Hard decsion.. what would you do? help!?

That was a pretty dumb thing to waste money on when you can't even afford a car payment. If you want to give guy #1 his money back and sell it to guy #2 for more money that is sh**** of you. I'd say you closed the deal when guy #1 handed you the money. Even though guy #1 gets his money back he still had to come out to your place twice. You are wasting his time.