Dear Let's Talk Credit,
My car caught fire, and I ended up buying another car from another dealer because the older vehicle constantly had problems from the moment I purchased it. It had to be repaired almost monthly. After the fire, I no longer wanted the car. The dealer is one of those predatory, "Buy here, pay here," dealerships. Salesmen at other dealerships have told me that I can take the car back to them and just leave it. I told them that I no longer want the vehicle. I asked to trade the vehicle for another one on their lot. They said no. When I began the relationship with them, they added an extended warranty for an additional $4,000, which drove the used car price up. The Blue Book price is far lower in value than what they are charging. Because I had to replace the vehicle or lose my job since I could not afford to wait for them to fix it, I went into deeper debt by purchasing a newer vehicle. I cannot pay for both vehicles, and I cannot depend on the older one. They have threatened to garnish my wages . Can they do this? -- Lamar
Assuming it is legal to garnish wages in your state, your creditor must sue you in court for the balance due on your car loan. If the creditor wins in court, a judgment is issued for the amount of the debt, which could be executed to garnish wages. If you believe the dealership is predatory and it makes good on the threat to sue you in order to garnish your wages, you might consider contacting an attorney.
If you stop making payments on the vehicle you don't want, the dealership would likely repossess it. It may be better for you to return the vehicle to the dealership if you cannot afford to make the payments. If you wait for it to be repossessed, the dealership will add all fees associated with the repossession to your loan balance.
If you return the car to the dealership, it is likely they will sell it to satisfy at least part of what you owe on the loan. However, the dealer can still sue you for the difference in the sale price of the car and the balance on your loan. Most dealers sell returned or repossessed vehicles at auction. They are not required to get the best price for the vehicle, but the sale must be "commercially reasonable" or you may be entitled to damages or a defense against the deficiency. It might be best to consult with an attorney on this issue.
I'm sorry you have had such a bad experience with your car. A good rule of thumb for future car purchases is to make at least a 10 percent down payment on any loan to purchase the car. This helps you avoid being upside down (owing more than the car is worth) in the loan. Also, stay away from add-ons such as extended warranties and credit insurance. These are designed to increase the dealership's profit.
Let's keep talking!
See related: In default on car loan: What to do? , Car's too small, loan's upside down , How wage garnishment works -- and how to avoid it