Start looking for another horse immediately, while you finish out the lease that you have already paid for. Go & get yourself some experience of looking at and riding horses that are in your price range. Make sure that he knows what you are doing, but make sure that everything is civilised and friendly.
Then - bu the time your paid-for lease IS up, you will have either
1 found a better horse
2 decided that you do want to pay this shyster an extortionate amount for this horse
3 been told, on the last day possible, and only if (1) was perceived to be a real possibility, that you can buy the current horse at your original offer of $500.
But you MUST enter this process with a real and genuine attempt to find a better horse elsewhere.
Good luck with it, and commiserations on dealing with this rogue.
Get up, get going, seize the day. Enjoy the sunshine, the rain, cloudy days, snowstorms, and thunder. Getting on your horse is always worth the effort.