For those of you that are unfamiliar, no I am not intending to literally flip my new vehicle purchase (as in toss it end over end into the ditch). Instead, from time to time I find a car that is super cheap that I would enjoy driving around for a while. In the meantime, I clean it up, fix a few things, and then sell it for more money than I paid for it originally (at least that is always the hope).
I flipped a truck last year and it was a nightmare! But, I still ended up making about $600 on it. A few months later I found a newer Chevy Malibu for only $4,900 and ended up selling it for a $650 profit. Those profit margins have been nice, but this time I am hoping to do even better.
How I Scored This Ride
I woke up lazily at 7:45 Saturday morning, took a wiz, then crawled back in bed, thinking about closing my peepers for another half hour or so. I had nothing planned for the day and that bed was still looking pretty nice. As I laid there snugly under the covers, I perused Craigslist for deals on local cars (as I do quite often). For the past month or so, I have been looking for a deal on a 2000 GMC Sierra (I even thought about driving to Kentucky for one that I spotted last week!). As I lay there in bed, my eyes suddenly opened wide as a 2001 GMC Sierra was staring me directly in the face!
It was a navy blue four wheel drive V8 with only 160,000 miles (these things will go at least 250,000 miles if you take care of them) and the price tag was only $4,200. I immediately called the number, hopped out of bed and started driving toward this beauty of a truck.
After a few wrong turns and an additional phone call to the owners, I found the Sierra in all of its glory. It looked pretty much as solid as the photos, but there were a few imperfections:
- The paint was scuffed on the passenger side, but wasn’t all that noticeable
- The ABS light and Check Engine light were on, but he assured me that these were only on because the sensors were bad (we’ll find out soon enough when I take it into the shop)
- The 3rd door handle was missing (no biggie – I can order one of these for $12)
- The tires were somewhat worn
After pointing out these flaws, the owner was willing to budge on the price a bit (I’m not entirely sure why, because his phone was ringing off the hook with others that were interested in the truck). I offered $3,600, he countered with $3,800, and I agreed.
Here is a photo of my new beauty perched in my driveway.
The Profit Estimate
Alright, so how much can I expect to make off of this purchase? I bought this truck for $3,800 and after paying taxes and the plate transfer fees, my total cost was $4,000.
According to Kelley Blue Book, this truck is worth $6,800. If there were absolutely nothing wrong with it, I could put no money into it and sell it for a $2,800 profit (in theory). But of course, this would just be too easy.
To get the ABS brakes fixed, the worst case scenario would probably be about $500. I would then order a few other small parts and pieces that will probably total about $100. And just to be safe, let’s add another $400 for incidentals (you know, those costs that I don’t foresee now, but will end up rearing their ugly heads prior to the sale of this truck).
So, with a total fix-up cost of $1,000 and the purchase price of $4,000, I could potentially earn $1,800 on this ride. Realistically though, the future buyers will want to feel like they got a deal on this truck, so I will sell it to them for about $6,300, which would net me a $1,300 profit. That is still pretty impressive!
So what do you think? Do you think I’ll earn some money on this purchase? Have you ever bought a car to flip?
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.