Flipping Cars

GRM Hive. I submit the following topic for discussion: car flipping.

I've noticed that the car market bubble seems to be deflating. You can buy a car in the $1,000 range again, new cars are being built as fast as ever, and maybe things have normalized a bit. I want to try something I've always wanted to try. I want to buy a car, clean it, and sell it for profit. Just one. Just to see how it works. Something like that yellow Cobalt that's been parked down the street with the for sale sign in it for a couple months. Private party. They have a Golden Retriever (in this random, made-up scenario), and that Golden goes everywhere with them. His name is Peter, and he loves his tennis ball. They also don't own a vacuum, so there's lots of hair in the car.

I'm not judging! I'm just observing.

I want to buy their car. For like $800. OK, fine, $1,000. The paint is gross because it's been parked outside, under a pine tree, for its whole life. But otherwise, it's been cared for mechanically. I'll throw plugs and wires at it, maybe toss in a new battery, polish it, replace the headlamps with Rock Auto units so they're clear, and send it out the door.

Are any of you into this kind of thing? A friend said he stopped during the pandemic when the market got all wonky. But that's when you couldn't buy a new car, demand never went away, and the only things left were used cars. I'm thinking this might be a good time to start it up again.

Here's where I'm going with this...

I... want to buy a garage. OK, I said it. Why? To put my cars in. How does flipping cars factor into that? Excuses.

Excuses?

That's right. Excuses. The thing you were told you should never, ever use in elementary school. ("That sounds like an excuse to me..." "Well, yeah, I'm hoping it's exactly that--an excuse for my behavior/tardiness/lack of produceable homework/etc.") I want an excuse to buy a building in town where I can store my Audi, and then... iunno... another Miata? Maybe something crazy with a V10? Something that should be cared for and not left on my driveway. Maybe a good excuse to buy a pickup.

So, what works for you guys? Do you aim high? Start with a $20,000 car and try to get it up to the $25,000 range? Or am I best-off buying a well-broken-in Cobalt for $1,000 and trying to squeeze $1,000 out of it?

Do it. 

Start with a low risk, low money car like your $1000 number, but one you can obviously make a few bucks on. You may not even like the flipping process, so no sense jumping head first into the deep end.

One thing to be aware of is your state laws regarding resale. There's a cap on the amount I can sell in Arkansas before it sends red flags to the tax collectors. Any more than 5 and they want me to become a dealer. I haven't ran into that issue even after surpassing the number but know others who have. YMMV.

There are also a couple ways to tackle this. Be the guy that sells cars the car guys want, OR being the guy that sells cars to EVERYONE. Both have their place but what do you want to do?

Also keep track of hours. I think this is an important lesson to learn. Knowing what time it realistically takes to make a car show worthy vs the cheap junker taking up space.

I tried this very process a couple years back. A buddy had been buying and selling Subarus like crazy and talked me into trying it out. Honestly back then it was like printing money but I think I got out before the bottom fell. The main reason I stopped was because it stopped being fun. I made a LOT more than I expected but having a good parts source and knowledge had a huge impact on that. Also finding great deals vs an okay one. When people know you will buy X or Y with cash and no hassle it sometimes pays off.

There's a dealer guy on the east coast on tic toc that buys/sells luxury cars - he mentions costs/sell and it surprising the low margins are on a $30-$50,000 car.  Sometimes $2-3000 profit? 

This or selling parts sounds like a great retirement gig.

confuZion3 said:

I've noticed that the car market bubble seems to be deflating.

I dunno if you've been paying attention to the news, but you might want to buy all of the cars you plan to flip today.

yeah, if you can pick up a good number of cheap cars that you can tag/title/get inspected right now for under $1,000 then do it. I predict the market is going to go back to those covid type numbers when fewer new cars were available.

At the very least, I can make a bunch of really short build threads here. 

Flipping thousand dollar cars is kind of silly - there isnt much meat on the bone and the ROI per hour is terrible.

Paint costs the same on a 70K silverado as it does on a $700 Hyundai

Getting a windsheild put in costs the same.

A detail takes the same number of hours.

Swapping headlights is the same steps.

*****not exactly, of course, but if I am going to spend 20 hours to recondition a vehicle, I need to be able to make 4 grand on it out the door or I may as well just work some more at my real job and spend my time at home doing things I enjoy, like working on the vehicles I already own.  20 hours of work rarely turns a $1k car into a $5k car unless you bought it very right, and those deals are not frequent enough to make a business case.  A guy is much further ahead to spend 20 hours and turn a $60k vehicle into a $70k vehicle - 5k in parts and labor, taxes and fees, 5k in profits.

Good points. This isn't intended to be a business--just a bit of fun.

Making money is fun.  

Another good point! 

In reply to 93gsxturbo :

That comes down to buying the right car. I bought a Honda Fit with a variety of small problems for $800. I spent about two afternoons working on it, and sold it for $3700. You don't buy one that needs a windshield, or an engine rebuild. You buy one that needs a cleaning and a few minor repairs that add up to too much for a regular person to justify taking it to the dealer and paying out the nose to fix on an older car.

