How to Make Money Flipping Cars — A Guide to Buying and Selling Cars for Profit

Flipping cars has side hustle potential written all over it if you love cars. The most successful flippers will also have some mechanical knowledge and strong negotiating skills, and the overall idea of buying and selling cars for profit is simple: buy low and sell high.

As simple flipping cars sounds, it’s no surprise it takes more than stumbling on a good deal. Knowing as much as you can before you get started will help you understand if this is the right side hustle for you and increase your profitability. 

This guide to flipping cars will explain everything from whether or not you need a dealer’s license (spoiler: it depends!) to how to find cars, pricing your flips, and more.

How to Make Money Flipping Cars — A Guide to Buying and Selling Cars for Profit

Do I need a dealer’s license to flip cars?

I want to start with a common question when it comes to flipping cars for profit. It’s one you’ve probably thought about already — how to flip cars without a dealer’s license? Is that even legal?

It all depends on how many cars you expect to flip in a year. Every state has its own laws about the number of cars you can legally buy and sell in a year without a dealer’s license. Some states have much lower limits, so you will want to research before going much further.

I live in Texas, and my state allows an individual to sell up to four vehicles per year without a dealer’s license. California limits you to four, Vermont allows up to 11, and Colorado is two. You can check with your state’s DMV or go to DMV.org and research from there.

Flipping over the legal limit in your state without a dealer’s license can result in a fine and even jail time in severe cases.

Now, if flipping cars turns out to be a side hustle you’re interested in, then it might be worth it to apply for your dealer’s license. The requirements vary by state, but the process often involves:

• Filing tax documents through your state’s department of revenue
• Completing a criminal background check
• Obtaining liability insurance
• Getting an auto dealer bond
• Going through some kind of educational training
• Paying paperwork processing fees

It can cost around $1,500 to get fully set up and legalized. That’s a chunk of money when you’re first starting, but it’s an investment in your flipping side hustle if you want to do more of it penalty-free.

Where to find cars to flip

The goal is to find a cheap car with enough potential that the flip will still be profitable. You can find that in cars that have been undervalued or have a highly motivated seller. Those cars and sellers are out there, and they aren’t as difficult to find if you know where to look.

Public auctions

This is where you’ll find cars seized by the government, repossessed by lenders, and even abandoned cars. Auctions deal in volume, unlike private sellers, so they’re not as focused on getting top dollar. Nevertheless, most flippers say this is the best way to find cars without spending a ton. You can easily find vehicle auctions in your area by doing a quick Google search.

While you don’t need a dealer’s license to purchase cars at auction, every state will have its own operational rules for auctions. Familiarize yourself with how everything works before you go.

Craigslist

Even though Craigslist has started charging a listing fee for people selling cars (it’s only $5), there are still many great listings from private sellers. The database can be a pain to search through, but it’s worth your time. 

Make sure you’re looking at owner-only sales, and be ready to negotiate when you meet the seller. I’d also recommend meeting in a public place if possible, and it never hurts to bring someone without you to check out your potential flip.

Facebook Marketplace

Marketplace is replacing Craigslist for some sellers, and it has much better filter features, making it easier to search. Again, look for owner-only sales. You can use Messenger for any preliminary questions, but it’s always better to see the car in person.

eBay Motors

It’s eBay, but for cars. Fees prevent some sellers from using the platform — and the ones there are usually less motivated--  but you can often find more niche-specific vehicles here if that’s what you’re into flipping. You’ll also be able to tap into a much wider network of sellers.

More places to find cars

More and more people are using the internet to sell their cars, but don’t overlook some old-school options. People still list cars for sale in the newspaper, and some still put “For Sale” signs in their cars. Another idea is to let your friends and family know what you’re doing and have them pass along leads.

Know your budget and be ready with cash

This is a side hustle that requires an initial cash investment, which can be anywhere from $500- $5,000 of cash. Decent used cars are a hot commodity right now, and to find one to flip and make a good profit, you may need up to $5,000. 

