Driving nice cars and making loads of cash while do so is perhaps the dream of many. Realizing the dream of flipping cars for profit is the trick. And anyone with the desire and effort to succeed can do both.
Making money buying and selling used cars is as old as the wheel itself. With so many products and services being sold online, can you create a successful used car business too?
You certainly can, and here are the steps needed.
1. Attend An Auto Dealer Training Class
Most states will require that you take auto dealer training class before receiving your dealer’s license. You will learn how to fill out forms, what you can expect to encounter once you open your doors, the pros/cons of operating a used car business, what is required to stay in compliance, and much more.
Before flipping your first car–hopefully earning a profit–learning how to do the back-end stuff is critical. Become an expert at filling out customer paperwork. This step will keep you in compliance, and put your clients at ease.
I highly recommend an auto dealer training class whether it is mandated by your state or not.
2. Get A Job Selling Used Cars
While this is certainly not mandatory, it just makes sense. If you do not have experience selling cars, why not get a job learning how to sell used cars for a month or two?
You can see firsthand how a successful used car business operates, and network with employees and customers.
Wouldn’t it be terrible to start a small used car business only to find out you don’t like it? Flipping used cars is not rocket science, but there is a process. To help ensure your small car business is profitable consider this option.
3. Get Insurance and Bond Quotes
You’ll need to have an active insurance policy to protect your business. Cars will go out on test drives, customers will leave their vehicles on your lot, and your sales staff will drive demo cars. All that activity needs protecting.
Getting the right policy to cover these events may take a few calls and emails but it is well worth it. Just remember, a competitive quote that won’t break your bank account is the goal.
Protecting the consumer is the job of the state. As such, they will require you to have a bond. The bond will help to safeguard the consumer should you not be able to fulfill your part of the deal—deliver a car, title, parts, etc.
Just remember to always act legally and ethically, to help prevent suit against your bond.
4. Submit Your Fingerprint Application
This a simple step that just requires a payment and scheduling the time for your fingerprints to be taken and processed.
If you have had some legal issues in the past, check with your state to confirm that you can start a used car business. Most misdemeanors and felonies should not be a problem.
5. Apply For Your Dealer’s License
Submitting a complete and accurate used car dealer application will help improve your chances that your used car dealer app will not be rejected. Be diligent and patient, and get it approved the first time around.
But don’t worry if you missed something or made an error. Corrections are sometimes allowed but may cost additional fees.
6. Secure A Lot Or Broker Office
Before you can begin buying and selling cars online or at your lot, you’ll need to obtain a commercial lease. If you plan to start your used car business with a physical lot, checkout what’s available in your city.
Real estate websites like LoopNet specialize in commercial properties. You can search their website and filter by location, price, square footage and more. A great resource to begin looking.
If you have the option to flip cars as an auto broker—and just need an office—that can be profitable too. Make certain that the lot or the office are zoned for auto dealers/brokers.
Try not to sign a lease until after you have been approved by your state. If this is not possible, insist on language in the lease that allows you to terminate it if you are not able to secure your dealer’s license.
7. Prepare For State Inspection And Zoning Compliance
While your application is being processed, you will get an inspection from your state and/or city’s code enforcement department. These are routine checks to make certain that your office or lot is compliant with state and local regulations.
They will be looking for things like your company name and hours of operation, locking file cabinets, phone lines, etc.
Check your state and local official websites for specific guidelines.
8. File For Your Incorporation, Business License, EIN, etc.
Companies like Rocket Lawyer make setting up your incorporation simple. Come up with a good name, check with your state for any current use of that name, and incorporate it.
There are several types of ways to incorporate. Discuss with the legal pros to see which incorporation formation is best for you.
A new EIN number can be processed and issued within minutes by visiting IRS.gov and filling out a few forms. Both an EIN number and incorporation allow you to separate your business and personal assets.
The incorporation can cost a couple of hundred bucks, but the EIN is free.
Apply for a business license with your local city business office. Again, check your local government’s official website for instructions.
9. Launch Your Website
There are all types of website templates and hosting plans available to service your used car business. If you have some site building experience, you might want to consider tackling this job yourself.
If you do not, several companies will do a lot of back-end work for you. (Leaving you with minimal task like marketing, responding to customer inquiries, updating your inventory, etc.)
10. Signup For Used Car Auction Access
Okay, so where do you get cars? Great question! Many used car dealers get inventory by attending dealer-only auctions. Many new car dealers unload their trade-ins and slow-moving inventory there.
On a regular basis these auctions will conduct sales, and send the car home to the highest bidder. Buyer beware. Some cars are “good cars”, and just weren’t good inventory for the previous dealer. However, some others cars are “trouble cars”, that are in need of a keen eye or a knowledgeable mechanic to spot repair issues or problems.
Signup for your auction access pass and start bidding on cars. Many auctions allow inspections and some test drives prior to sale day.
The dealer auto auction will most likely be a major source for your inventory, but it’s not the only place–not by a long shot. You can purchase vehicles to flip from private individuals too. Check Craigslist or CarGurus and filter your search query to include only private owner cars.
These cars are typically in good condition, and you can negotiate better pricing than what you may see at your local auction. The bad part is driving all over town to view one car at a time.
11. Secure Used Car Inventory Financing
So, how will you pay for your inventory? Will you finance the cars yourself, or will you use what is called a floor plan to pay for your cars?
A big key to that answer is what price point you will settle in on. Are you going after young, first-time buyer customers or a more established clientele?
Another thing to consider is deciding what car makes you’d like to specialize in. As you start buying and selling cars online, you’ll be known for certain car types and models. This can be a good thing—you’ll build a customer base without even trying.
12. Take A Used Car Business Class
As mentioned earlier, getting sales experience is a great idea. To further improve your chances of success, taking a how-to class on flipping cars can be the difference between being profitable and having to close your doors.
By following these steps, working hard, and constantly learning, you’ll eventually realize your dream of enjoying and selling used cars for a profit.