Is the motor the only problem? If the body and interior are nice I am going to have to suggest keeping the car. Rebuilding that motor for $8,000 is ridiculous, and that price may be artificially high, as your mechanic is probably not interested in doing the job.

I bet you could get a nice running engine around $500.

Motors and mechanical bits can be replaced easily. Bodys, paint and interiors are where the real money goes.

I sold the engine out of my old 220 114 car for 600 bucks and that was a while ago. Motor was like new.

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'90 300SE 298k
-300K and it gets put into retirement.
'80 300D 255k Purchased new by family in 1980.

Had a:
1973 220 (gas)
1980 300SD
1992 400E