Selling cars for profit without the expense of having a large lot
Have you ever flipped a car?
Many people are selling cars for profit without having a used car dealer license.
There's nothing wrong with selling a personal car for more than you paid for it. There is a certain limit which varies in each state of personal cars you can buy and sell. Check your state's laws on how many cars you can sell privately, and getting a dealer's license. If your buying and selling cars without registering them in your name, and your intent is to make a profit without having a dealer license, that's illegal in most states. Plenty of people are selling cars for profit anyway and never get caught. If they do get caught, the state will probably give them a warning if they get their used car dealer license and do it the legal way.
If you are selling cars privately for profit....
pageokYou can make some decent money buying and selling cars on craigslist. You can make a lot more money if you get a dealers license. Don't worry, you don't need to have a lot of start up money to get the license.
Unlicensed dealers don't follow licensed car dealer laws:
- They don't collect sales tax
- They're not bonded, or insured
- They don't have a car lot
- Most of them don't smog the cars or perform safety checks. You can view a vehicles smog history by going to AutoCheck®, and running a vehicle history report.
- Why it's sometimes easier for an unlicensed dealer to sell a car
pageokUnlicensed dealers pose as private parties and say their selling the car for a friend or relative. Unlicensed dealer are selling cars for profit by posing as a private party:
- In a private party transaction, the seller will often lower the selling price on the bill of sale for the buyer. This way, the buyer won't have to pay as much sales tax when registering the car with the DMV. In California where I live, the car dealer laws are charging tax, and licensing on top of the sales price.
- Most private parties seem more honest since their intention is not to make a profit.
- Lots of people don't want to buy from a dealer. Dishonest dealers have given us a bad reputation. With car home selling, buyers don't have to deal with an aggressive salesman breathing down their neck.
- Dealers have to register the vehicle on the customers behalf. Some buyers feel more confident having the title in their hands, and registering the vehicle themselves.
Most unlicensed dealers selling cars for profit are deceitful, and if there are problems with the car after the purchase they hide, and ignore phone calls.
pageokMost unlicensed dealers buy cars from police impound auctions, or private parties. I have a mechanic friend who buys cars with blown head gaskets. He buys them cheap, fixes them, and sells for a profit. If you’re a mechanic, it’s a great side business because cars with problems are sold cheap. Only mechanics will buy them. Most people are quite picky, and don't want to have to put in that extra work. Unlicensed dealer's selling cars for profit are good at finding deals in classifieds
If a licensed dealer does a retail transaction, they have to register the vehicle in the new owner's name. Unlicensed dealers never buy from dealers because they don't want to pay sales tax, nor have the vehicle registered in their name. They want to be able to pass the title onto the next buyer, which is registered in the previous owners name. This way, there will be no record of the unlicensed dealer in the transaction. They also know that licensed dealers are selling cars for profit too so they don't think they'll get a good deal.
Why it's sometimes easier for a licensed dealer to sell a car
- Licensed dealers generally have plenty of cars to choose from.
- Most of them offer financing.
- Car dealers take other forms of payment like credit cards.
- There cars are held up to greater duty of good faith. The vehicle has to be safe. The tires, and brakes have to be decent.
I myself buy cars from private parties if I see something that’s a good deal.
There are plenty of advantages to buying cars on craigslist, and cars.com for resell. You can get excellent deals! A lot of the time you can get cars cheaper than what dealers pay for them. Like anything there are also disadvantages like:
- If there’s a really good deal, the seller is getting tons of calls. You can be on your way over there, and by the time you’re halfway there, the car is already sold.
- Other times you get there, and some other guy pulls up ten minutes later. You both want the car and you’re in an awkward situation.
- You drive far and by the time you get there see the car was grossly misrepresented. This has happened a bunch of times.
- Sometimes you get really lucky and strike gold. I look in the classifieds for certain cars that are rare, and not often found at dealer auctions.
It's safer to buy a car privately than from a public auto auction if the vehicle at the auction doesn't come with a guarantee. If you buy privately you can do a much more thorough inspection of the car. You can test drive it, take it to a mechanic, etc. You can't test drive cars at public auto auctions. This is dangerous because the car can have a ton of problems you wouldn't be aware of without driving it first.
I mostly go to dealer auctions because their are tons of cars to choose from at great prices
pageokUnlicensed dealers who are selling cars for profit sometimes make more money than small dealers because they pay no taxes, and have no overhead. It's not honest money though, and a lot of times there's lying and deception involved. People who sell on the street don't say they're dealers. They make something up.
If you're curbing cars in California now watch out!
BILL NO: AB 2042 is a new bill that has recently passed which allows an officer to remove a vehicle when a peace officer has issued a citation for acting as a vehicle dealer, manufacturer, distributor, or transporter without a license or temporary permit. If you're showing cars on the street with "For Sale" signs in them you could get busted. This bill happened mainly because a bunch of people were complaining. On some city streets around where I work there will be a whole row of cars with "For Sale" signs in them. People who live in the area where getting upset because these cars were taking up all the parking in the area. These cars will sit there sometimes for weeks. The public had enough.
