How much of an issue could this cuase? Let's say using two 195/70/14's and two 205/70/14's. Yes, these tires are about an inch different in diameter, but that is only 2% different.

Motives are unimportant, just curious if there would be any adverse effects. Oh, and yes, same sized tires would stay on same axle, no mix and matching on the rear of example.

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B
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1983 300SD

Using tires as you propose is fine as long as you can acceopt a speedo error if the rear tires are over the normal diameter the speedo will read lower than actual. I don't see any possible rubbing unless you go with a wider tire

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'95 E320 Wagon my favorite road car. '99 E300D wolf in sheeps body, '87 300D Sportline suspension, '79 300TD w/ 617.952 engine at 367,750 and counting!

I'm thinking of issues just as over or under steering, or wandering on the road. Things like that. Would that not be an issue with having two different sized tires?

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B
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1983 300SD

I believe the only major concern would involve ABS. Specifically, the tire size differential would cause (obviously) a wheel speed differential which would cause the ABS to activate. Since your car is a 1983 it's a moot point.

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'94 W124.036 249/040 leder; 8.25x17 EvoIIs
'93 W124.036 199/040 leder; 8.25x17 EvoIIs, up in flames...LITERALLY!
'93 W124.036 481/040 leder; euro delivery; 8.25x17 EvoIIs
'88 R107.048 441/409 leder; Euro lights
'87 W201.034 199/040 leder; Euro lights; EvoII brakes; 8x16 EvoIs - soon: 500E rear brakes
'70 R113.044 050/526; factory alloys; Euro lights