1st Post $1000 89 535i advice (long)

[NITDRIVR]

Hello,
My name's Matt and I just purchased an E34 from a charitable thrift for $1000. I also own a 81 528i runner, 80 528i parts, 74 R90S, 73 Scout and 73 Lincoln. I do all my own repairs except paint and tranny internals.

The other day I was browsing records at the thrift and overheard talk of a $1000 BMW out back. Not registered and insured so no test drive, but I started it put it in gear and looked it over. It has 198,000 and the auto. The paint is dull on the topside (can see previous buffing attempts) with a few scratches and minor dings (bright red) interior is fair, tires mostly gone. The good news is the underside is mostly dry and good condition, and it doesn't appear to have been wrecked, and it was cheap.

Today I drove it around and the good news, goes straight, stops straight and the engine runs strong with no smoke. The bad news I hear a faint metal on metal dragging noise while moving. At first I thought it might be a hung up caliper but I realized it was tied to engine speed. I don't hear it parked and running, so I suspect the tranny (the fluid doesn't smell burned). It also gives a quiet little squeal occasionally on full throttle upshifts. The check engine light came on twice once stopped in gear and once idling in park. Idles at a smooth 800 or so.
The fan clutch is bad, climbs to red at long lights, but goes right down moving (I could stop it with my thumb running at temp).

Since it was advertised good running I probably can return it since I couldn't test drive it and I haven't transferred the title. On monday I might get a diagnostic from a BMW shop.

I don't mind doing some repairs but I already have a driveway full of potential patients. I'm looking for some miles before the 5 spd conversion and paint. So have I found a gem in the rough or a hole to heap money into?

Thank you for any advice.
Matt maybe a former FirstFiver

[winfred]

possible noise point is the driveshaft dragging on the heat shield above the converter, due to shield being bent or busted tranny mounts, i've seen it both ways

[NITDRIVR]

Thank you for the reply. That sounds like a good answer because I have never heard anything similar from an auto before. I'll crawl around underneath it tomorrow and see what I can see. I'm suspicious the check engine light is low oil pressure at idle, not unusual for a high mileage engine. Despite being a bit of a pandoras box I like the car.
Thanks again
Matt

[winfred]

if you had low op the op light would be on, these motors don't wear out that way, check engine light meens somethings pissing off the engine control system, usually a sensor out of spec or air leak

[NITDRIVR]

I just RTFM. Spotted that and it eases my mind. Hopefully it passes smog. Think I'm going to skip the shop visit and just get the Bentley and maybe a Peake tool. I kept the Bentleys from my volkswagen watercoolers in case another one follows me home. Thanks.

[Kalevera]

Good idea on the Bentley's. Sounds like you got a much better deal than I did (do a search on "previous owner" to read all about what I went through with my 5). As you may know, the engine is bulletproof. Just be sure to check the banjo bolts (I found one sitting in the valley the first time I popped the VC last week).

whit