I'm driving this morning up a hill in my 1983 240D manual transmission, I shift down to third, a few seconds later I hear this bang and a continuous grinding noise and I lose connection between the engine and the wheels. I pulled over and came to a stop. I tried to start going again in first, but all I heard was the grinding sound as I let the clutch out all the way and it didn't move. The shop said maybe a broken rear axel or a blown differential. How serious are these or any other diagnoses?

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1983 240D 3.0T 4-speed manual, now sold

1989 Subaru GL Wagon 5-speed Touring Edition