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I have a 1989 240 wagon with AW70 automatic transmission and 3.73 rear end. Best improvement I ever made was replacing the stock camshaft with an "A" grind cam. Other good cam swap candidates are a "B" cam, a "VX" cam, or a "VX3" cam. (you can often find them for sale on turbobricks) I have NO trouble keeping up with (or, frankly, staying in front of) traffic.
I will say that the 240, even before the cam swap, was noticeably faster than my 1993 940 with same engine and transmission but the 4.10 rear end. I've got a VX camshaft in that car now, and although it is better, replacing that stupidly short geared rear axle is likely the only way to make it less of a road slug without doing serious engine mods (+T or a 16v head conversion). The 240 runs 3K on the interstate at somewhere north of 80MPH, and still has power to pass should I wish to. The 940 runs 3K at about 70 MPH and with the stock M-cam had zero headroom to pass.
Before any of this, though, you need to make sure things are properly adjusted and that the car has had a tune-up. Cap, rotor, plugs, wires, valve adjustment, kickdown cable adjustment, throttle cable adjustment, and confirmed timing belt is installed correctly (this last is likely only if the thing is DANGEROUSLY slow, as in "air cooled VW slow" or "non-turbo diesel Mercedes slow").
john
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1989 245 245K / 1993 945 131K
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