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Just a thought - and I'm sure you two have already come up with it as well - but if you need to find a suitable middle ground, then start charging your son rent for his room. He'll have to work to afford room & board, as well as his car payment, and you'll be able to provide him with shelter (and keep an eye on him to a certain extent).
If, on the other hand, he decides to continue with his plans to get a place with that friend you mentioned before, then this suggestion will most likely be unusable.
But I hope it helps, and throw a few good wishes from me in that box Lurkette is keeping!
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