Cash is extremely important, too. You can’t use a credit card, and no one is going to accept a check. PayPal and Venmo come off as scammy to sellers. 

Anyone who’s been flipping cars for a while will tell you to always keep cash ready at home because you never know when something will pop up. 

Know how much you are able to spend before you start flipping cars, and do not invest more cash than you can afford to lose. There’s always the risk of buying something that’s a lemon or hard to sell. You can avoid this, but cash should be separate from your other financial obligations.

Know what a car is worth before looking at it

One of the best ways to avoid making a bad investment is to research its market value before you even check it out. Websites like Kelly Blue Book and Edmunds will give you an idea of how much you can sell a car for and they require basic information like make, model, year, and any extras.

Those valuations will help you look at cars and see if they’re being undervalued (this is how to flip cars for a higher profit). But this is just a starting point. Some sellers think their cars are worth more than they are, and knowing the actual value will prevent you from overspending. 

Having high miles, engine issues, or needing bodywork are all red flags. You might be able to see some of this from the listings, but you’ll have to look at the car to get a better idea.

Public auctions typically list their inventory online before the day of the auction. You can see what’s for sale and do some initial research before going in to bid on a car. Make sure to check the pictures, because some auction vehicles have been totaled in accidents.

Know your budget and be ready with cash

One of the best ways to avoid making a bad investment is to research its market value before you even check it out. Websites like Kelly Blue Book and Edmunds will give you an idea of how much you can sell a car for and they require basic information like make, model, year, and any extras.

Those valuations will help you look at cars and see if they’re being undervalued (this is how to flip cars for a higher profit). But this is just a starting point. Some sellers think their cars are worth more than they are, and knowing the actual value will prevent you from overspending. 

Having high miles, engine issues, or needing bodywork are all red flags. You might be able to see some of this from the listings, but you’ll have to look at the car to get a better idea.

Public auctions typically list their inventory online before the day of the auction. You can see what’s for sale and do some initial research before going in to bid on a car. Make sure to check the pictures, because some auction vehicles have been totaled in accidents.

What to look for when buying a car

Flipping cars successfully comes down to finding a car you can buy low and sell high. That doesn’t mean you’re taking advantage of sellers or buyers-- you’re just smart enough to spot a deal. And that comes down to knowing what to look for when you check the car out in person.

The vast majority of sellers are honest in their listings, but there are certain things you can only see in person. This is when you’ll see if you’re making the right investment.

Here’s how you will inspect and evaluate a potential flip:

• Mileage: Cars with low miles almost always sell for more, but some cars are known for being able to hit 200,000 miles or beyond. Toyotas are some of the longest driving cars, next to Chevy SUVs.
• Exterior: Rust is one of the most expensive exterior repairs, and unless you run a body shop, it should be a major red flag. You’ll want to look for rust around the wheel wells, under the car, and the floorboards in older cars especially. Also, check for dents, scratches, wear around the roof rails and fenders. Small scratches and dings shouldn't immediately be a deal-breaker. Instead, think about minor exterior issues with the overall condition of the car.
• Interior: The interior is more important than some new flippers realized because it can give you an idea of how well someone maintained their car. Small stains or little rips in a seat isn’t a huge issue, but strange smells or giant cracks or rips will be hard for buyers to overlook when you flip.
• Engine and engine compartment: There’s a lot under there, but one of the biggest red flags is a dirty engine compartment. This means oil or other fluids could be leaking. Check the belts and see if the radiator shows signs of leakage. If you’re allowed to drive the car (not typically allowed at auctions), test the brakes, see if it runs hot, test the AC and heat, and check for transmission issues like when you’re shifting, like it doesn’t want to engage or shift smoothly. Replacing a transmission is the worst. See if the check engine light is on, and if it is, ask if you can bring it somewhere to run the code so you know what the issue is.

The most expensive repairs are transmission, suspension, camshaft, head gasket, catalytic converter, brake lines, and the timing belt. I also highly recommend researching what the most expensive parts are to replace on a car before you even look at it.

