The local dealer told me it needed a new tranny ($3,500) and also recommended a new timing chain ($4,000).
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You should be able to get the timing chain and related parts replaced for no more that $1,000, even at a dealer. An indie shop will probably be in the $800 range. Rebult trannies are available for $1500 to $2,000 but probably not from a dealer. Do some shopping for the timing chain work. I know that in your area there are 3 MB dealers, Seattle, Eastside, and Tacoma. Plus there are several good indie shops too.

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1986 560 SEL (159K miles)