Flipping cars basically means buying a car for cheap, fixing or tidying it up if necessary, then selling it for profit. Even though the process is not all that difficult nor expensive, there are a couple of factors one needs to address before embarking on the profit-rich journey of flipping cars.
The most obvious benefit of flipping cars is the profit by either making it your primary source of income or by simply doing it as a side hustle. Furthermore, car flipping can also be a great way to capitalize on your car enthusiasm as it enables you to test your skills and knowledge in addition to earning a potentially sizable profit.
However, there are a couple of significant drawbacks to car flipping, and the most obvious one is the risk involved. No matter how well you inspect the car, it does not mean that the car will be in running condition the very next day. Besides the car itself, the whole process can often be stressful and full of potential pitfalls.
If you do everything right, and you pay close attention to the market and how you can fix the car fast and cheaply, you are in a position to earn quite a bit of money. It’s best to start small and build your investment pool through successful car flipping, and later maybe even turn it into a large-scale business.
You might also want to read our ultimate car flipping guide.
Pros of car flipping – Why should you do it?
As mentioned previously, the ability to earn a decent profit is the most obvious benefit of car flipping. If you manage to do it fast enough, it can be the easiest money you’ve ever earned. The job itself can also be satisfying as it enables you to spend time around cars. If you are a car enthusiast, this is obviously a huge benefit.
The ability to work for yourself, by yourself is also a benefit of car flipping. You have the freedom to decide which car to buy when to buy it, and how to sell it. You don’t have to listen to anybody as this is your way of making money. You can decide what to do with the profit, and how frequently do you want to flip cars.
By being a car flipper, you are also actively expanding your network which can be beneficial if you ever want to partner up in the future and do something way bigger than just flipping a few cars per month. The best course of action is to always remain polite and professional, this way everyone makes money, and everyone is happy.
If you decide to work on cars yourself, you are also bound to increase your mechanical understanding of how cars work and how to fix them. Besides repairing cars, you are also likely to gain more experience cleaning dirty cars. Furthermore, flipping cars is also a fairly safe investment when compared to the stock market.
Cons of car flipping – Why should you skip it?
Any investment has a potential downside and flipping cars is not any different. Even if you follow a strict plan on how to flip cars, you can still lose money. You can lose money due to many contributing factors which can not always be visible from the get-go.
Unexpected expenses related to car flipping can sometimes eat your entire profit. Although you’ve spent a great deal of time inspecting the car before buying it, there is always a chance you will miss diagnosing an electrical fault, a dent, or anything similar. Cars cost money to maintain as well which means that if you don’t sell your car quickly, you are losing money.
Selling a car can sometimes be way more difficult than you’d expect. Whether it be the demand or the price, the longer the car is listed, the lower the chances of selling it. Besides the car itself, it is not true that car flipping only requires you to be active a few hours per week. This might only be the case for partnered-up or most successful flippers.
The market itself is extremely complicated and anything you do can end up being a risky move. People often tend to overcommit, and they end up with a car they can’t fix. Many things can go south, and all of it is bound to hurt your wallet. All of this contributes to stress and it can often demotivate you from wanting to go on.
Is it worth it to flip cars?
It can be worth it if you are really into cars, and you have a vast understanding of how the car market works. However, you always have to be ready to lose money as this is a constant in any form of investing. The 2020s have been fairly uncertain, and no one knows what will happen in a year or two, so whatever you do, don’t put all of your eggs in the same basket.
If you do decide to start flipping cars, do it safely and don’t overcommit and buy cars you can not fix or sell. This way you will minimize the risks, and if you can finalize the deal fast, it’s a good indicator that you might be the man for the job.
Which cars should I flip first?
The best idea would be to focus on popular, always in-demand cars manufactured by mainstream brands such as Toyota, Honda, Ford, etc. Be sure to opt for lower-mileage cars that are easy and cheap to maintain. Don’t go for niche cars until you are more experienced with the entire process.
The Toyota Corolla or the Honda Civic are great starting points as both of these are popular, reliable, easy and cheap to maintain, and most importantly – always in demand.
Do I need to fix the cars myself?
If you want to flip damaged cars, it’s best to focus on lightly damaged cars. It’s not true that you need to be a mechanic to flip damaged cars, but this is often the most profitable approach. If you can partner up with someone with mechanical knowledge, you will have more time on your hands to scout for the best cars.
You can approach the craft from many different directions. Be sure to do the math beforehand, and all of the drawbacks listed will have a lesser impact on the outcome.