The popular Barrett-Jackson automotive auctions are the flashy end result of the business of flipping cars. While buying used vehicles for a low price, fixing them, and selling for a profit has always been around, there is a renewed interest due to shows like Fast N Loud and Counting Cars.
Pre-Great Recession, car flipping was a decent way to make cash as a side business, or even a full time source of employment for a few adventurous souls. The trick was to find a vehicle that needed minimal work, but was priced below its good condition value. A common story among flippers was to find a running car for $1500, do a full detail and tune up, and sell it for $4000.
However, the market has changed in the last several years. The recession of 2009 ate up a lot of household’s expendable income, suddenly making the $1500 cash purchase unattainable. Also, due to the economy, families put off purchasing new cars, making the used market heat up. The lending system has changed as well. Gone are the days when banks were offering zero down to consumers with no credit buying a brand new car. Additionally, the Car Allowance Rebate System, Cash for Clunkers, resulted in the destruction of several candidates worthy of a flip. Everything from a Bentley to a TVR, to a Buick GNX and several Corvettes were traded in and scrapped under the program. With less potential projects out there, their value rises, and squeezes out the part time flipper.
Is it all dark and dreary for this hobby/part-time income generator? No, there are signs it is returning to life. First, the economy is slowly improving. Sure, it’s still not great, but year by year as employment levels return to normal, that will generate more expendable income, and have more people looking to use it. Second, the average age of a car on the road in the US is now 11.4 years, according to Polk automotive research firm. Some of these vehicles are starting to wear out, and there will be demand for affordable, but nice, cars. Flipped vehicles included.
For the flipper, the market has upsides as well. The used cars on the market are better built vehicles, with more options and safety features than in the past. Gone are the days when the clear coat faded off after 5 years, and the head gaskets were due for replacement every 40,000 miles. With more durability, the part time mechanic has less to fix, therefore a lower bill to get the vehicles back into desirable and profitable shape. Plus, with the plethora of information available online, flippers have access to incredible mounts of know-how that was unavailable just 10 years ago.
While the flipper’s market has changed, it is still a viable option for those with patience and forethought. While dealers may hate flippers, they have survived, and will continue to survive, as long as the used car market exists.