Ask how long the car has been sitting. If it’s been years — you’ll run into this from time to time — that’s a warning. The car probably hasn’t been maintained, and cars also need to be driven regularly to keep things from drying out.

Check the vehicle’s history

If you’ve found something you’re interested in, use the car’s VIN (Vehicle Identification Number), to run a quick check on the car through a couple of different databases. You can do this on-site, and it’s easiest to keep the websites pulled up on your phone even before you look at a vehicle.

Running the VIN helps you avoid cars that won’t sell well and will help you sell a safe car.

You’ll want to run the VIN through the National Insurance Crime Bureau to ensure it hasn’t been stolen or reported as a salvage vehicle.

Having a salvage title means something happened to it — flooding or severe damage — that has caused an insurance company to deem it a total loss. Even if it’s restored, a seller probably won’t get damage coverage on it. Plus, according to Kelly Blue Book, vehicles with a salvage title sell for 20-40% less. That might be good when you’re buying it, but not when you’re trying to flip a car.

The other database you should check is SaferCar.gov. You’ll learn if the car hasn’t been repaired as part of a recall in the past 15 years.

Those first two are free, but many flippers also like paying for a Carfax or AutoCheck report, which shows a vehicle’s history, including ownership and accidents.

Settling on a price

Auto auctions have rules about bidding, so make sure you know what they are before you start bidding — you can find this on the auction house’s website.

However, buying a car from a private seller requires negotiation, and good negotiations require you to remain calm and unemotional throughout the entire process. Don’t be aggressive with the seller because that’s not going to appeal to anyone.

The best approach is to understand the seller’s motivation. Do they need to make some quick cash? Are they moving out of town? Are they selling the vehicle for an older relative?

You can uncover their motivations by asking lots of questions. When did you buy the car? What did you use the car for? What kind of car are you replacing this one with? Do you have maintenance records or receipts? These questions are less about gathering information and more about helping you understand the seller.

Knowing who you’re dealing with will help you realize if this person needs fast cash or is willing to hold on to the car until they get top dollar.

Remember, both you and the seller have a bottom line. They won’t accept under a certain amount, and you’ve got to set a hard line for yourself too. If you can only afford to spend $5,000 on the vehicle, and if the seller is intent on $4,500, that doesn’t leave much room to deal with potential issues.

Having cash in your pocket almost always motivates a seller to get closer to your price. Go in with money in your pocket, understand your absolute top price, and stick to it.

Take care of the paperwork

Once you buy a car to flip, there’s some paperwork involved, and that’s what legalizes the sale.

Auto auctions generally take care of this stuff for you, but buying from a private seller means you need to:

• Fill out a bill of sale: You’ll want the VIN, date, sale price, odometer reading, and names and addresses of the buyer and sellers
• Transfer the title: The seller will give you the title when you purchase the car, but it needs to be signed, dated, and then brought to the DMV. Then you’ll get a new title in the mail. This can vary state to state, so double check before you buy the car.

Avoid buying a car with a lien on it — this means the owner doesn’t have the title because it’s not completely paid off. Cars with liens will probably have a lower price, and I get the appeal but getting the lien off the car can be a lengthy process.

Getting the car ready to flip

This is a two-part process, and it’s where it’s helpful to know a lot about cars, but even then it can be difficult to diagnose and fix every single issue.

Part 1: Find out what’s wrong with the car

Buying a diagnostics tool can give you an idea of what’s going on. You can also check out a repair site like RepairPal and run through their symptoms checker. 

There are also online forums for nearly every make and model of vehicle where you can describe what’s going on with your car and enthusiasts will help you diagnose your issues. To find these groups, do a Google search with the make and model of the vehicle + “forum.” The people on these forums range from incredibly helpful to know-it-all enthusiasts. You’ll get more help if you ask questions clearly and politely.

Another option is bringing the car to a mechanic, but keep in mind that some auto shops are quick to overdiagnose, and you can easily get caught up paying for unnecessary repairs. Making friends with your mechanic (this is a thing) can help you save money. They’ll tell you what’s wrong, and you promise to come back to them for repairs you can’t fix.

