When it comes to flipping certain items, cars rarely enter the conversation, as many consider their rapid depreciation an argument against going this route.
For used cars of a specific age, though, flipping can be done profitably. After all, this is how auto dealership magnate Robert Bassam got his start in the business.
Want to learn more? Read on below…
1) Know the law in your jurisdiction
Before you go crazy buying low-cost cars, take a second to see if there are any laws in your area that restrict the amount of vehicles that you can legally buy/sell in a year.
For example, California prohibits you from selling more than five cars in a year unless you have a retail dealer’s license.
There are ways to get around provisions like this, like listing consenting friends and family members as the seller, but be sure you know the law inside and out before attempting something like this.
2) Build up a bankroll
Once you know what you can and cannot do, start building up a reservoir of capital that you will use to make your purchases.
This account should be separate from the money that you use to pay your rent/mortgage, groceries, gas, etc, as there is a considerable amount of risk in flipping cars.
If you spend all your money, only to end up getting stuck with lemons that you can only sell for scrap, you will end up adding a great deal of unwanted stress to your life.
3) Do your research
While you are saving up enough money to begin this exciting business venture, start doing research that will make you an expert on auto valuations.
After all, the deciding factor of whether you will be a success will be whether you can spot vehicles that are undervalued by their owners.
For starters, we recommend Kelley Blue Book, as this resource is one of the most respected authorities of vehicle valuation.
Additionally, get on Craigslist, Kijiji in Canada, or the most frequented online classified board in your area in order to get a sense of what people are asking for their rides.
Once you have done this, you can begin to formulate your money-making strategy.
4) Start with common cars
Many newbies are obsessed with the idea that they must go after rare or expensive cars, as it is this that will make them the big money.
This is true for experienced sellers, but if you are just starting out, chances are high that you will end up getting taken to the cleaners by seasoned buyers.
Instead, focus on getting commonly-owned cars at a low cost (relative to their present condition). If you do, you’ll be able to offload them to buyers that will be less knowledgeable about their value.
This will make it easier to sell your stock, and at a higher profit margin.
5) Inspect potential buys thoroughly
If a car is priced low, it could be that the seller has no clue what their ride is really worth – or it could have serious defects.
Put a prospective vehicle through its paces, and if there are signs that you will need to sink serious cash in order to make it roadworthy, abort mission.
However, if you will only need to put a few hundred dollars in order to make it run respectably, continue on with the sales process.