You are a private seller who just sold multiple cars only to find out that you cannot exceed a certain number of sales in a year. In this article, we’re going to talk about how to flip cars without a dealers license, I mean more cars than is allowed in your state. Not everyone has the privilege of owning a car dealership or a dealer’s license. I’ll guide you through various methods to sell cars – some of them are the right ways, and the other is not so right. While I don’t endorse one of the methods I’m about to show you, you just need to know about it. Specifically, we’ll cover two legal ways to buy and sell cars without a dealer’s license. We’ll also discuss a third method, which I don’t recommend, but it’s something that some private sellers still practice.
How to Flip Cars Without a Dealers License
Here are 3 major ways anyone without a license can buy and sell multiple cars in one year.
1. Buy and Resell to Another Buyer
Let’s say I’m buying a vehicle from you. I’ll give you the money, and you’ll sign over the title to make me the legal owner. You have sold the car to me, and my details are right there at the top of the title, so we’re all good.
Now, in this case, I don’t have a dealer’s license. But that’s not a problem because it’s just one car. I’ll take the title and the bill of sale you gave me to the DMV. There, I’ll register the car, and pay the sales tax, the title fee, and the registration fee. They will give me license plates, and then the car is legally mine. I can drive it, fix it up, clean it, and even sell it whenever I want, as long as I have the title with me. Sometimes, it might take a few weeks for the title to arrive. So, until I get the title, I can’t really sell the car. If I try to sell it without the title, the buyer might be hesitant to pay me. They’d want to see the title first. So, I just have to wait a bit before I can sell it. That’s how it works.
In many states, unfortunately, there’s a limit to how many times you can flip cars without a dealers license, which is about 3-5 times per year. For instance, in Washington state, a private seller cannot sell more than 4 cars a year. So, what if you want to flip more vehicles than your state mandates? The state considers you an unlicensed dealer at this point, and you are required to obtain a dealer’s license. If they find out you are selling more cars than required as a private seller without a license, you might be fined.
2. Register the Car in Another Person’s Name
The second method you can try is a workaround in this situation. So, let’s say your state allows only 4 cars per year and you have already bought 4 cars, and on the 5th one for the year. What you can do is to get the 5th car and subsequent ones registered in the names of people you know – such as your mother, sibling, best friend, or girlfriend.
For example, if your sibling is buying this car, she’ll be there to sign all the paperwork. If she’s not present, and you are okay with it, and so is the buyer, you might just use your sibling’s name. Then you take the paperwork to your sibling to get the car registered in their name. Now, she can also add 4 cars to her name for you to sell that year. This way, technically, you and your sibling can buy and sell 8 cars together.
The first method I mentioned is simple, but the downside is you end up paying sales tax, registration, and title fees for 4 cars, in addition to waiting for the titles. With this second method, it’s similar – your sibling will have to pay for sales tax, registration, and title on those 4 cars, and also wait for the titles to come through.
3. Resell the Car with Open Title
This third method is not allowed in almost every state. You need to be really careful if you decide to go this route to flip cars without a dealers license. I’m telling you now, it’s not a good idea. But if you are set on doing it, it’s your responsibility.
Let’s say I’m buying a car from you. I’ve paid for it, and now you have the title. You ask me, “Who should I make the title out to?” I respond ‘Leave it blank.’ I might put it in my name or maybe my sibling’s. So, when you sell the car, you sign your name but leave the buyer’s section empty. This is known as an open title or title skip. An open title is not allowed because it’s technically still registered to the previous owner. This can be a big problem for sellers. If you sell a car with an open title, it’s still registered in your name. Even if the buyer uses their own license plates, the car is unregistered but still legally yours. So, if the buyer has an accident, they’ll trace it back to the seller.
Title Skipping or Jumping is a Felony
From the perspective of a buyer, I understand that it makes sense to buy and flip cars with open titles without a dealers license. Let’s say I decide to sell a car to someone. I’m not yet sure who the final owner will be, but I take the car, clean it up, fix it, and then sell it. In this process, I will have to skip putting my name on the title and directly put the next buyer’s name. This is a title skip, and it’s actually a felony in most states. Moreover, if a buyer finds that you jumped title, they may report you for dishonesty. While I don’t recommend it, it’s something that happens frequently.
You Need a Dealers License to Flip Multiple Cars
Consider getting a dealer license. As a licensed dealer, you might buy a car from a new car store, which in turn bought it from the original owner. The title then goes from the owner to the dealer, and then to you. As a dealer, you sell the car without having to register it in your name, passing it directly to the next buyer. Thus, you avoid paying sales tax on every vehicle you flip. A licensed dealer doesn’t need to register each car and pay sales tax. They can simply use the next assignment section of the title. If they sell to another dealer, they can continue this process. However, this is only possible because of their dealer licenses. Without a dealer license, you can’t just fill out the title and expect it to be legal. It’s not permissible, so don’t try it. Technically, and often illegally, in most states, you could leave the title blank and sell it to someone else.
Don’t Forget to Pay Your Income Tax After Flipping
Taxes are really important, especially when you’re earning money from buying and reselling cars. This counts as income, and you have to pay taxes on it. I’m not a tax expert, so it’s best to talk to an accountant. But remember, if you are making extra money, and it’s over a certain amount, you must report it and pay taxes on it. This applies even if you’re dealing in cash. For example, if I buy a car from you with cash and then sell it to someone else for more, make a profit, and get paid in cash, it’s still considered income. So, you have to pay taxes on it.
I want to mention that I’ve never had to flip cars without dealers license in this manner before. This is why you need to get a dealer’s license or don’t exceed the number of sales you can make in a year in your state. With a dealer’s license, you are allowed to always buy and sell multiple cars. I’m just trying to show you all the different methods and options you have. It’s up to you to make the right decision, but at least now you are informed.
Read also: Seller Signed Title in Wrong Place [Solved]