Five Things About Flipping Cars

Garage Love: Five Things About Flipping Cars

by Per Schroeder

Before there were car dealers, there were horse traders. Find a horse, brush it down, put new shoes on its feet and send it on the way to a new owner. Repeat as often as necessary to make ends meet. Of course, there are a lot of shades of grey between horse thief and glue salesman.

Here are five tips that can help you make some extra income buying and selling cars.

Get Straight With The Tax Man

From the starting line, you have to decide how you’re going to handle whatever profit you make on flipping cars. Your federal and state governments will consider any net profit you make after expenses a taxable income. That said, there are a lot of potential deductible expenses to declare on your taxes.


Their website might look friendly and warm, but don't kid yourself—if you start making money on cars, you'll need to declare that income.  

Your state government will also be concerned with whether or not you qualify for dealer status. If you buy and sell more than a certain amount of cars during the year, you might be required to have a dealer license and insurance. A bonus of this is that you could then qualify for dealer or transporter tags to help you move cars around without registering them. Get it right or run the risk of the consequences. 

Yes, we know you can probably get away with it at smaller profit levels, but money is very easy to track in your bank account.   If you want to keep it on the sly—cash is king.  


Have you ever noticed that small car lots specialize in a certain make or type of car? They do this because it is helpful to focus energy on finding and fixing cars that you are familiar with. Do you know the ins and outs of Hondas Civics? Start by looking for those first. Other appliance cars like Accords, Camrys or minivans are especially good to start with—they are well liked and often searched for. The only downside of popular cars like that is they are harder to find cheaply.


You can even specialize in just finding donor cars for racers.  This NB Miata is a decent starting point for a Spec Miata project—that hardtop alone is worth $1k.  Get the car for a few bucks less and you're in the money.  

It is especially helpful to go one step further and hone in on one specific generation of car that’s got good resale. You can spot common problem areas or issues and know how to fix them before you get in over your head. As tempting as it may be, specializing in sports cars can be a gamble. Your business will be highly seasonal and easily dampened by market downturns. On the upside, come Spring, everyone wants a convertible! 


911s are increasing in value rapidly—even Sportomatic versions are selling for real money these days. A sale can be as easy as putting a piece of paper under your wiper at a Cars&Coffee event. 

It’s In The Buy

The profit of a car flip is often in the buy. That is, the skill and luck that is involved in the used car business is in finding a car that you can make a profit on, rather than the work or money you put into it once it’s in your driveway. You’ll need to obsessively hunt for potential projects online and around town, but don’t fall in love with any one particular car. If you can’t get that gem for a good price that gives you some meat in the sale, walk away. There’s a reason that car dealerships will skin you alive using the Black Book (which uses the very low wholesale auction values for trade value.) The trade-in buy is where the much of the money is made at a dealership.

You can use your location in the country to your advantage. If you live in the rust belt where cars become sacrificial anodes in a few short years, look at rust-free cars from the South as that’s a great selling point. Down South, all-wheel-drive cars won't fetch the same premium as up North.



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