Flipping cars can be a legitimate profitable business if you are well within the regulatory limits, but these vary greatly from one state to the other. If you are predominantly interested in buying and selling cars for personal use, a standard private car insurance policy should do.
However, if you want to sell cars for profit, and you plan to sell as many cars as possible, you are going to need to acquire a specific dealer license and specific insurance policies. The key aspect of making sure you get the right prices is to investigate how your specific state regulates car flipping.
Sometimes a state will require you to opt for a specific business insurance policy, while others might even let you off with just a personal insurance policy. Of course, this also highly depends on if you want to buy and sell cars for yourself, or you want to make it a larger scale business.
The best course of action would be to reach directly to your insurance provider and ask which insurance coverage model is the best for your specific needs. It’s also a good idea to cross-shop because some insurance companies offer tailor-made insurance policies for each business model.
Read this too: Our big guide on flipping cars.
Buying and selling cars for profit
The majority of car flippers out there are focused on making money moving cars as fast as possible. If you are one of them, you are likely going to need a specific dealer’s license which comes with many other requirements such as insurance and other fees.
Many successful car flippers believe that insuring a specific car you plan on selling is the best idea if you are not moving a large number of cars per year. Insurance policies such as these are tied to the car and they are usually the best and most secure.
However, it all depends on your business model. Some car flippers sell cars without even seeing them which means that there is no need for insurance policies that cover parking fees or transport. If you are usually offering lengthy test drives, it’s best to insure your cars for the purpose you used them for.
Be that as it may, the best thing you can do is to get to grips with all your state laws that apply to car flipping and insurance. This way you will be able to plan accordingly and you will not waste time when the car actually reaches you.
Selling cars for personal use
If you are the type of guy who loves changing cars every 3 months or so, you don’t need specific dealer licenses nor do you need specific insurance coverages. As most states enable you to sell up to 5 cars per year without a dealer’s license, it means you are well within this limit.
As such, a regular private insurance policy will do, but this can also change depending on how valuable the car is and where it’s coming from. Some cars that are being shipped from far away places and ones that often change their transport vehicles are more prone to damage.
Furthermore, cars that are traveling exposed to the elements are also more susceptible to damages. This means that you should investigate how and when your car is going to be shipped and opt for an insurance policy that covers the risks of each aspect of shipping.
Furthermore, if the cars you are selling are more expensive, the insurance policies are also going to be more expensive. This can sometimes lower the potential profits, but if you are only selling for personal use, and you are not interested in making a maximum profit, it’s just best to be safe.
Risks involved in car flipping
In order to choose the right insurance, you need to be aware of all the risks which are often associated with car flipping. Some cars tend to gather less interest which usually means that they are not sold as quickly as you’d want, and if that’s the case, be sure to insure the car for any potential damage.
Besides cars staying on the lot, risks involved in shipping the car or taking it for a test drive can also ruin your car flipping business if you are not insured. Furthermore, the places where you keep your cars should also be insured and safe from fires, floods, or any other natural disaster.
Some cars spend a lot of their time changing hands without actually being driven, this means that some car components such as tires or brakes can degrade over time because they are not used enough. It’s always best to check all the vital car components before you decide to opt for a specific insurance policy.
How many cars can I sell without a dealer’s license?
The answer to this question depends highly on the place you live as different states have different rates. As mentioned, NY enables you to sell up to 5 cars for profit per year, while Indiana enables you to sell 15. However, some countries don’t have maximum numbers if you are buying and selling solely for personal use.
Be sure to investigate the regulatory limits and try to find business models which are well within the regulatory limits.
How do I acquire a dealer’s license?
This also varies from one state to the other, but there is a general outline of what you ought to do. Firstly, obtain the application process and fill it up, after that you sometimes need to finish a specific training program and get a surety bond.
After this, you will have to register your business name and apply for a sales tax number and obtain a federal tax identification number. Also, be sure to obtain a valid insurance policy and submit your application for approval.
Is there a limit to how many cars one can own?
There is no limit as to how many cars one can own. While most people tend to own a single car or not a single one at all, others can sometimes own 5 or even 10 vehicles. The most interesting demographics are associated with owners of Bugatti vehicles which on average own 84 different cars.
Besides owning 84 cars, they also own three private jets and a yacht or two. Average Bentley owners have only an average of 8 cars registered on their name which makes them a plebian group.