Flipping Cars
I’ve sold quite a few cars over the years. I blogged about it at Buying Used Cars.
Recently, I’ve been following a very popular car Flipping page on Facebook. It’s both entertaining and educational.
Here are my recent observations regarding Car Flippers on the page:
Observing Flippers:
Flippers are diverse and fall into one of three categories: Dealers, Owners and Brokers. See below.
Most Flippers like selling cars. There’s a lot to like. Making money. Meeting new people. Every car is a project and finishing projects makes you feel accomplished. I find this particularly fascinating because I like working on cars but not selling them. There’s just too much stress in selling for me as I feel an unusual responsibility to the Buyer to provide a good car.
Some Flippers are supportive after the sale, but many are not. If something were to go wrong with a car after a sale, I, along with many other Flippers, will help the buyer out. But some have ‘bumper to bumper warranties’, where the warranty is from the time your front bumper crosses their property line to when the rear one crosses.
Only serious Flippers do math. The rest like to brag about how much ‘profit’ they made on a sale. “I bought this for $500 and sold it for $7000’” was a recent post. What they don’t tell you is that they bought the car from their Mom or that they put $6000 worth of time and material into the car before they sold it.
No serious business does not take time and material into account when calculating profit - but flippers do it all the time. It is ‘math’, however, that separates the serious from the hobbyist.
Good Flippers put a lot of time into detailing a car. They realize that car buying is an emotional buy and they want it to look good. This is something most people don’t appreciate when they try to dump their old cars on Marketplace. Flippers put the time in to scrub every orifice of the interior. They get all the dog hair out and polish the headlights. Then they wash and wax the exterior.
A good Flipper would also makes sure everything works! They won’t make a list of a bunch of little things that can easily be repaired on the listing.
Flippers develop different rules of engagement as they progress in the business. You could have two people that are both very good at buying and selling cars, but they approach their businesses entirely different.
For instance, many Flippers don’t want anything to do with Subarus because of head gasket issues, but on the other side, other Flippers do very well with making the repair and then selling them.
Some Flippers even make money selling Chevy Malibus, where others won’t touch American cars.
Flippers develop their buying and selling philosophy with experience - not science. It’s fascinating that two Flippers can be diametrically opposed in their business models, but both be successful.
Which Type of Flipper Should You Buy a Used Car From?
As forementioned, there are 3 different types of Flippers:
Dealers. This is a business that buys and sells cars.
Owners. If it is not sold through a business (dealership) it is considered a Private Party sale.
Brokers. This is a person that is ‘helping’ the true owner of the vehicle sell the vehicle. It can be a dealer or an individual.
Buying from a Broker is also considered Private Party Sale.
A Flipper can belong to any and even all of these groups. They can be a used car dealership selling a dozen cars per month or they can be the guy that collects cars, fixes them up and then eventually sells them. In New York State, you are legally allowed to sell up to 4 cars per year without getting a dealer license. People like me take advantage of this and buy and sell a few cars per year.
It’s always caveat emptor (buyer beware) when buying a used car and it doesn’t matter from whom you buy.
Dealerships are held to standards by the State. In New York, we have the Lemon Law which protects Consumers when buying cars with less than 100,000 miles. Dealers can sell a car with over 100,000 miles ‘As-Is’ and not provide any warranty at all.
This is legal and ethical as long as the Dealer is not concealing any defects that he is aware of.
Dealerships want you to believe that buying cars from them is safer than buying from an individual. This is not true in all cases. In either case, buying from someone reputable is the wise choice - whether a business or an individual. That’s what makes the difference.
Buying from the individual that owns the used car has distinct advantages.
Private Party Sales are much cheaper than buying from a dealership. You get the whole history of the automobile.
Knowing the person you are buying from is a great way to get the facts about the car.
Private Party sales have the downside of no warranty - ever - no matter what the mileage.
The only legal or ethical stand a person has against the Private Party Seller is whether they tried to conceal a known problem with the car. If they did, one may have a stand against the Seller in a court of law. But these things are hard to prove.
In general, you’re on your own when buying Private Party.
That’s why the price is so much lower than a dealer!
