Have you ever wanted to flip a car? Well I just bought one yesterday that should earn me a little over a thousand bucks, and I thought it would be fun to let you in on the step by step process of my car flipping experience.
Related Article: Make Money By Flipping Cars?
What Did I Buy and Why?
For the past few weeks, I have been hunting for a 2000 or newer GMC Sierra truck. First of all, I really like this model of truck and would love to drive it myself for a while (which I will definitely do), but secondly, there is a great demand for this type of truck, especially going into the winter months. Here in Michigan, people would definitely prefer to have a four wheel drive vehicle when the snow starts to fly. With a truck purchase, I will be able to supply this high demand, and hopefully be able to make a quick buck in the process.
In my weeks of scouring for this truck, I stumbled upon a few deals, but was too late to respond to a couple of truly jaw-dropping values (this will happen – I can’t possibly expect to land every single deal that’s out there), but then another deal dropped into my lap without me even looking for it specifically. I was looking through AutoTrader the other day and spotted a 2000 GMC Sierra that looked to be in pretty good shape. The dealership was asking $5,995. If it was as clean as it appeared in the ad, its true value was probably something like $7,000, so I went over to take a look at it. As it turns out, the truck was a hunk of junk and was probably only worth $5,000, so it was not something that I could flip for a profit. But, on that same lot, another truck had just come in, a white 2004 GMC Sierra and this one looked pretty sharp. The price tag? $4,995. After tax, title, and transfer, I would have been looking at a cost of about $5,500. Now it was time to negotiate.
I am not a master negotiator by trade, but I like to think I can get a good value here and there. With this truck, there were a few things that were a potential negative and enabled me to talk the owner down on his price. First, the tires were starting to get worn – they will probably get me through this winter and summer, and then I would have to replace them. Second, the third door handle was broken. And finally (the biggie), the truck didn’t seem to shift quite right. This was a gamble on my part because this could mean a bad transmission (which would probably cost a couple thousand dollars to repair), or it just needs a little transmission cleaner mixed into the regular fluid.
I first let the dealer tell me his “best price”, which actually wasn’t too bad. Instead of $5,500 out the door (after taxes and all that), he was willing to come down to $4,850. I took my time, walked around the truck again (all while doing calculations in my head) and told him I would buy the truck and leave with it today if he could get me out the door at $4,700 (an $800 reduction from the sticker price). He looked a little bit uncomfortable, but I could tell it was a possibility. Finally, he nodded in agreement and I bought myself a truck.
What To Do Now
The going rate for a truck like this in good condition is probably around $7,000 today, but I have a little bit of work to do before I can slap a big price like that on it. Here’s my list of things that I could do to improve the value.
- Give it a good cleaning inside and out – this truck was pretty dirty and was smoked in. I need to get that smell out to make it attractive to all buyers.
- Paint some bare spots – there are some areas where paint chipped off and could use some fresh white paint. For about $10, I can do this without much of a problem.
- Smooth out that transmission – I will first try to put in some transmission aiding liquid to see if this will smooth out the shifting. If this isn’t effective, I will most likely have to get the transmission fluid flushed out and put new in. This cost could range from $10 to $100.
- Fix the third door handle – the handle is cracked off, but many replacement parts are available. The cost – a mere $25 and some grunt work.
- Fix the A/C – the air conditioning is a little wacky. It works, but some vents throw heat, and others throw air. Hopefully I can figure this out myself with no expense.
- Replace the front bumper fascia – The front plastic piece is cracked a bit and could use replacing. It’s not necessary, but it would make it look more sharp. The cost would be about $130.
- Sell it!
The Potential Upside
In total, I paid $4,700 for this truck. At the most (assuming I don’t have to replace the entire transmission), I would put in another $250 to make it look pristine, so I would be somewhere in the neighborhood of $5,000 for total expenses. Since the truck’s KBB value is about $7,500, I think I could comfortably ask $6,900 and most likely get $6,500 as the final selling price (always leave room in your price for negotiations – people like to think they got a deal). This would allow me to pocket $1,500 and get me that much closer to paying off my house!
What do you think about this buy? Am I on the right track?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.