Is the car flip worth it?

Flipping cars has been a side hustle for years as a way to earn some extra cash. But at a time of rise in used car prices and ordering vehicles online, the game has changed – and the profits are much higher.

Here’s how car flipping works: a person orders an in-demand vehicle from the factory at a fixed price. When it arrives months later, the value of the vehicle increases; due to the current car market, it can be sold at a profit.

Yes, there are related costs – sales tax and registration – and it can be risky, as you can’t guarantee the price will go up once you get the car. But it has become so popular that it has caught the attention of automakers, who are trying to clamp down on the practice.

For example, the Ford F-150 Lightning, a truck sold before production began, comes with an agreement that the buyer will not resell the truck for at least one year (this additional agreement is included at the discretion from the dealership), as reported by automotive news site Carscoops. And, GM will void the warranty on the popular Chevrolet Corvette Z06 if it’s resold in less than a year, according to automotive site Jalopnik.

A modern way to buy new cars

The trend these days is for highly anticipated models to be ordered online and built to buyer specifications. Buyers will need to put down a deposit, usually just a few hundred dollars, and they can turn the car down later if they change their minds.

Electric cars and fashionable novelties, such as the Corvette Z06 or the Cadillac Escalade-V, are the favorite target of pinball machines because the deployment is slow and the stocks are limited.

Achievements

While some buy a car with the intention of reselling it, not all car buyers do. Sometimes the idea of ​​returning a vehicle comes to an owner’s mind because he sees the price of cars going up and wonders why not?

Kirk Dunn, an entrepreneur from Long Beach, Calif., took advantage of both types of turnarounds. He saw the value of his Chevrolet Silverado pickup truck increase so much that he sold it to Carvana for a profit of $3,500. Over the next few months, the market remained hot, allowing him to buy two new trucks, then flip them for a profit and enjoy driving newer and better models.

“I can’t even tell you how many hours I spent negotiating and researching,” he says. “But it was a game and a kind of fun.”

Likewise, I was driving a 2014 Volkswagen Jetta SportWagen, which initially cost me $13,000. I had no intention of selling it – until I realized Carvana would give me $16,800 even after adding 30,000 miles to the odometer.

Risky business

While today’s auto market is still hot, with prices for electric vehicles rising five times faster than gasoline car prices, according to research from iSeeCars, the fun is coming to an end. In fact, used car prices have started to drop recently.

According to automotive research site Edmunds, the average transaction price for 3-year-old vehicles was $31,302 in July, down 4.6%, or $1,526, from their high of $32,828 in January. .

“There’s a bet that prices could stabilize between the time you buy it and the time you return it,” says Richard Arca, director of vehicle valuation and analysis at Edmunds.

“This situation will not last forever,” says Karl Brauer, executive analyst at iSeeCars. “If you time it wrong, you’ll be stuck with that new car or you’ll have to sell it at a loss.

And then there’s sales tax and registration fees that will cut into your profits. In California, for example, that fee is $5,745 for a $50,000 vehicle. It’s a big nut to crack.

Before going back

To successfully flip a car, you first need to have a good eye on the market so you can buy low and hopefully sell high.

Start by researching the value of the car you want to return in price guides such as Kelley Blue Book and Edmunds. Here are some additional tips from the experts to help you decide if flipping is worth the risk.

  • Estimate all charges and the cost of any work to be done on the car.

  • Look for a well-maintained model with few miles and few owners if you want to return a used car.

  • Make sure there are no penalties or restrictions on the sale of the car you are considering buying.

  • Determine if the amount of money you hope to earn is worth your time and effort.

And finally, pick a car to flip that you wouldn’t mind owning in case the music suddenly stops and the market finally cools down.

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