what do I do about the car and can I sue the dealership

If you both signed on the front of the contract, then you both are co-borrowers, meaning you both share equal liability for the debt and both of your names would be on the title as owners of the vehicle. The fact that they listed your name first doesn't make the ex-daughter-in-law any less responsible for the debt.

If you are not living at the same residence, or in the same locale, then you should not have been a co-borrower; rather you should have signed on the back of the contract as a guarantor. The fact that you cannot drive any more is further reason that you should not have been a co-borrower. However, once a contract is signed, you can't go back and say you didn't mean to sign it. While checking your driver's license would be good business practice on the dealer's part, they are not really at fault for not checking it. My question is, did you bother to bring up that fact when the loan was consumated? If not, why?

The car dealer was really "out of the picture" once the finance company bought the contract. If you do not want to make the payments, then you can have your daughter-in-law surrender the car to the finance company. They will sell it and apply proceeds from the sale to your account. You and your daughter-in-law will still be responsible for any deficiency balance remaining after the vehicle is sold.

Hindsight is 20/20, I know, but I see too many people who don't really understand what being a co-signer means. If you co-sign for someone, you really need to trust that they will fulfill the contract, because if they don't then you will have to.