You can also Google common issues for that vehicle using the make, model, and year. This will give you an idea of where to start, and fixing these things is a good selling point.

Part 2: Fix the car

There are a lot of repairs you can do on your own, and online resources like YouTube and How Stuff Works can show you how. Or maybe you can pay a mechanically inclined friend some pizza and beer to show you how things work.

Taking your flip to the mechanic is another option, but shop around and get a second or third opinion if you don’t trust their bid.

Buyers like things like new tires and having their fluids topped off. Tires can get expensive, so you might not always want to replace them, however, if they're worn, the car isn’t safe to drive.

If you run into repairs that go outside of your budget, prioritize safety issues. It’s the right thing to do.

Doing a thorough cleaning of the inside and outside of the car will make it ready for pictures and showing. Professional detailing can get pricey, but for higher-end cars, it’s almost a must.

Pricing your car

Earlier in the process of flipping your car, you checked its market value. Consult that again as you list your car for sale, but also take into consideration the overall condition of the vehicle. If you weren’t able to fix every issue and stay in your budget, then that should be reflected in your asking price.

You should check local selling marketplaces to see what cars are selling for in your area. There are some places where SUVs have a higher value, like Colorado, Montana, Arizona, or New Mexico. In California or Florida, convertibles will have a higher value.

In most places customers want basic, mass-market vehicles with low miles. Fuel-efficient sedans and compact SUVs do well in most markets, and manufacturers like Honda and Toyota are known for producing cars that last. Still, check local listings to catch any unexpected market nuances.

Listing your car for sale

No surprise here, but you can list your car for sale in many of the same places you looked to buy from. That means you can list on Craigslist, Facebook Marketplace, eBay Motors, putting a “For Sale” sign in your car, etc.

When you create your listing, be sure to include:

• Lots of pictures, including pictures of any major body flaws
• Basic details, like make, model, year, and mileage
• List out an extra or bonus features
• Briefly describe the vehicle’s condition
• List any work you’ve done
• List any repairs it may need soon

Be on top of your Facebook message requests and emails once your listing is up and live. Buyers like responsive sellers, and there’s a chance they need a car quickly and are willing to pay top dollar for one.

Finalizing the sale

You can meet buyers in safe public places, like a grocery store or school parking lot. Be nice, friendly, and answer their questions honestly.

Let the potential buyer take the car for a drive and run the VIN if they want. They might want time to think about the sale, and that’s okay, but avoid “holding” the car for them.

Ask for cash — avoid checks, PayPal, or other online payment methods, and don’t accept financing options. And don’t forget to fill out the paperwork. When you’re flipping cars, it’s the same on the buyer and seller end.

How much money can you make flipping cars?

There is serious side hustle potential in flipping cars, but too many variables say everyone will experience the same outcomes. Your success is dependent on being able to spot a good deal, fixing the vehicle up, listing it, negotiating, and more.

The most successful flippers know something about cars and know how to negotiate. These are key skills you can learn more about before you get started, but you’ll also learn about them along the way.

If you’re new to flipping cars, the difficult part is needing those skills on top of an initial cash investment. You don’t want to drain your savings to start a side hustle you might not be good at. Start by just thinking about how you’ve been in past situations require those skills, like negotiating for a raise or selling your old car. These experiences can be telling.

The final word on flipping cars for profit

If you’re interested in flipping cars to make some extra money, start by thinking about whether or not you can afford that initial investment. It can take anywhere from $1,000 to $5,000 to get started. You’ll need that in cash, and that shouldn’t be draining your emergency fund.

Flipping cars is easier for anyone who has experience working on cars, even if that’s basic maintenance. But the entire process gets easier after your first couple of flips. You’ll get a better feel for looking at cars, knowing how to approach repairs, and negotiating as a buyer and seller.

The bottomline is you need to be able to spot a deal to buy low and sell high. It sounds overly simplistic, but leveraging your knowledge about cars will help your profits.