifetime, but the average flipper will sell a couple of cars a week/month.
Do I Need a Dealership License to Flip Cars?
Flipping cars is legal, but there may be a limit to how many cars you can sell in a certain period before being considered a dealer and having to apply for a dealership license. Although most cars are not registered before being sold, it can be hard for the local authorities to track how many vehicles you are selling, but the punishment for getting caught often involves hefty fines and even jail time.
Depending on where you live, getting a dealer’s license could be expensive, and making the choice to become a licensed dealer often means making the choice to invest in and run a small business. This is much different from selling a few cars on your front lawn.
Should I Get a Dealer’s License?
Ultimately, if you already have a full-time job and just want to make a little income on the side, it might not be worth investing in a dealer’s license. However, if you want to make flipping cars more than a side-gig, and you can sell over the allotted number of vehicles, it might be worth investing in a dealer’s license.
It is worth noting that, in some areas, it is possible for an unlicensed flipper to sell cars through a licensed dealership. This is sometimes beneficial because car auctions often do not allow unlicensed individuals to buy cars, so you gain access to much cheaper vehicles. Additionally, you can sell over the allotted number of vehicles without having to invest in a license yourself. The downside, however, is that the dealership will often take a sizable percentage of your profits.
How Many Cars Can I Sell Each Year?
The answer to how many cars you can legally sell without a dealer’s license is quite literally different everywhere. So, it is a good idea to call your local authorities to learn more about the up-to-date laws in your area. We have compiled a list of the information that we could find for each state below.
- Alabama: 4 Cars
- Alaska: 4 Cars
- Arizona: 6 Cars
- Arkansas: 4 Cars
- California: 5 Cars
- Colorado: 2 Cars
- Connecticut: It is illegal to buy and sell cars with the intention of making a profit without a license and you can only sell up to 4 personal vehicles.
- Delaware: 4 Cars
- Florida: 2 Cars
- Georgia: No confirmed number but it is rumored that 5 is the number of cars you may sell per year.
- Hawaii: 2 Cars
- Idaho: 4 Cars
- Illinois: 4 Cars
- Indiana: 11 Cars
- Iowa: 4 Cars
- Kansas: 4 Cars
- Kentucky: 5 Cars
- Louisiana: 4 Cars
- Maine: 4 Cars
- Maryland: 2 Cars
- Massachusetts: 3 Cars
- Michigan: 4 Cars
- Minnestoa: 4 Cars
- Mississippi: 4 Cars
- Missouri: 7 Cars
- Montana: None Confirmed
- Nebraska: 7 Cars
- Nevada: 3 Cars
- New Hampshire: 4 Cars
- New Jersey: No limit so long as the cars are acquired legally.
- New Mexico: 4 Cars
- New York: 4 Cars
- North Carolina: 4 Cars
- North Dakota: You cannot buy and sell vehicles with the intent of making a profit without a license.
- Ohio: 5 Cars
- Oklahoma: You cannot buy and sell vehicles with the intent of making a profit without a license and may only sell up to 4 cars registered to you in a year.
- Oregon: 5 Cars
- Pennsylvania: 4 Cars
- Rhode Island: 4 Cars
- South Carolina: 5 Cars
- South Dakota: 4 Cars
- Tennessee: 5 Cars
- Texas: 4 Cars
- Utah: 2 Cars
- Vermont: 11 Cars
- Virginia: 4 Cars
- Washington: 4 Cars
- West Virginia: 5 Cars
- Wisconsin: 5 Cars
- Wyoming: 2 Cars
Can You Make a Profit Flipping Cars?
It is possible to make a profit flipping cars, but how much money you make flipping cars without a dealer’s license will depend on how many vehicles you are allowed to sell each year. For example, flipping cars in Vermont, where you could sell up to 11 cars a year, might be more profitable than flipping cars in a state that only allows individuals to sell three cars a year. However, it also depends on how much you earn from each car.
For example, it may be possible to make more off from 3 vehicles that you are able to purchase really cheap than 11 vehicles that you got for near asking value.
