Can you still make money flipping cars? Yes, it's possible. But that's a very different answer from saying it's something I'd recommend for the average person looking for an easy way to make extra money.
I originally wrote about flipping cars many years ago, when I had firsthand experience with buying vehicles at auctions and finding opportunities where a car could be purchased substantially below its likely resale value. It worked, and under the right circumstances it can still work today.
But knowing what I know now, I'd approach it much more cautiously. There are simply too many ways for what looks like a $2,000 or $3,000 profit to turn into a few hundred dollars, or even a loss, once you've actually bought, repaired and sold the vehicle.
So if you're considering flipping cars, I wouldn't begin by asking how much money you could make. I'd first ask how much could go wrong between buying the vehicle and eventually selling it.
That's the calculation that determines whether the apparent opportunity is really an opportunity at all.
Can You Really Make Money Flipping Cars?
The basic concept is certainly appealing. Find a used vehicle priced substantially below its realistic market value, purchase it, take care of any necessary repairs or reconditioning, and resell it for more than you have invested.
If you buy a car for $7,000 and sell it for $9,500, at first glance it appears you've made a very nice $2,500 profit.
But the difference between the purchase and resale prices isn't necessarily your profit.
You may also have sales tax, auction or buyer fees, title expenses, transportation, inspections, repairs, tires, brakes, detailing, advertising and other selling expenses. And then there's the expense that's hardest to calculate beforehand: whatever you didn't know was wrong with the vehicle when you bought it.
Occasionally everything goes perfectly and there really is a substantial profit. But there's considerably more risk involved than the simple "buy low and sell high" description suggests.
The Profit Is Usually Made When You Buy
One principle hasn't changed: if you're going to make money reselling a vehicle, most of the potential profit needs to be built into your original purchase price.
You generally can't buy an average used car at an average price and expect to somehow sell it for considerably more. There's no reason the next buyer should pay you substantially above what comparable vehicles are already selling for.
Instead, you need enough of a price advantage at the beginning that you can eventually offer the vehicle at an attractive price and still have a comfortable margin after your expenses.
That's considerably harder than it sounds because you're rarely the only person who recognizes an underpriced vehicle. Depending on where you're buying, you may be competing with dealers, experienced resellers, mechanics and other buyers who understand used-car values very well.
Public Car Auctions Aren't Automatic Bargains
Public car auctions were one of the places I looked for opportunities, and there can still be attractive vehicles sold through these auctions. But I would strongly caution against assuming that anything purchased at an auction must be cheap.
An auction is simply a method of selling a vehicle. The final price is determined by the people bidding on it.
And bidding creates another danger: emotion.
You identify a vehicle you want. Someone else bids against you. You raise your bid. They bid again. Suddenly the objective begins shifting from buying at the correct price to winning the auction.
That's exactly what you don't want to happen if you're buying a car for resale.
Before bidding begins, determine the maximum amount you can invest in that vehicle while still leaving a substantial margin for repairs, expenses and profit. If the bidding exceeds that amount, walk away.
There will always be another car.
The Biggest Risk May Be Sitting Under the Hood
This is where flipping vehicles differs enormously from reselling furniture, collectibles or many other products. A modern automobile is an extremely complicated mechanical and electronic machine, and you may be purchasing one with limited information about its true condition.
A car can look excellent and drive perfectly during a brief inspection yet still have an expensive problem waiting underneath.
- Transmission problems
- Oil consumption or internal engine problems
- Cooling-system failures
- Electrical and computer problems
- Air-conditioning repairs
- Suspension or steering problems
- Worn tires and brakes
Even relatively ordinary repairs can destroy what initially looked like an attractive profit.
Suppose you think you've found a vehicle with $2,500 worth of margin between your purchase price and its likely resale value. It then needs $900 worth of tires, $600 worth of brakes and repairs, and several hundred dollars in taxes, transportation, fees and reconditioning.
Suddenly, that $2,500 opportunity has almost disappeared.
And that's assuming you haven't encountered a major engine or transmission problem.
A Cheap Car Isn't Necessarily a Good Buy
This is another lesson that applies whether you're flipping cars or simply buying one for yourself: sometimes a vehicle is cheap for a very good reason.
It may have an accident history, mechanical problems, undesirable mileage, a poor reliability reputation or some other issue that's preventing buyers from wanting it.
And resale demand matters enormously.
You aren't simply trying to buy a car cheaply. You eventually need another person to want to buy that particular vehicle from you.
A vehicle supposedly worth $10,000 that you purchase for $7,000 sounds like an excellent opportunity. But if you can't find a buyer willing to pay $9,000 for it, you don't have a $2,000 profit.
You have a car sitting in your driveway.
You're Probably Not Going to Get The Going Retail Price
There's another mistake that can make a potential car flip look much more profitable on paper than it really is: comparing your expected selling price with dealer retail prices.
If dealerships are advertising similar vehicles for $12,000, that doesn't necessarily mean you'll be able to buy one for $9,000 and resell it privately for $12,000.
