Is Car Flipping Worth It?

Flipping cars has been a side hustle for years as a way to make a little extra cash. But in an era of rising used car prices and online vehicle ordering, 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 vehicle’s value rises; because of the current car market, it can be sold at a profit.

Yes, there are related fees — sales tax and registration — and it can be risky, as you can’t guarantee the price will increase after you have the car. But it’s become so popular that it’s caught the attention of carmakers, which are trying to clamp down on the practice.

For instance, the Ford F-150 Lightning, a truck that sold out before production started, comes with an agreement stating that the buyer won’t resell the truck for at least a year, as reported by car news website Carscoops. And, GM will cancel the warranty on the popular Chevrolet Corvette Z06 if it’s resold in less than a year, according to auto 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 the buyer’s specifications. Buyers will have to put down a deposit, usually only a few hundred dollars, and they can decline the car later if they change their mind.

Electric cars and hot new models are the prime target of flippers because the rollout is slow and inventories are limited.

Impulse flipping

Sometimes the idea of flipping a vehicle occurs to an owner because they see car prices climbing and figure, well, why not?

Kirk Dunn, a Long Beach, California, contractor took advantage of both kinds of flipping. He saw the value of his Chevrolet Silverado pickup increase so much he sold it to Carvana for a $3,500 profit. Over the following months, the market stayed hot, allowing him to purchase two new trucks, then flip them at a profit and enjoy driving newer and better models.

“It was a game and kind of fun," he says.

Risky business

 According to a study by iSeeCars, the fun might be coming to an end. In fact, used-car prices have begun to soften recently.

According to car research site Edmunds, the average transaction price for 3-year-old vehicles was $31,302 in July, a 4.6% decrease, or $1,526, compared to their peak of $32,828 in January.

“This situation won’t last forever,” says Karl Brauer, iSeeCars executive analyst. “Time it poorly, and you’ll be stuck with that new car, or have to sell it for a loss.”

Before you flip

Successfully flipping a car starts with having a good eye for the market so you can buy low and — hopefully — sell high.

Start by looking up the value of the car you want to flip in pricing guides such as Kelley Blue Book and Edmunds. Here are a few additional tips from the experts to assess the risk and reward.

• Get estimates from online car retailers, such as Carvana, Shift, Vroom and CarMax.
• Estimate all fees and the cost of any work that has to be done to the car.
• Look for a well-maintained model, with low miles and few owners, if you want to flip a used car.
• Make sure there isn’t a penalty or restriction on selling the car you're considering buying.
• Consider whether the amount of money you're expecting to make is worth your time and effort.

 Finally, choose a car to flip that you wouldn’t mind owning in case the music suddenly stops and the market finally cools off.