Remember, even if you sell the vehicle online or out-of-state, the sale still counts towards your local quota. Some people try to find ways around this quota, such as selling under other names, but if you are caught engaging in illegal activity, you could face hefty fines and even jail time.
With a Dealer’s License
The potential to make money increases significantly if you partner with a dealership or obtain a dealer’s license because you are no longer bound by a legal limit. With a license, it is not only possible to make money by flipping cars, but thousands of people make a full-time income doing it.
How To Make the Most Profit from Flipping Cars
- Find and purchase cheap or undervalued vehicles.
- Add value to the vehicle.
- List and sell the vehicle for more than you invested in it.
This might be the most challenging part of the entire process. Ideally, you will want to find a car in good condition (or can be brought to good condition with minor repairs), but you also want it to be cheap. Since most sellers understand the value of their vehicle, this can be hard to find.
There are many well-known places to look for used vehicles, such as social media, online marketplaces, classifieds, newspapers, and Craigslist. This content is owned by moc.sotuaytsur. However, some of the best deals can be found simply through word of mouth, and some flippers will even knock on people’s doors to inquire about parked vehicles. Additionally, you can sometimes find vehicles through storage auctions, repo lots, and junkyards.
Do your research! Understanding the actual value of a car will help you find a good deal. Avoid vehicles that need a lot of repair work, especially if you do not know how to do the repairs yourself. In-depth repairs can often end up costing a lot more than initially thought, and having it done at a garage could chew up any potential profit. Obtain the vehicle history report whenever possible to gain a better understanding of the vehicle and what could be wrong with it.
Adding value to a vehicle is where the profit is. Used car pricing may be described as efficient, meaning values and prices of vehicles are well known by all the participants. It is, as said earlier, harder to purchase a vehicle with a profit margin when all participants are price-wise.
But what if only one of the participants was price-wise? How does that change the profit margin? The best way to profit in the flipping game is to buy cars where the value isn’t quite so clear, or at least to one of the participants.
Buying a vehicle, for example, as a nonrunner or has an engine light on, some rust issues etc., etc., you might think such a vehicle is a complete lemon and does not represent a good deal. But such a vehicle is far more difficult to value, and that’s where the opportunity lies in the flipping game.
Find The Right Seller
I’ve been in the auto industry all my life. My father ran his own auto shop all his working life. He taught me, “The day you buy is the day you sell.” In the beginning, I’ll be honest, I had absolutely no idea what that meant, and being a teenager when I first heard it, I didn’t care.
But years later, the penny finally dropped, and so for those of you who are in the dark also, here it is. If you buy an excellent car at a fair price, you will make selling that car later really easy. Make sense?
Ok, so now let’s try and find the right seller. Imagine with me for a moment you are checking out a prospective purchase, and you find it has some problems, maybe an engine light on, but the vehicle itself is solid, or as my father would describe it, “it’s an honest car.”
Now imagine also you knew what the problem was and even better how to fix it at first cost. This presents an opportunity for you to use the vehicle’s faults to drive the asking price way down.
A buyer in that position is in the driving seat during negotiation, and since the seller hasn’t fixed the problems prior to the sale, says to me they likely don’t know how to fix it and just want to be rid of the vehicle asap.
On the other hand, maybe the seller is well aware of the problems with their vehicle but doesn’t have the resources, time, knowledge, skills, or contacts to fix them. Either way, the right car problems present a buying opportunity to those that have the right skill set.
The value you bring to the deal is proportional to the amount of profit you make. Knowing how to negotiate skillfully, how to inspect a car, how to fix a car at first cost, knowing where to get inexpensive parts, having a wide range of contacts, etc., is where the actual value is, and the profit lives there too.
And so we come full circle “The day you buy is the day you sell.”
Find The Right Buyer
Do not jump on the first offer you get. Waiting for the right buyer, someone who is willing to pay what you are asking is important. Yes, you should always leave room for negotiations, but if you have done your homework, you know what the car is worth, and someone else will too.
Make sure to list the vehicle in local papers and take advantage of local bulletin boards. Social media can also be an excellent tool for finding buyers. Be honest with buyers about what is wrong with the car and what work you have put into it, and do not be afraid to turn down an offer if it is below your firm selling price.
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