I thought nem and van couldn't be used together, but rather "nincs". Why is it okay here and not "A piros autó nincs fent, hanem lent." Or is that okay too? Thanks in advance.
You're contrasting above with below, so here nem negates fent & not van. You could say, though, that "Nincs fent az autó." (Possible translations if you want to stress fent include "Fent nincs az autó." or "Nem fent van az autó.")
It can't be. You only could if you describes the car with adjectives. "Az autó nem piros, hanem kék." Adjectives can take the verbs' role as a statement, but places can't.