It sounds like they may have pulled a fast one on you, quoting you one price, then charging you something else. And what is this about wiping out the first deal like it never happened? What is the point of that?

Bottom line is, do you have the title or is it being held by a bank/lein holder? If not, and the company you purchased from is holding the title while you make payments to them, you will probably have more hassles before you are done.

If the contract is straight forward, you should be able to pay off the balance (through either a sale or trade-in of the car) and be free of them. However, if they have inflated the price on your present car you may be upside down (oweing more than it will trade in for-wholesale). In this case, you will have to make up the difference by coming up with more cash, or selling your car yourself to get the higher $ amount (retail).

If there are problems with the car, then did any kind of warranty come with it?

If you have only owned the car for a couple of monthes I don't think that you will get enough on a trade in to pay off the loan on the first car. I hate people that rip others off like this and that sounds exactly like what he did.