Many bodyshops say they paint whole panel even if some small parts of the panel is rusted.
Is this usual?

What is the advantage and disadvantage?

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1992 300D 2.5 turbo diesel. 319 k miles.
124.128 chassis, 602.962 engine, 722.418 tranny.

Yes because if they were just to paint one spot it would stand out like a sore thumb. If its a fender there painting they usuall have to blend the paint into the door.