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$3000-$4000 to replace the engine is an unreasonably high estimate for this job. Get a second (and even a third) opinion from other garages to see what they will charge. As jorrel mentioned, a tested boneyard engine is definitely an option to pursue.
Another alternative, if you are the handy do-it-yourself type, is to do the job your self. As it stands, your car is still running. Obtain another engine and go through it yourself to rebuild it while your car is still running. Once the second engine is rebuilt, take a weekend and swap it out yourself. This would be my preferred method of attack, but then again I've been doing stuff like this for about 25 years now and an engine swap is nothing new to me.
billy242
Urbana, IL
1980 242DL with lots of GT and IPD stuff
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