Check to see if the wiring harness has been replaced, it's a problem (but not too expensive to fix). Early warning signal is if the car idles rough - it may act like the idle's not set high enough when the AC is turned on.

I vote for the 3.2 litre motor. I followed that recommendation when I bought mine and am very glad I did given the limited performance enhancements available for the 124.

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1992 500E