Can I take action to sue a used car lot dealer for selling me a lemon?

If your vehicle had less than 18,000 miles on it when you bought it, you may be covered under your state's Lemon Law and may be able to force the dealer to fix it (or take it back, if it can't be fixed). At the end of this answer, I'll include a link to a very informative webpage put out by your state government about the Lemon Law.

If the vehicle had more than 18,000 miles, here are your options:

1) If there is a warranty, it must be honored as per its terms; if the vehicle and condition would be covered, you can bring legal action to enforce it.

2) If the dealer lied to you about their being a warranty, you can sue the dealer either for  fraud and/or for breach of contract (if the warrnaty is mentioned in the sales agreement); you may be entitled to monetary compensation, or possibly to rescind the sale (they take the car back; you get your money back)

3) If the dealer knowingly lied about the condition of the car when it was sold (i.e. the dealer knew of the problems), then that could provide another ground for suing based on fraud.

Here's the link about the IN Lemon Law; good luck: http://www.indianaconsumer.com/consumer_guide/lemon_law.asp