Do you see yourself with this car for many years if it had a good engine? do you really like the car? Although a properly rebuilt engine may exceed the value of the car. What would another with a rebuilt engine cost? Also do you have the money to get a rebuilt engine? Assuming that you really like the car and money is not a serious issue, and you plan to keep it for many years rebuild it(rebuilt engine, proper one for the car) and continuing enjoying it. In the long run this is the most trouble free, and least amount of unknowns.

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1977 240D turbo