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This is typical for an older 960. Your car is equipped with a self leveling suspension. This consists of very thin springs that only support part of the weight of the car. The rest of the weight is supported by Nivomat shocks which do the selve leveling part. The shocks usually have a life expectancy of 100k miles. Anything over that is bonus time. The shock must be replaced with another Nivomat because the springs are unique to the Novomat suspension. You can not use normal shocks because your car will continue to sag. The schocks go for around $200 each. You must replace both at the same time. If one failed the other one is not far behind.
I don't know if you have a sedan or wagon but both are prone to the same failure despide the different suspension designs. For wagons, FCPgroton makes a kit for $200 that replaces rear shocks and springs to eliminate the self leveling feature a half the cost.
There is a wealth of information in the FAQ on this subject under the features button.
http://brickboard.com/FAQ/700-900/NivomatConversion1.htm#Volvo760780NivomatShockConversion
Good luck
Justin
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