Buying and selling used cars for profit in California?

The question you seem to have missed is "If this was an easy way to make money, why isn't everyone doing it?" The answer is "Because it isn't an easy way to make money." You really, really don't seem to have thought this through. People don't willingly sell vehicles at a loss. Consumers trade in vehicles when they buy new ones, not because it's a great price--because it's usually a terrible price--but because they don't have to deal with the hassle of disposing of their old vehicle. The dealer won't pay market price for the car because they have costs and need to make a profit on that transaction too. Then there's the actual logistics of the thing. Borrowing money from a credit card for a business venture is insane. And you're completely ignoring the issue of sales tax, which you'll probably have to pay unless you register as a dealer, which isn't free. Then you're going to need some way of getting people to buy your vehicles, which means advertising, which means more cost. But if you're trying to resell vehicles at a profit, you need to look at auto auctions. That's pretty much the only place you can regularly get resellable vehicles at a price which makes the idea economically viable. My advice? If what you want to do is to start your own business, then for the love of all that's holy, come up with another idea. But if what you want to do is sell cars, get a job at a dealership. They know what they're doing.

You aren't listening. Say you borrow $1000 from a credit card as a cash advance. Right off the bat, you're looking at a charge--usually 3-5%--so you've got costs of about $40. The finance charge on a $1000 balance is going to be about $12 a month, so if you make minimum payments for three months, you've got additional costs of $36, for a total of $76. That's 7.6% of your total cost, so you unless you can sell the vehicle for at least 107.6% of what you paid for it, you're actually losing money. If you can sell it for 110% of the purchase price, which is a fantastic rate of return, you were only looking to make $100 to begin with. Now you're down to $24, or 2.4%. As municipal bonds currently have yields in the neighborhood of 5%, you'd be better off just buying one of those and holding it to maturity. If you still think this is a good idea, your understanding of how business works on an economic level needs a lot more work than I thought. Again, for the record, financing business expenses with a credit card is a horrible idea unless you can pay it off, in full, every month.

I think the exception to the rule of not getting into the beater-car-flipping business (which is correct: don't do it, you will lose money and have no fun) is if you can specialize. Generic econobox cars -- what you are considering buying and selling -- are totally fungible. A crappy old Corolla can be replaced with a crappy Civic, and both of those can be swapped for a Sentra. There will be other people who have better financing, access to better prices, or in house skills and labor that you don't have. However, if you instead become a specialist in a rare make and/or model (eg boxy Volvos, diesel Benzes, a particular variety of Porsches, etc), then you are no longer dealing with fungible items. The market is much clearer, and it becomes much simpler to buy low, do the needed value-added detailing and repairs, and sell high. This doesn't take a lot more money than you have, but it does take a lot of monomaniacal knowledge -- you need to know every detail of changes through model years, how to spot non-factory parts, and how to access buyers who are looking for that exact model.

Have you looked into what permits are required and what environmental regulations pertain to selling used cars in CA?

The people responding with "why isn't everyone doing it?" haven't bought or sold cars recently. There's a thriving market of people who buy cars cheap, fix them up, and flip them. I'd argue that most of the used cars people buy in the US have been flipped at an auction or through a 3rd party before the sale. Certainly you know about used car dealers, and you've heard of the brokers who exist in various niches and certainly do hang out on Craigslist. I personally bought a car from one of these small-time dealers doing almost exactly what you describe off of Craigslist a little over a year ago. The guy who flipped the car to me? Well, let's just say he was done flipping. Literally. He seems to have had a legit operation -- a current dealers' license since he had been doing more than five a year, some storage space -- but he was losing money, had closed down his operations, and was planning on moving out of the area. He wasn't able to turn the cars over fast enough, and he was getting desperate to get out. In the case of my car, it's clear that he started advertising it for thousands of dollars more than I bought it for, and finally "settled" on my e-mail offer when he got close to the edge -- I didn't get a call from him for a couple of weeks after I sent him a note, and he offered it to me at a discount over the price he had listed on Craigslist just to clear out this last bit of inventory. He had been showing it and showing it, wasting his time, but nobody bit. This wasn't some sort of exotic car, either -- it was a perfectly normal Volvo with no major problems. To him, it was a doorstop, a paperweight that was getting in his way, wasting his time, and not making him any money. (Don't worry about my side of the story -- it's been a reliable family wagon that I got at a great price.) If you buy a car as a private party in CA and want to flip it, you're in a race. jamaro's post is pivotal: if you don't flip it fast enough, you're on the hook for the registration fees and for smog testing. That can easily cost as much as you just spent on a $300 car. And there's the risk that, for older cars, it won't smog again, and you're on the hook for a smog repair before you can sell it. And then, there's the chance that even after buying the car, parts to fix it, registering it, smogging it, and getting a smog repair, that you just won't be able to sell the thing until you drop the price to what you've put into it. And then there's the risk that the car dies on the person who just bought it, and it becomes a nightmare for both parties. So, that's the reason why it may not be a good idea: there's plenty of risks. If you lay out money on a beater and the sale doesn't happen right away or problems crop up, you could be stuck with all of your capital in one car or a couple of cars that you just can't get rid of, either because of problems or at the whim of the market. You can end up with less money than you started with even if you do everything right. The larger players are able to buy lots and lots of cars and have enough postings or foot traffic to make turnover consistent, and also have the ability to re-flip the cars at little to no loss at auctions if it just doesn't sell from listings or on the lot. They have risk, but it's managed, diversified risk. When you're working at a smaller scale, a single car purchase can bomb you completely out of the game. If you can't take the risk of ending up with less money than you started with, get a job with a detailer or used car dealer and let *them* take that risk. If you're rarin' to flip a few cars, adjust your expectations, read as much as you can on the DMV web site and on Craigslist, go for it, and either pocket the money or learn from your mistakes.