You're not offering the buyer everything a dealership can offer.
A dealer may be able to arrange financing, accept a trade-in and provide certain warranties or other protections depending on the vehicle and the sale. Just as importantly, many consumers simply feel more comfortable purchasing a used vehicle from an established business than handing thousands of dollars to an individual they don't know.
A private seller therefore often needs to give the buyer another reason to choose his or her vehicle.
Usually, that reason is price.
If comparable cars are being offered by dealers for $12,000, you may need to price yours noticeably below those vehicles to make your private-party sale attractive. Exactly how much lower will depend on the vehicle, your local market, its condition and how quickly you want to sell it.
That's especially important when you're calculating a potential flipping profit before buying the car.
Don't start with the highest dealer asking prices you find online and assume that's what you'll eventually receive. Estimate what a realistic private-party buyer would actually be willing to pay you.
What I Looked For
When I was actively looking for vehicles that could be resold profitably, I generally preferred cars with characteristics that would also appeal to the eventual buyer.
- Strong consumer demand
- A good reputation for reliability
- Reasonable or unusually low mileage
- Clean overall condition
- Desirable equipment
- A large enough price advantage to absorb unexpected expenses
Exceptionally low mileage could be particularly interesting because it gave a vehicle something that immediately differentiated it from the other cars a buyer might be considering.
But I wasn't looking for any particular magical make or model. I was looking for vehicles that would stand out to the next buyer for the same reasons they stood out to me.
If bought correctly, you shouldn't have to convince someone that the car was a good value. The vehicle and the price should do much of that work themselves.
A Real Example
Years ago, I was reviewing the advance listings for an upcoming public auction when several inexpensive cars caught my attention. They weren't exciting vehicles, but they had something that made them unusual: exceptionally low mileage for their age.
They were former government vehicles, which made them even more interesting. Government fleet vehicles can sometimes accumulate relatively little mileage while still receiving regular scheduled maintenance.
Years ago I would have gone through a fairly precise calculation using the wholesale and retail values available at the time and established a target purchase price substantially below the vehicle's expected resale value.
I don't think reproducing those old dollar amounts today would be helpful. Used-car prices, auction fees, repair costs and virtually everything else have changed too much.
But the thought process is still useful.
I wasn't asking, "How cheaply can I buy this car?"
I was asking, "Can I buy this cheaply enough that after every expense I can still offer it to the next buyer at an unusually attractive price and make a worthwhile profit?"
Those are two very different questions.
Know Your Maximum Price Before You Bid
Once I had determined what I believed a vehicle could realistically be resold for, I worked backward. I estimated my likely expenses, allowed room for something unexpected, included the profit I needed to justify the effort, and established my maximum purchase price.
But if the bidding were to go higher than that number, it simply would no longer make sense.
That discipline is essential because it's very easy to rationalize another $200 while you're bidding. Then another $200. Eventually you've won the vehicle but eliminated the reason you wanted it in the first place.
I've always believed one of the most valuable skills when buying cars is the ability to walk away.
That's even more important when you're buying with the intention of making money.
Your $2,000 Profit May Not Really Be $2,000
Before purchasing any vehicle for resale, I'd calculate the entire transaction as conservatively as possible.
Start with a realistic selling price—not simply the highest asking price you can find online—and subtract everything you'll have invested before the vehicle is sold.
- Vehicle purchase price
- Applicable taxes
- Auction or buyer fees
- Title and registration expenses
- Transportation costs
- Pre-purchase or post-purchase inspections
- Mechanical repairs
- Tires and brakes
- Cleaning and reconditioning
- Advertising or selling expenses
- A reserve for unexpected problems
Only after subtracting all of those expenses do you have something approaching a potential profit.
I'd also be conservative about what you think the car will sell for. An advertised asking price isn't necessarily the price buyers are actually paying.
Don't Forget What Your Time Is Worth
Another expense that doesn't appear on a receipt is your time.
You have to locate potential vehicles, research values, inspect them, negotiate or bid, arrange transportation, deal with repairs, clean and photograph the car, advertise it, answer inquiries and meet prospective buyers.
Some of those prospective buyers won't show up. Others will make unrealistic offers. Eventually you'll negotiate the final sale and handle the paperwork.
If that process produces a true $2,000 or $3,000 profit, perhaps you consider the effort worthwhile.
If an unexpected repair reduces the actual profit to $300, the entire exercise can look very different.
Don't Forget About Sales Tax
There's another expense that can make casual car flipping less profitable than it initially appears: sales tax.
The exact rules vary by state, so you'll need to check the laws where you live. But there's an important distinction between an individual buying a vehicle and a properly registered dealer purchasing inventory for resale.
A licensed or properly registered dealer may be able to purchase vehicles intended strictly for resale without paying sales tax on that inventory purchase. An ordinary individual buying a vehicle to flip generally shouldn't assume the same exemption applies.
That means you may owe applicable tax when you initially purchase and title the vehicle. Then, when you eventually sell the vehicle, your buyer may also owe the applicable tax when he or she titles the vehicle.
