1. No it would not create a precedent. 2. You are already obligated to make payments as a cosigner.3. If the car gets repossessed it will show as a bad debt on your credit (probably already is hurting your credit) and if there is no gap insurance you may be liable for any loss the lender sustains as a result.4. You would not create any barrier to suing the other party by paying. That might even help your cause but you will have the burden of proof. Best course would be to cooperate with lender to cut their losses, help them to repossess the car and see if you can get them to give you a release.
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As you know, as a co-signer, you're on the hook for the entire debt. The lender doesn't know or care about your deal with your co-borrower.
Precedent doesn't matter to the lender. They'll ding your credit the same way they'll ding the c-borrower's credit, but yours will matter, because you're the one with (maybe formerly to this incident) the good credit. But why make the next payment if you're not going to keep making them? Yes, they may repo the car, sell it at auction, and hold you and the co-borrower liable for the difference between the loan and the amount received at auction (which is always low).
Yes, you can successfully sue the co-borrower if you want. They're unlikely to defend and you'll win a judgment. But it's unlikely to ever be collectible. They've got no money, and they needed your good credit to buy this car, so all is likely to do is waste more of your money and time. Sorry, but this is why co-signing for a loan is never wise.
The best thing to do, if it's practical, is pay off the car loan, take possession of the car (which means getting it from your co-borrower) making sure you've got its title, then privately selling it yourself to recoup some of your loss. Then you could sue the co-borrower if you want, if you think they'll ever have some money.
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One of my former attorney friends used to say a guarantor is a fool with a fountain pen. Unfortunately your credit is already taking a hit and I suggest you make a payment to stall the repo. At the same time I would consult an attorney with debt experience and immediately attempt to assert your claims against your former friend. One thing does not preclude you from your remedies and does not create a precedent.
Unfortunately you are both jointly liable for the debt. You can make payments to avoid repossession it does not obligate you to any future payments, what does obligate you are the documents you signed when you bought the car. If no payments are made the car will be repossessed, your credit damaged and you both could be sued for the balance. You can, however, sue the co-borrower to indemnify you from the loss you have incurred based on the agreement you had that they would make the payments.