Is It Worthwhile To Invest In Car Flipping?

For years, flipping automobiles has been a side activity to supplement one's income. The game has evolved, though, in an era of growing used car pricing and online vehicle ordering, and the profits are much bigger.

The following is how automobile flipping works: A person places a fixed-price order with the factory for a popular automobile. When it comes months later, the vehicle's value rises; due to the present state of the auto market, it may be sold for a profit.

Yes, there are associated taxes — sales tax and registration — and it might be dangerous because you can't guarantee the price won't rise after you buy the automobile. However, it has grown in popularity to the point that carmakers are attempting to put a stop to it.

According to automobile news website Carscoops, the Ford F-150 Lightning, which sold out before production began, comes with an agreement declaring that the buyer would not resell the truck for at least a year (this additional agreement is included at the dealer's choice). According to the car blog Jalopnik, GM will void the warranty on the popular Chevrolet Corvette Z06 if it is resold in less than a year.

A Contemporary Approach To Purchasing New Automobiles

Nowadays, highly anticipated models are bought online and produced to the buyer's requirements. Buyers will be required to put down a deposit, which is normally only a few hundred dollars, and they will be able to refuse the automobile later if they change their minds.

Because the rollout is delayed and supplies are limited, electric automobiles and trendy new models like the Corvette Z06 or Cadillac Escalade-V are excellent targets for flippers.

Success Tales

While some automobile owners want to resell their vehicles, this is not the case for all car buyers. Sometimes an owner considers flipping a vehicle because automotive costs are rising and they think, well, why not?

Kirk Dunn, a contractor from Long Beach, California, takes advantage of both types of flipping. He witnessed his Chevrolet Silverado pickup's value rise so dramatically that he sold it to Carvana for a $3,500 profit. The market remained strong in the months that followed, allowing him to buy two new vehicles, flip them for a profit, and enjoy driving newer and better models.

"I have no idea how many hours I spent negotiating and researching," he adds. "But it was a game, and it was a lot of fun."

Similarly, I was driving a $13,000 out-the-door 2014 Volkswagen Jetta SportWagen. I had no intention of selling it until I discovered Carvana would pay me $16,800 for it, even though it had 30,000 miles on it.

It's A Risky Business.

While the present automotive market is still hot, with electric vehicle costs growing five times faster than gas car pricing, a study by iSeeCars suggests that the good times may be coming to an end. In reality, used-car prices have just begun to fall.

According to Edmunds, the average transaction price for a three-year-old vehicle was $31,302 in July, a 4.6% decline, or $1,526, from the peak of $32,828 in January.

"There's a chance that prices will fall between when you purchase it and when you sell it," says Richard Arca, Edmunds' head of vehicle assessment and analytics.

"This situation will not persist forever," says Karl Brauer, executive analyst at iSeeCars. "If you don't time it right, you'll be stuck with that new automobile or forced to sell it at a loss."

Then there are sales tax and registration costs to consider, which will eat into your profits. In California, for example, the costs of a $50,000 car are $5,745. That is a difficult nut to crack.

Prior To Flipping

To successfully flip an automobile, you must first have a keen sense of the market in order to purchase low and, ideally, sell high.

Begin by researching the worth of the automobile you wish to sell in price guides such as Kelley Blue Book and Edmunds. Here are a few more professional ideas to help you determine whether flipping is worth the risk.

•Get quotes from online vehicle dealers like Carvana, Shift, Vroom, and CarMax.

•Estimate all fees and the cost of any repairs to the vehicle.

•If you want to flip a used automobile, look for a well-kept model with low mileage and few owners.

•Check to see whether there is a penalty or limitation on selling the automobile you're thinking about buying.

•Consider if the money you intend to earn is worth your time and effort.

Finally, pick a car to flip that you wouldn't mind having if the music suddenly stops and the market settles down.