Just by way of example, on the Fit, I spent a few hours taking trash out of the interior, doing a good clean inside and out. Not some crazy $500 detail! We're talking a basic, thorough vacuum and hand wash of the inside and outside. I wanted it to look good but it didn't need to be pristine. The windows were slow to open and close; I cleaned the tracks and sprayed silicone in all the contact points and that fixed them. The remote locks didn't work, and the driver's door didn't latch all the way. They were related: adjust the driver's door catch and it fixed both problems. The headlights were cloudy; I already had a polishing kit and used that to great effect. All told it was just some minor fiddling that took a car from "abandoned looking and kinda broken seeming" to "really quite nice, for the price." It sold to the first person that came and looked at it.

So the key is: buy right, and keep your market in mind. I think flipping enthusiast cars could be a problem; everyone wants a Honda Civic, but there's a far narrower market for a Simca Aronde. Know what sells and buy only what sells.

There is a massive gap between 1k and 50k buy in on a flip. I doubt most are comfortable doing that kind of leap in up front cost or requiring a loan which raises the stakes. A healthy amount of money can be made in the target area of $10-15k final price. It's a market that a lot of folks need a car in. Even bumping down to $5-8k  market there's money to be made but you just have to be cautious and buy the car you know you can sell vs the one you think you can. If you can do high volume low stakes cars there's nothing wrong with that. Especially if it's not really a business but a way to fund projects. That's what I used it for entirely and it worked great.

Ahh, another one: I did do some more major repair on a Chevy Volt. A few years ago I got a 2012 Volt with about 157k miles and a bad battery for $1500. I planned to part it out but was disappointed by what parts were actually fetching once I looked into it. My bad for buying it before doing the research but it was a friend deal and I said yes when it was offered. I changed course and bought a battery from a 37k mile Volt out of a junkyard in Chicago. It was $1350 with shipping for the battery. I then dropped the battery out of the Volt and set the two packs side by side. I swapped just the cells over to the original pack from my Volt so coding wouldn't need done on battery modules. I reinstalled it, and did the prescribed coolant bubble purge cycle using a laptop that I loaded some eBay Chevy techline software onto. I had to add the proper coolant and also ended up needing to replace the heat loop coolant pump which was another $150 or so. I ended up with less than $2000 in repairs, learned some neat stuff, and spent maybe 3 days on it part time here and there. I sold the car, again to the first person to come look at it, for $7000.

It can work out great. I'm sure there are nightmare outcomes but I think those are more likely if the car is bought wrong or if you aren't the type to actually see a project through to the end. It also helps if you're the type that doesn't mind dealing with people.

I have had a couple that just didn't make much money, or that turned into part-outs. But in all cases it's been worth my while to have done it. I haven't done as many flips or part-outs as some of the folks here, but just enough to be dangerous with bad advice. Ha!

Pledge furniture polish will make tired paint look amazing.

New hubcaps, some SEM trim black and some rubberized undercoating will make a tired car look much, much better.

A small can of ATF will make a loose automatic shift like new until it doesn't.

Never buy a used car from me.

93gsxturbo said:

Making money is fun.  

 

Dealing with buyers in the modern age is not. I've never traded in a car, but probably will next time the missus needs a newer one as I just can't deal with the FB marketplace morons any more. 

Flipping the cheap stuff means smaller loss if you have a problem that costs to fix.  Flipping the more expensive stuff is tough because the buyer has to come up with their own financing.  I have been doing it for decades, from my experience finding the right candidate is the key.  And knowing what you can and cannot repair also matters.  I have stayed in the under 5K pond and usually break even or make a profit up to a grand or so.  That is parts only, if I include my labor it gets questionable.  Again, spend lots of time researching and hunting for the right car. 

I think the best flips, if you are so equipped, is to get nice looking cars with a mechanical issue you can take care of. So Subaru head gaskets, BMW oil leaks, clutch replacements, or maybe just there is a model you know really well how to source, condition, and replace the engine or trans. I find the mechanical work much smoother to fix than the looks/smells of neglect.

I think the Prius dudes on here have a really good model, and would be wise to emulate. 

Word of caution, never try to flip something that needs a heater core replaced....

Hah, thanks for the advice Shawn. You know... on who to not buy used cars from.

I bought a Ranger a few years back for $500. The paint had peeled off in places. Clear coat had flaked away in others. I used that truck as a test bed for learning how to do paint correction, and wouldn't you know it, I'm not very good at it even now.

I'm not sure what the point of that story was... But mechanically, I replaced the brakes, got the engine running great, put new brake lines on it, and fixed a bunch of mechanical stuff. I drove it around for a year or so and then sold it for $1,500. I probably broke even, but got to drive it around for a while.

The Prius flip model is brilliant. Nice cars with an easy-enough-to-replace battery = win.

Good advice regarding the heater core. I assume you just mean because it's a $40 part that takes $2,000 worth of labor to replace? Or is the need for a new heater core also an indicator of trouble with the engine?

I thought I posted, but it seems to have gotten lost in limbo. Apologies if this is a repeat. 

