How to buy and sell used cars is a required attribute or key skill for most car entrepreneurs. Car flipping is popularly known as one of the exciting emerging automotive businesses contributing significantly to the greater automotive world. In this post, I’ll endeavor to explore some of the critical aspects of how to buy and sell used cars.
What Is Car Flipping?
The phrase ‘car flipping’ is fairly new in the automotive world. It is used to describe a type of business that has probably been around for some time now though. Car flipping has become one of the key strategies for making money selling cars. To understand the phrase and the making of money selling cars fully we will look closely at the words used in the construction of the phrase.
The key or defining word in the phrase is the word ‘flipping’ as most people know what a car is.
Flipping is generally associated with securities trading. The word describes the business of acquiring and the disposal of IPO (Initial Public Offering) shares. These securities are then immediately disposed of after coming into the market. The profits are usually substantial within the shortest possible time. This form of trading is frowned upon by investment bankers who underwrite most of these IPOs in the market. The key attribute of the business is ‘quick profit’ time is of the essence.
Lately, especially in the US, the term has been made popular by its use in the real estate market. Properties are acquired by investors at significant discounts by real estate investors. They are then disposed of fast usually after some form of rehabilitation of the said property.
The process of asking and answering yourself the question ‘how to buy and sell used cars is in a nutshell what we call ‘car flipping’. Many other key processes make up the full picture of the car flipping business that we will explore here.
How to buy and sell used cars business concept
The same mentality is now used to push for a quick profit by doing significantly fast car trades. In ideal times making money selling cars can indeed be a quick hustle. This can just be about getting a vehicle at a discount from one source and within a short period getting a buyer prepared to get the same vehicle at a higher price.
Lately, though this now is a business at times associated with acquiring a used; old or damaged car; restoring and reselling for a profit within a short period.
While it is a lucrative business it is also somewhat technical and if done without careful attention wheels can come off and one can easily fail. There are several aspects of the business that are critical that require careful attention. Some of the foundational considerations include the following:
- Criteria of cars to flip
- Where to buy the cars
- Your technical team
- Auto building parts
- Marketing and profit considerations
Suitable Stock of How to Buy and Sell Used Cars
The car flipping business is not for everyone and neither is it one to just jump in because one feels like getting a quick buck. There is a need for meticulous consideration of all the requisite steps; from sourcing to ultimately delivering it to the customer.
While there is a wide range of vehicles to flip, not all of them are great for making money selling cars. The first consideration is the market size and estimated demand for the range of cars. The second most likely should be the availability of the finally selected car(s).
In selecting the car or cars to flip one must be as objective as possible to avoid personal and emotional attachment dynamics. The car flipping business is generally a ‘passion-driven business’ which implies a lot of subjectivity in a way. A great selection for flipping however would be one done objectively.
Depending on your strategy there are generally about four classes of vehicles to consider when going into a flipping business.
- The high-end luxury cars
- The mid-end moderate cars
- The low-end small cars
- Utility cars
All of these types of vehicles do have their market segments within the greater automotive flipping market. What vehicle to pick will largely depend on your budget and your targeted market.
The High-End Luxury Cars
This is one of the best niches of making money selling cars in the auto flipping business. It however takes a lot more of literally everything (time; money and skill) to get to that ‘high profit’ end.
While it can be highly profitable it is also a very tight niche without a wide array of buyers. The buyers on this end are usually extremely fussy and picky. The workmanship of the final product has to be top-notch. There’s usually no room for sloppy work on the parts used and even the paint job has to be flawless, to say the least.
The good thing about this flip is that the returns of one flip can cover one for a longer period before the next one. There are generally not many high-end cars on many public roads around the world hence even finding bargains on this end are very slim.
To find these cars one might probably look at dedicated auctions for diplomatic missions and other such related sections of society. By their exclusivity, such ‘auctions’ if they do exist may not be public and one might need special permits to attend I assume.
A niche for those who have mastered the craft
This is a niche I would not even advise for new players in the market unless one is probably a seasoned technician on high-end vehicles. Over and above the know-how one needs genuinely ‘deep pockets’ to fund some of the flipping projects on this end. Some of the components of these cars are extremely specialized; some may even require to be shipped from specific countries.
In a nutshell, high-end car flipping is not for novices. If you are thinking of trying car flipping I suggest you start at the low end and then gradually crawl into it. High-end car flipping is near as demanding as vintage car flipping which we are not covering in this article.
The Mid End Car Flipping
This end of the market has a significantly huge and critical mass of the flipping business. This is where most of your sedans and station wagons are. The target market with this flipping end is wider and includes among others families; from the young ones to old. With the advent of ehailing companies like Uber and Bolt, this suddenly has become a high-demand sector. If done carefully within the qualifying range of these companies there’s is just no shortage of demand.
While the demand is high because of the business side of this range of cars they are still readily available for flippers also. The simple reasoning behind this is that most of these are manufactured for the mass market. The brand new market is generally bought by the upper end of the middle income to the lower end of the high-income earners.
The psychology amongst many of that section of buyers is to just own cars that are still within warranty. These are usually professionals that don’t want to be bothered by the nitty-gritty of attending to issues associated with cars out of warranty.
Where To Find Cars For Flipping
From The ‘brand new car’ Buyers
While many of the ‘brand new car’ segment of buyers fall into the ‘trade in’ trap by many dealerships there are some that usually prefer to hold on to fully paid cars. They usually only do so until they start facing those costs associated with these cars; like your normal regular service and a few repairs. There is the normal wear and tear replacement of parts that come with vehicles that have come out of warranty which may be unknown to some of these ‘sophisticated’ car owners.