A friend of mine did something similar to supplement his income. His approach was different, though. He bought cars for $50-$100 each at auction, fixed them by himself and with a friend who has a car dealer's license, and would resell them for $1,000. About 90% of the repairs that he did were all blown head gaskets. Most of the cars were small 80s-90s American and Japanese cars. He made great money, since his labor was free and the head gaskets (and the other stuff you replace while you're in there) usually only ran him about $150 per car. However, he stopped doing this. Why? Too much customer service. He had too many people call him to complain, wanting their money back, because the cars frequently had other problems beyond those that he fixed. Sometimes their complaints were valid, sometimes they weren't. "My 1.2 liter Geo Metro can't do 65 up the hill when I have 2 people in it," for example. Are you prepared to deal with the headache of people being unhappy with their purchases from you?

My dad did something similar in college in the 70s. Within months of buying a Porsche he found it was costing him an arm and a leg in parts to keep it running, so he bought a parts car he could pick from. Soon he had a couple parts cars and was selling Porsche parts on the side. Did he make much money? No, not really, but it did allow him to keep a Porsche he couldn't have otherwise afford to maintain. To me, it sounds like the overhead of California law (smog, inspection, registration, insurance, etc) will likely destroy your profit margin. I agree with Jamaro, detailing cars may be a better way to earn some cash. Low overhead + labor intensive work is low-risk formula for for making cash on the side. Flyer cars at Autozone, advertise on craiglist or even find a used car dealer. There's always demand for good detail work, especially at (slightly) sub-market prices.

Typo: You must have the proof of insurance and or for most cars, a smog certificate. CA DMV takes 3-5 weeks to send back an updated pink slip.

In CA, the seller has to provide the smog certificate. The smog test has to have been performed sometime within the previous 90 days. Buying the car does not reset the clock on the smog certificate, you have 90 days from the date on the smog certificate to flip the car under the previous sellers' certificate and even then the DMV might require you to submit an inspection report before they'll accept the registration. If you take too long to fix or sell the car, a new cert costs $8.25+whatever fees the shop feels like tacking on, the test costs $35-100. Since you are looking at $300 cars, you'll find many of them are not smog certifiable. While anything built from 1975 on back is exempt from the smog requirement, gasoline powered vehicles built from 1976 to four model years from today require smog certs from the seller and the car has to be running in order to perform the smog test, which brings up another expense: insurance. If you operate the vehicle on the streets (including just leaving it parked on the street), http://www.dmv.ca.gov/pubs/brochures/fast_facts/ffvr18.htm. Speaking of registration, you have 10 days from the day you buy a car to register the car in your name with the DMV. You have 30 days to pay transfer and registration fees. You must have the proof of insurance or for most cars, a smog certificate. CA DMV takes 3-5 weeks to send back an updated pink slip. Since you're not really a mechanic nor a businessperson, here what you should know: all or most of your money would be locked in the beater sitting in your driveway. You'll have spent a good chunk of your capital just getting legal with owning it, never mind repairing it. You won't get any money back out until you sell it. You will be someone with a shop that has an inventory of just one item and the longer you keep it, the more it will cost you in lost interest and opportunity + finance charges if you buy parts with your credit card. The cars you are looking at selling, at the $1200 range, are beaters. People who buy beaters haggle fiercely. If you can't afford to come down on your asking price, they'll walk away to the next beater because if there's anything California road conditions allow, it's an ample supply of beaters that run good enough and look good enough. I know how to detail a car Why don't you do this? Invest <$100 for supplies and flyers that you tack up in your mechanic friends' shops, put up a craigslist ad as a mobile car detailer. Less financial exposure and a greater opportunity for success.