Years ago I did a lot of motorcycle flipping. Not so much to put money in my bank account - it was more to get the opportunity to try every bike that I liked. I had a good several-year run of making enough $ to get the next bike in, but still being able to pass on a great deal to the next buyer. Those were my favorite deals. I mostly bought things that needed parts/repair and gravitated towards stuff that I had experience fixing and/or parts stashed for. Lots of Yamaha FZRs, Honda NT650s, Honda XRs, Yamaha RZs and RDs, and anything else that caught my eye. It was usually stuff that was somewhat niche but not super obscure. Somewhere along the way, the buyer base changed (or maybe I changed) and the social aspect of it was no longer fun. 

ddavidv said:

93gsxturbo said:

Making money is fun.  

 

Dealing with buyers in the modern age is not. I've never traded in a car, but probably will next time the missus needs a newer one as I just can't deal with the FB marketplace morons any more. 

I used to be a regular fixer-upper/flipper kinda guy and the shift in this behavior over the last 10 years or so has completely turned me inside out. You used to have to deal with some losers but generally more often than not, people were serious and respected your time.

These days people will be openly disrespectful or hostile, text you "HELLO????" six times in a row if you don't respond within 5 minutes of getting their message and then offer you 1/5 of your asking price, have some incredibly unrealistic expectations of 30+ year old vehicles, etc...

Unless it's an enthusiast type car I can sell somewhere like GRM or a marque-specific forum or group, I can't be bothered to deal with all the idiots. I want to sell my 850R and get something newer as a daily but my last go round was so awful I seriously dread putting myself through all of that again.

In reply to confuZion3 :

If you're not in Northern Ohio or Indianapolis, we will gladly teach you the Prius game.  

Prius: https://grassrootsmotorsports.com/forum/off-topic-discussion/business-idea-creative-input-needed-prius-content/196386/page1/

Prius: https://grassrootsmotorsports.com/forum/off-topic-discussion/500-prius/186073/page1/

Prius plus:  https://grassrootsmotorsports.com/forum/grm/this-weeks-salvage-auction-targets/273534/page1/

Pontiac Vibe: https://grassrootsmotorsports.com/forum/cars-sale/06-pontiac-vibe-for-sale-listing-or-build-thread/145574/page1/

Since this is all gambling, this one involves a loss, not a win: https://grassrootsmotorsports.com/forum/grm/salvage-cars-know-when-to-holdem-know-when-to-fold/164801/page1/

There's a couple of ways to look at buy to sell model. If you're doing it just for fun and value your time at close to nothing or even wages, it's a hobby at best. If one buys with the intention of making money, you have to include your time and overhead, whatever that might be. Realistically, no for-profit business model can be sustained without two things. You have to pay yourself and recover all incurred costs in the sales price. 

I used to buy and sell things I found on Craigslist  or Marketplace, but now there's enough people using the hobby model, it's the rare thing that can be turned around for a small profit. For the most part, I've abandoned hunting there. Best if you have a network of resources for your flip candidates. Last vehicle I bought, fixed and sold for profit never saw the buying public and was purchased directly from an estate liquidation guy my GF knew. I consider that sort of find a rarity now but take advantage when I can.

In reply to confuZion3 :

Specific to the Cobalt:  

Is it a 2 door?  I ask because 2 door cars are very hard to sell.  No one who has to haul young'ens will want it.  Not being "cool" enough, the "cool kids" wont want it either.  If it is a sedan, great.  Everyone who need a cheap way to get to work/school/etc is your customer.  

Buy it as cheap as possible.  Remember, the profit come from the low purchase, not from the high price you sell it for.  When looking at the car, do your math backwards.  Ask yourself what a "completed" car like this should sell for.  Maybe even go out to Marketplace and try to buy (price check) what nice ones are on the market currently in your area.  Then, if you feel for example this is a $3,200 car then work backwards from there.

If it were me, I would send that car to my detail guy and for $300 he would do the exterior, interior and headlamp buff.  It would come back with that "looks like it ready for a used car lot" kind of look.  Tires are expensive, even for crappy ones so look hard at them and price if they need to be replaced.  Crappy tires are still $75 each when mounting is factored in.  Decent tires are $100 each and great tires are $200.  So, even at $75 each you can be nearing $400 if a tpms is needed and tax.  

I try to sell my cars with all the functional problems addressed.  I find that people dont want to pay you $3k and it still needs tires.  I get the tires and sell the car, ready to go, for $3,500.  Mostly I an selling to people who don't want to "do the work."  

$1,000 car
$300 detail
$400 tires
$500 misc, undisclosed problem
$2,200

List the car for $3,500 and be willing to accept $3,200 and you've turned a cool $1k.  

Don't plan for "get rich quick" kind of money but I put my hourly target to $100 per hour of effort.   I've been wrong and only netted $50 per hour but it still good "hobby" money.  It's also interestingly an industry of acceptable "not income taxed" money.  That changes if your rolling many cars but a handful a year and they won't come looking for you.  Of course, if you want to take buiness deductions towards something like a building then you'll have to play the full tax game.  

I think we can all agree the secrets are "buy it right" and "know the market"