When they are hit and shocked by these unexpected and unplanned costs that are when they suddenly go into panic selling as they suspect these costs may escalate out of control. Indeed these costs can go out of hand if parts are sourced and bought without much care and some level of research.
Bargain ‘Hunting’ and ‘Mining’ on How to Buy and Sell Used Cars
I remember going to a dealer to enquire about the airmartic shocks for my 2007 ML 320 CD. The price of a pair of those things just shocked me, to say the least. I suddenly realized I owned a car for a different socioeconomic class. The reality just dawned on me that I actually could not afford that car. I didn’t have that kind of money and neither did I think it was a fair price at all.
When one gets into that position; as I said earlier one’s suddenly transformed into a highly motivated seller; a great opportunity for flippers. The hunt for a flipping vehicle is unfortunately like that of a vulture sometimes. One has to find identify and move swiftly on ‘vulnerable’ buyers.
There’s another sub-segment in this group that will not trade in their fully paid cars but would rather sell to individuals at their prices; usually marginally or substantially higher than the trade-in value. While they may not like the trade-in prices these are usually open price negotiations as long as they can beat the trade-in value.
Unfortunate for them but fortune may be to the flippers these sellers usually prefer to dispose of their vehicles when they already have their eyes on a given vehicle. Hence they are usually also motivated sellers. Motivated sellers are generally a great source of discounted prices.
Auction Houses
Auction Houses are a great source of good bargains for flipping cars also. There are several kinds of auctions we could explore here but two types that would be of great interest to flippers are the insurance scraps ones and the bank repos.
Insurance scraps
The insurance scraps or auctions are generally for accident-damaged cars where insurance companies are trying to salvage something out of cars that have been written off. These can be profitable points if done well but they are also extremely technical as they can involve some intricate mechanical dynamics of cars.
One element about these that needs close consideration is the coding of accident-damaged cars. Depending on your country’s dynamics there are different codes for different levels of damage. Some codes legally cannot be rehabilitated and every sound flipper should be aware of these. Since there are variations to these codes from one country to the other, it may not be wise to labor on the point other than that one needs to be aware of these.
Bank Repos
The other source as earlier said is the bank repo auctions. Bank repo auctions can also present great and real flipping opportunities for smart players. The greater part about these auctions is that most of the cars are here are in good condition. The only sort of rehab they may require is a thorough car wash to deal with the filth that may be associated with these types of cars.
Government & Big Corporate Auctions
Government departments and big corporations at times have fleet management policies that compel them to dispose of their vehicles after a given accounting life cycle. Some governments and big corporations prefer to bring in auctioneers on their premises instead of sending them to auction houses. These are usually are snatched internally by employees in the proximity of these disposal systems.
While the marketing part of any business is literally at the far end of the process in the car flipping business some can get ‘orders’ before they get the car. This is especially so for those who may have already established themselves in the market. The fact that bank repo auctions have many of these implies that the speed of flipping can be extremely quick indeed.
Biggest And Most Reliable Source
By and large,e this is probably the biggest source of those who are on the mainline of the flipping business. This is not necessarily because this is where you find the most cars but for any entrepreneur predictability of the supply of merchandise is important. Most of the auctions all over the world run at specific times which makes it easy for planning for a flipper even if the cars may not be as discounted as those that one can find randomly.
Community Notice Boards
One area to find great discounts is the community notice boards in the public spaces including local supermarkets; community halls; municipality and government buildings. The great thing about this source is that most people who put up these posts are highly motivated and some may not even have the budget to post on paid platforms and media.
To find flipping cars this way is not that easy though. One has to put some time into it and it will cost you a bit of gas to move around the target centers. Most people would of course prefer to post in the high traffic centers. It would not be unwise for a crafty flipper to also drop your numbers for those who may be considering selling their cars. It is also advisable to keep a separate business line to avoid volumes of calls on your phone.
Reliable sources
After a while, one gets to establish reliable sources, for these bargains to just continue checking regularly. This of course depends on one’s need for vehicles. The turnaround time for a flipping business is critical. Hence the source market should ideally have the capacity to match the turnaround time.
If reliability can be established this is by far the most profitable source. Of all the sources; this I believe is the one whose majority composition are highly motivated sellers. Some of them are actually in desperate positions that they may be willing to take any reasonable price.
Crafty Negotiation Skills
While it may sound a bit insensitive, but honestly bargains will come from desperate people. You’ll need to sharpen your negotiation skills to ‘squeeze’ and get great deals. How to buy and sell used cars needs one to recognize an opportunity and seize it.
Depending on your country or state requirements all vehicles generally have some ‘ownership document’ which you’ll need to verify before closing any deal; this is especially so for private transactions.
There are several sources we can talk about but I believe some may be country-specific. These above-noted ones are not the only sources but any or a mix of them can sustain a viable car flipping business depending on the size of the business.
Conclusion
Many flippers view this kind of business as a side passion or hobby hustle. This however can give massive profits for those who choose to make it the main hustle. If you love cars and are prepared to do a comprehensive study of the market; from sourcing to the final consumer then car flipping is for you. In the coming publication I will explore the marketing side of this business; don’t miss the publication.
I wish you all a happy flipping hustle making money selling cars. Our shop has a wide array of auto replacement parts for any of your flips of low-end; ordinary cars to high-end cars.
Let me hear from other flippers what your experiences on how to buy and sell used cars are. Feel free to leave comments.