Those aren't technically two taxes on the same purchase. They're two separate transactions involving two different buyers. But from the standpoint of someone trying to make money flipping cars, the tax you pay on your original purchase can become another significant expense that reduces your potential profit.
For example, a $2,000 difference between what you paid for a vehicle and what you eventually sell it for isn't necessarily a $2,000 margin. Taxes and title expenses associated with acquiring the vehicle may have already consumed a meaningful portion of it before you've spent anything on repairs, reconditioning or selling costs.
This is another reason professional dealers have advantages that casual car flippers don't. Dealers who meet their state's requirements may qualify to acquire inventory for resale without paying the same tax an ordinary retail purchaser would pay.
Before purchasing a vehicle specifically for resale, check with your state's tax and motor vehicle authorities to determine exactly which taxes, title fees and registration requirements will apply to both your purchase and eventual resale.
Dealer Licensing Laws Are a Serious Issue
This is one part of my original article that I would definitely handle differently today.
States have their own rules governing how many vehicles an individual may sell, when someone is considered to be operating as a dealer, and whether purchasing vehicles specifically for resale and profit triggers additional licensing requirements.
Those laws can change, and I wouldn't rely on an old article—or what another person tells you they're allowed to do—to determine what's legal where you live.
Before purchasing even one vehicle specifically for resale, check the current requirements directly with your state's motor vehicle or dealer-licensing authority.
If you're planning to do this repeatedly as a business, the licensing question becomes even more important.
Would I Recommend Flipping Cars Today?
For the average person looking for an easy side income, probably not.
That's a more cautious answer than I would have given years ago.
Someone with strong mechanical knowledge, extensive familiarity with used-car values, access to reasonably priced repairs, sufficient available cash and enough discipline to reject marginal opportunities may still be able to make money flipping cars.
There will always be mispriced vehicles. There will always be sellers who need to sell quickly. And there will always be buyers looking for a well-priced, desirable used car.
So the opportunity hasn't disappeared.
But neither have the risks.
If you don't know cars particularly well, one major mechanical problem can eliminate the profits from several otherwise successful purchases.
That's a risk I'd be reluctant to minimize simply because successful flips make good stories.
If You're Still Considering It, Stress-Test the Deal
If you're seriously considering a particular vehicle, I'd run the numbers again before buying, but this time assume things don't go perfectly.
What if repairs cost $1,500 more than you expect?
What if the car ultimately sells for $1,000 less than you anticipated?
What if it takes two months to find the right buyer instead of two weeks?
Would you still be comfortable with the purchase?
If a relatively modest surprise turns a profitable transaction into a losing one, I'd probably walk away.
The people who consistently make money buying and reselling cars aren't necessarily those who find the most vehicles.
They're often the ones disciplined enough to reject almost all of them.
One Thing From My Original Strategy Hasn't Changed
There's one piece of advice from when I actively pursued these opportunities that I'd absolutely keep today: never become emotionally attached to the vehicle you're trying to buy.
Know the numbers before you negotiate or bid. Establish the maximum amount you're willing to invest. And once the price exceeds the amount that makes financial sense, let somebody else have it.
Missing a vehicle doesn't cost you anything.
Buying the wrong one certainly can.
The objective isn't simply to buy cars cheaply. It's to buy only when the potential reward comfortably justifies the financial and mechanical risk you're assuming.
Today, I'd set that threshold considerably higher than I did years ago.
Bottom Line
Yes, it's still possible to make money flipping cars. Experienced people with the right automotive knowledge, access to repairs and a strong understanding of their local market can undoubtedly continue finding profitable opportunities.
But I wouldn't describe car flipping as easy money, and I certainly wouldn't encourage someone to start buying auction vehicles simply because they've heard stories about people making thousands of dollars doing it.
The apparent profit between a low purchase price and a higher resale price can disappear quickly once repairs, taxes, fees, transportation, reconditioning and the unexpected enter the equation.
If you understand cars exceptionally well, know your state's legal requirements and can purchase with enough margin to absorb substantial surprises, there may still be opportunities worth pursuing.
For everyone else, I'd approach car flipping with considerable caution.
Maybe Buying Soon? Don't Give the Dealer the Advantage
The price on the window is only part of the deal. Knowing how much you can negotiate, the method to use to get the lowest possible price, and what your trade-in is really worth can potentially save you thousands.
Before You Negotiate Your Next Car
Buying used? See my Don't Get Taken Advantage of at the Dealership Guide to learn how much you may be able to negotiate and the strategy I recommend for getting the lowest possible used car price.
Buying new? My Don't Get Taken Advantage of by a New Car Dealer Guide explains how much dealers may discount and the strategy I recommend for getting the lowest possible new car price.
Don't Get Shortchanged on Your Trade-In
Your trade-in can change the deal by as much as thousands of dollars. Before accepting an offer, see my Spot The Unfair Trade-In Value Guide to learn how dealers determine trade-in prices and how to therefore recognize a low offer.
Some Insider Insights: