It’s rather impossible to give an exact number as to how much can you make buying and selling cars, but making money by trading cars is possible. To maximize your profits, you need to be a skilled trader with lots of reliable contacts and with a vast knowledge of the used car market.
Buying and selling cars can be done in a couple of different ways. The most obvious one is to open up a car dealership, but car flipping might be a better idea for those who don’t want to invest large sums of money at the very beginning.
It also depends on which types of cars you plan on trading. Regular consumer cars such as the Toyota Corolla or the Honda Civic can earn you a decent sum of money, while classic cars and supercars can be by far the most profitable when it comes to car flipping.
Either way, if you want to earn money trading cars, you have to have certain skills and a bit of luck in the process. The used car market is changing fast and you need to be on top of your game in order for it to be truly profitable.
Car dealership – costs, profit margins, and future
The most obvious way one can make money trading cars is to open up a 3rd party independent dealership. Currently, there are more than 18k registered light vehicle dealerships in the US, and as time goes on these numbers are in constant decline, but that can be attributed mostly to the pandemic.
To open up a dealership, you need as much as $100k-$200k in advance just to secure an adequate space and to do all the registration, insurance, and tax fees. These vary greatly depending on which types of cars you want to trade, and how big of a trader you want to be.
Earning money owning a car dealership also depends on which brand of cars you are planning to sell. Some brands like Ford, Mercedes, Kia, Toyota, and Honda are extremely popular, and there are loads of interest to buy these cars.
However, the future of traditional car dealerships is rather grim at the moment because brands like Tesla decided that there is no need for a 3rd party dealership and that the company can sell cars directly to its customers. Only time will tell if this is going to expand beyond Tesla, but it seems like the model is working.
Flipping cars – Which cars, how to flip, profits
Flipping cars usually consists out of buying specific cars solely for the purpose of reselling them afterward. This means that you need to look for cars that are either popular and underappreciated, iconic classic cars in need of mild to extensive restoration, and high-end supercars and sports cars.
These 3 types of cars are the ones to consider if you want to maximize your profits. After you decide which car you want to buy, be sure to clean the car up and tidy it as best as possible. If it’s a classic car or a supercar, it’s also necessary that you check the car out extensively before buying it.
If you have experience working on cars, or you have experience detailing cars, both of these come in handy with car flipping. The profitability of car flipping depends on how well you do and the types of cars you want to sell.
It’s best to start with something small in order not to waste your money, but if you want the most profitable cars to flip, new limited-edition supercars are your best bet.
Regulatory aspects of the car trading business
One thing to keep in mind is that car trading can be illegal if not done properly, which means that you might face serious criminal charges if you don’t reside within the legal limits of your respective state. As mentioned, state law differs substantially, so it’s always best to investigate what you can or can not do.
If you want to sell multiple cars for profit, you need a dealer’s/trader’s license which usually requires you to contact the Department of Revenue and the Department of Licensing. These two can inform you about what it takes to acquire a dealer’s license and what are the associated costs.
It’s never a good idea to start doing something without the bare minimum of knowledge, and the worst thing of all is the fact that illegal car trading also harms legitimate sellers who have spent lots of money to do everything above the board.
A little about insurance when flipping cars.
FAQ Section
Should I start trading cars?
Car trading can be a fun way to spend your free time, but it can also be a legitimate, profitable business venture. If you love cars and you spend lots of time browsing through various online car listings, you might even try to do it yourself.
It’s best to start with something small and safe such as a Toyota Corolla or a Honda Civic. Try to find cars that don’t have any serious mechanical or electrical issues, the best ones to consider are cars that are undervalued because they are in a subpar cosmetic condition which can be fixed fast and cheap.
Is EV trading a good business venture?
Electric cars are becoming more and more popular, and as such, many people are questioning if trading EVs is a good business plan. This highly depends on where you live because some places like LA or NY have enough EV interest which can make the business profitable.
Other areas which are not yet on board with the EV revolution are not recommended, and you ought to wait for a while and keep an eye on the market demands.
Is luxury car trading a profitable business?
It depends on what you consider luxury. If you want to trade executive sedans that depreciate like crazy, the profit margins are sometimes negligible. However, high-end limited edition supercars are extremely profitable because they are limited in production.
Cars such as these often go for twice their original price in the first few months after release. This means that if you can secure a build spot for such a car, you are likely in a position to earn a decent profit.