Q: Three months after buying a used car, I discovered that the dealer had turned the odometer back 100,000 miles. When I came to return it, the dealer insisted that since I used it meanwhile, I owe him the equivalent of three months’ leasing.
A: A sale of defective merchandise is void. The item remains the seller’s; he must repay the buyer. Shulchan Aruch rules that if one bought a house and later found it defective, he must pay rent for the time that he lived there (C.M. 232:15). Later authorities debate whether the need to pay rent applies also to movable objects or to items that are not intended for rental (Ohr Sameach Hil. Mechira 16:8). Due to this dispute, we apply the principle of muchzak: whoever is in possession of the money wins. If the dealer has the money, he can withhold the equivalent amount of leasing; if the buyer has not paid yet (e.g. the car was bought through seller financing) he would not have to pay.
Beis Din would have to ascertain, though, whether there is a minhag hamedina on this issue. If there is a clear practice not to pay rental, the dealer would not be able to withhold money for leasing even if he were in possession.