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Here's the thing - you can't keep from being sued. If this guy wants to take you to small claims court, there's not much you can do to stop him. When he does, he's going to allege that the two of you had a verbal contract to sell the car. And you did, at least in so far as I read your OP.
The real kicker is whether or not it was an enforcable contract and if he can convince a judge that you should buy the car. Personally, I'd say that you made a good faith effort to exit the contract by letting him keep the deposit, but you really need to consult an attorney when/if this guy decides to take you to court. Personally, I think he'll calm down, realize that it isn't worth his trouble and let it slide. There isn't enough money in this deal to make it worth his time.
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"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin
"There ought to be limits to freedom." - George W. Bush
"We have met the enemy and he is us." - Pogo
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