Ah yes the lemon, official fruit of bad cars across the United States.
According to the always trusty Yahoo Answers the term comes from the "sour taste a bad car leaves in your mouth". What I found even more interesting was that in Scotland they call bad cars "scrappie-dodgers" (that is a way better term and should be adopted in the U.S.).
The truth is there are about 20 different stories about where the term "lemon" comes from when referring to bad vehicles. Here a couple of my favorite explanations:
1. To hand someone a lemon was British slang (1906) for "passing off a sub-standard article as a good one."
3. In 1979 a woman named Rosemary Shahan from Lemon Grove, California bought a car that still wasn’t working after 3 months in the repair shop. She then picketed the shop for 5 months, which
created a public outcry against the treatment customers received from
mechanics and car dealers. This public outrage became the basis for a
citizen movement for "lemon laws".
The highlights in our lemon-filled commercial from the 1992 way-back machine include, real lemons (that you eat, not that you drive), laser music, running footage of old Hondas and a $20 bill being squeezed right out of a lemon (don't waste your time it doesn't work, I tried for hours).