I bought a 48k mile 2002 FIAT Punto from a second-hand dealer two weeks ago for £2,200. I also bought 3-month warranty. After one week I needed to put engine coolant in. I checked the oil and it was fine. On Tuesday my wife drove it to Bath and the coolant warning light came on as she drove into the car park. On the way back from Bath the engine started smoking badly, lost power, etc, etc. Someone who stopped and helped her said that there was no oil and that the head gasket had gone and that we should demand a replacement car. "It'll never be the same again." I spoke to the dealer that sold the car on Tuesday evening and they said that they'd get it taken back to their local garage who would have a look at it. The car has only just been collected this morning, after a number of phone calls to the selling dealer. The dealer is now saying that we have to sort it out through the warranty company, who will then pay us back the cost of the repairs. So my questions are: Do we have any right of exchange? Do we have to deal with the warranty company or should the dealer sort this out? What would be a reasonable outcome?