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If the cost of replacing the engine, typically with a reconditioned unit, is less than the cost of repairing it, then its time to replace it.
The big items that can contribute to a decision to replace the engine are worn cylinders and rings - they cause much white oily smoke, worn and broken valves and valve seats - leads to huge loss of compression, worn bearings - engine knocks when cold, cracked block or head - water loss.
If you're handy with engines, you can do much of the repairing yourself and save costs, since it is possible for non-professionals to do much of the work of reboring cylinders, replacing bearing shells and grinding valve seats.
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