If it happened on the first engine, there could be a lot of oil left in the exhaust that will keep coming out - so the second engine is not necessarily suspect. I think you want to have someone test drive it under lots of load/unload conditions and look for what kind of smoke it produces.

What is the oil consumption? Seems the owner is on top of it to some extent, and so ought to know how much it loses. If it is reasonable, say, less than 1qt/700 miles, Id go for it. If more than that, beware.

Of course for the price, even factoring in a new engine the car is pretty cheap...

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Current Diesels:
1981 240D (73K)
1982 300CD (169k)
1985 190D (169k)
1991 350SD (116k)
1991 350SD (206k)
1991 300D (228k)
2008 ML320 CDI (199k)
1996 Dodge Ram CTD (442k)
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Past Diesels:
1983 300D (228K), 1985 300D (233K), 1993 300D 2.5T (338k), 1993 300SD (291k)