Unlicensed dealers curbing cars on the streets were selling cars with unpaid back fees, unpaid parking tickets, lack of appropriate smog certificates, or other similar issues. unlicensed dealer activity conducted on public streets is a constant source of complaints to law enforcement agencies. They assert that unlicensed dealers frequently sell stolen vehicles, salvage vehicles that lack functional airbags, vehicles that cannot pass smog check, and vehicles that lack required safety equipment. Unsuspecting citizens buy these cars and do not find out that there are problems until they go to register the vehicle with DMV.
You'll sink if you don't make connectionsWhen sizing up a car, think to yourself what it's going to take to bring the car up to par. Look at the car, and estimate the defects you'll have to fix. Is it going to be worth it? Can I get someone to fix it cheap? Can I get the parts cheap? Can I find them used? If you want to be successful selling cars for profit, you have to able to get the mechanical, and cosmetic work done cheap. Try going to lots’ of different body, and mechanic shops. Go to ones recommended by others in the business. With time you'll start to find a couple of shops that, give you a wholesale price, and that you trust. I have certain mechanics I go to for certain things. For instance I have a guy I go to just for my diesel vehicles. I have my main place where I get the majority of my work done at a great price. Then, I have my guy whom I go to when my first place can't do the work. I don't go to him first because he's a lot more expensive but a much better mechanic.
- Find a good smog technician! I can't over emphasize that enough. I pay $30 each for my smog tests, and certificates.
- Try buying good cars with bad paint. Fewer people are interested in them, and they sell for much less. I get decent quality paint jobs done for $280, and any dents fixed on top of that for a very reasonable price, depending on the size. Small dents cost me $20 a piece to fix
- You should be paying anywhere from $90 to $140 to replace a windshield depending on the car.
- I pay $50 each for new tires.
- Brake jobs shouldn't be any more than $120.
How not to waste time on the phone with a potential buyer
pageokIf a buyer says "Can I have your address so I can come see the car this weekend?” say "Call me and hour before you come by, and I'll give it to you then.”Often, I’ll spend a lot of time giving a potential buyer my address, and directions. It takes ten times longer if I'm talking to a foreigner who doesn't speak English very well. I'll spend all that time, and the buyer ends up not showing up, without bothering to call. I wasted all that time for nothing. Get used to people flaking out on appointments to come check out your car. Make sure they confirm with you before they come.
How to spot another curbstoner
Guys who curb cars and search craigslist for deals generally don't like to buy cars from other people doing the same thing. People who curb cars like to buy from private owners. You can tell someone is just flipping a car when you see there are no plates on the car in the pictures. Cars with no plates were just purchased at police impound auctions and purchased for the sole intention of flipping them.
If you call on a car and the person tells you there selling it for their cousin or someone other than them, they're are flipping it. Basically, if someone is selling a car and the title isn't in their name, nine time out of ten it's another person doing the same thing you are.
There are many ways for licensed dealers to make big money selling cars for profit without having a large lot. Keep your overhead low. That way, you'll survive in the business your first few years.
ConsignmentConsignment is great because you can sell cars for profit on other peoples lots. The retailer takes care of all the paperwork, and you either split the profit, or pay a commission. Every state is different, but most allow wholesalers’ to sell their vehicles on dealers’ lots for consignment. You don't have to pay the high overhead, and the retailer does the majority of the work. Most retailers are willing to do this because they don't want to tie up all their money in their inventory. If the car doesn't work out for them, they won't have to take a loss. There is sometimes a lot of down time during an auction while your waiting for certain cars to come through. Take these opportunities to get to know other dealers, and make connections. It’s a good way to find other dealers selling cars for profit willing to do consignment.
Luis's question: Don't really know where to get started. I was thinking of targetting Japanese imports and even moreso.....importing cars from japan if possible. What do you think about that? Waste of time?
Hondas and Toyotas are some of the best cars to flip but there very hard to get cheap. Try Hyundai and Kia. There are plenty of them around you can get pretty cheap with low miles, and they're very economical. The ones with automatic transmission will sell faster. I don't know how you would import cars from Japan unless you have connections over there. I think you would be more inclined to exporting cars to Japan.
pageokI'd like to be legal in selling cars im gonna go for my dealers licence.What would happen if you get caught selling cars without a dealers license? Can i get arrested, ticketed or what? Normally when i sell a car i use a bill of sales. The first from the seller to me then the second i make as a gift to a friend and use his name to sell it.or i just use the same price as i got it to the my purchaser in the car value.has worked well i guess lol.but its time to open up a lot with cars under 5k
In my opinion you'll only get in trouble if your doing shady things like committing fraud. Some examples are selling cars with salvage titles, odometer roll back history, wrong paperwork etc. Screwing people over will get you in trouble fast. Otherwise you really don't have anything to worry about. I'm not advocating selling cars without a license because it's not legal. Not only that most people who sell cars on the side lie to the prospective buyer about it. It seems like your selling a couple on the side for some extra cash. If you want to get serious about it you'll have to become a dealer.