Do flippers take title to a car?

[Todd Simpson]

I'm curious if flippers take title to the cars they buy and sell. At least here in NJ, that means 6% sales tax and a wait of 30 days or so to get the title in your name.

I assume dealers are exempt from sales tax, and just pass along the old title?

[aigel]

Skipping title is the only way to go for true car flippers. Skipping title means that they buy the car but only have the seller fill out theri section, skipping the buyer's section.

The sales tax and time lost waiting for a title is only one issue. The other is the fact that most states only allow a limited number of private sales per person, without them having a dealer license. Also, if the flippers can claim the title is signed from a friend who moved away or a close relative, they will potentially avoid questions why they resell so quickly.

Aside from special interest cars, there is for example immigrants in our area that systematically lowball families on their beater vans and trucks. They skip titles in these sales and turn around the next day and sell the vehicles for more to their unsuspecting and trusting fellow immigrants. The profits are not big, but it probably adds up at a rate of two or more cars a week?

George

[techweenie]

I skip titling on about 60% of the cars I flip. Some states don't charge sales tax on used car sales. California gets 8.25%. If you're flipping at a low margin, titling kills it. If you're doubling the price of the car you flip, like some manage to do, then titling is not a big deal. Usually, with Porsches, people are sensitive to the number of prior buyers, so too much re-titling can bring the value down a bit.

[Zeke]

Having a dealer's license, or working under a dealer's umbrella, is the only way to do this legally. Like contractor licenses, there aren't enough inspectors to catch much of the goings on. I got caught skipping a title on a 356 because unbeknownst to me, the seller turned in the release of liability form and listed the price he sold it for. I got a call from an inspector up in Sacramento (CA state capital) and it wasn't a fun deal to get out of. This was about 6 months after the car was gone. It cost me the sales tax after some "friendly" negotiations, but I was looking at a lot more than that.

If someone were to be writing down all the license numbers of the cars appearing at your house (like I do with my dirt bag neighbor), when the ***** hits the fan, it will be all the taxes plus big penalties PLUS interest. And, they will just use the Blue Book if you don't show them otherwise, which, in itself is admitting guilt. They have the right to pull your banking records and they will forward all their findings to the IRS and the state tax board for income taxes.

I don't think it's worth the risk even if you use all cash. It was just that one little peice of paper between the 2 titles that nailed me. How are you gonna know that the person selling won't send that in? In order to protect myself from liability once that car leaves my house, I'm sending one in. I did when I sold the Ragamuffin to the flipper. I presume he has a dealer's license.

More: (edit) Let me explain what I meant by "friendly" negotiations with the DMV person. I told him that I had to sell the car because I couldn't afford to fix it after it blew up 2 days after I bought it (whether that's true or not, I won't say). And, yes I paid $xx,000 for the car, but sold it for a bunch less. He told me that was too bad, but send the taxes and fees within 3 days or face more penalties. He kinda reminded me of the lyrics from a song by the Georgia Satellites, "Don't give me no lines and keep your hands to yourself." I'm sure he has heard every song and dance there is. You really can't cover a fire with smoke.

[techweenie]

Wow. I'm surprised you got that call. many sellers turn in the release of liability form in CA. Very few times does that data get entered by the state. mostly, they just throw them away and bill the prior owner for the license fees (very high in CA). I use a DMV service and they suggest hand delivery with signature to the DMV clerk. I've had multiple encounters with DMV folks trying to collect license fees for cars long gone -- often to other states or countries -- because nobody recorded my report of sale.

[Zeke]

First, let me correct myself. I didn't a call. I got a letter with an investigator's name and no. I called him. Second, I have not gotten any renewal notices for cars sold unless the renewal was in the queue already when the sale occurred. Bill, I don't think they throw them away. They didn't in my case. I haven't gotten a renewal for the Ragamuffing either, and that would be coming up about now; it was here this time last year. So, my guess would be that the buyer might be hearing from the DMV. No matter, the car is in Europe now and for sale at $44,000.