What kind of legal recourse do I have?

You bought the car AS IS so you need to understand that is AS IS. Your neighbor does not have to refund any money or do anything. You have the right to sell the car, repair the car, park the car, whatever you wish. You can sue if you wish... as soon as the Judge hears AS IS you just lost, you will be out the filing charges and still have the car. It may have run great for them without any problems but once you buy the car it is yours making no difference if they knew of any problem or not.