Getting Flipped
Many people don’t understand the one simple rule regarding Private Party sales:
There are NO refunds.
Buying from an individual is not like buying from Walmart, You can’t take it back - or rather you shouldn’t. It’s the unwritten rule amongst Flippers - no returns.
This rule applies to Flippers and the good ones live by this Code. If you sell a car to a Flipper, you will never see them again. Even if the car breaks down a day later, a Flipper will not come back on you.
When a car turns out to be a lemon, a Flipper learns from the mistake, recognizing ‘they were the flip’, and they move on. Someone duped them by selling them a car that was worth less than what they paid.
That’s why when you’re buying from a Dealer or an Individual, you always want to have someone with mechanical knowledge look over the car. When that title is signed over to you, the car is yours. No backsies.
Buying from a ‘Broker’
In most states like New York, it’s illegal to buy a car and not have the title transferred to your name. Transferring the title is the final step in a purchase.
But if your 90 year-old Grandma can no longer drive and wants to sell her car, but doesn’t know how to use Marketplace, there’s nothing wrong with her signing the title for you to sell for her.
This is brokerage sale.
There are car brokers that will sell your car for you on consignment. They may clean it and do some simple maintenance and then list it on their lot. Using a broker is a good way to move vehicles without getting involved. They take a portion of the sale price for their effort, but in many cases they get more for the car than you could get.
In both of the cases above, with Grandma or Broker company, there was no sale of the vehicle to the intermediate party. That’s why it’s all above board.
If you BOUGHT the car from Grandma with the intention of selling it, THEN you would be required by law to title it in your name. This would cost you Sales tax and a small titling fee in New York. As mentioned, you are limited to 4 sales like this per year as an individual.
There are plenty of Flippers - including dealers - out there ‘selling for a friend’, or in other words, selling a car with a signed or ‘open’ title. Personally, as long as a I get a Bill of Sale from the true title owner of the car, and the guy selling the car is reputable, I don’t care if he paid for the right to sell it. I always buy cars ‘As-Is’ and take the responsibility for the sale. I know cars and their value and if I miss something in the review, it’s on me.
Dealerships have a problem with Open Title sales and they lobby hard against people transacting by ‘jumping titles’. Rightfully so, as Dealerships 1) pay for the right not to pay taxes to the state and 2) title jumping is illegal.
Selling Cars to Flippers
Some people don’t like selling cars to Flippers. They don’t like the idea of people making money off of them.
This is silly. You should sell to the person that gives you the best price. Period.
But there are distinct advantages to selling a car to a Flipper.
Flippers buy cars As-Is. As I mentioned, you’ll never see the person again after you sell to a Flipper. This is a huge advantage.
Selling is exasperating. Your reputation is on the line with every sale. One bad experience with a mouthy customer and you’ll realize what these guys deal with day after day.
There’s a lot of knowledge and prep involved with selling a car the correct way. People that try to sell cars themselves also quickly realize how much work it is. First there’s the prep. The repairs have to be done and the car has to be impeccably cleaned and shined. Next, there is the listing and marketing. Flippers take many photos from different angles and list all the good and bad of the vehicle.
And then there’s the selling: the dozens of responses and texts to the ad along with phone calls and missed appointments.
Go to FB Marketplace and you’ll quickly realize who does not know how to sell a car. Crappy photos of a dirty car that “Starts, Drives and Stops.” Crappy cars are trying to be sold by lazy owners that over-value their vehicles all the time.
If you find the right Flipper, he’ll give you a decent price for your car and take care of all the hassle of selling. People scrap cars all the time, where a Flipper would pay much more than the scrapyard - and they would come pick it up.
Trade-ins are another area where Flippers can be helpful. Dealerships don’t give squat for trade-ins. If they seem like they are, they’re likely inflating the price of the car you’re buying to make it seem the trade-in is fair. Get a price from a Flipper than take that money and get your best deal.
Buying Cars from Flippers
Years ago, I bought a Subaru from a guy from Florida in a motel parking lot.
Def shady. The car was a rust bucket.
There are some shady people out there selling cars and some have bad reputations. The ‘bumper to bumper’ warranty is case in point.
Do your research. Find someone reputable that stands beind the car.
And bring a mechanic!