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The oil light is just for the oil LEVEL, it won't come on due to a small leak. If the Oil light does come on, it means you're way low on oil (probably dangerously so - bad for engine).
I had the cranshaft seal go on my '97 and it was leaking bad enough with Dino oil that I got the part replaced, I got it replaced at an Indie Mechanic, but guess at a dealer it's only $300-400 of your total... Here's my suggested inspection to decide if you need to get to it now or not - with car at idle, you can see oil leaking out looking near the passenger front wheel if it's getting real bad. My suggestion is put it neutral (if manual) and have it sit on the driveway for 2-3 minutes, if you don't start seeing more than a few drops on the driveway, I'd just watch the level closely (start by checking daily, as comfort grows, I'd check every 100-200 miles)...
NoteL It takes some time for the oil to migrate out, as if you have the plastic tray still installed on the underbody of the car, it is dripping on this first, then slowly moving down till it usually finally drips off the back edge of the underpan 'tray' back by the wheel.
mine I pulled wheel and wheel well cover, and was staring at the crankshaft seal itself, seeing 2-3 drops a second of oil coming out! If you're comfortable pulling a wheel and a few screws out, this can give a much greater level of confidence of how much this is leaking.
Also, a oil change and switch to a high-mileage oil can sometimes help plug (or at least lessen) a minor leak - not full synthetic, that will leak worse.
As for the bypass valve, that's a judgement call on your Son's driving habits. I got my first turbo Saab as a senior in HS, and rule was I drove to keep the turbo gauge in the white (ie basically no boost), or I got booted off shared insurance with my parents (would've cost me an extra $2k a year, strong incentive when you're 18). Under low boost conditions, you'd effectively never end up needing the bypass valve, as that is to prevent overboost when shifting to lower revs while under boost (pressure spikes when revs/throttle drop off and turbo is still pushing extra air into the system). If A BPV were to completely fail, and remain closed during an overboost condition, the engine would get WAAY more air than it needs, increasing air pressure substantially to the engine... you could blow a hose in the intake system, or force the engine to deal with very high pressure. I'm less experienced (DIY, not a pro) than many in these forums, not sure if overboost during a no-throttle condition would be as bad as flooring the throttle, but not something I want to find out first-hand.
As for the A/C, I'd make your Son use the same method used for generations, use the Windows (and sunroof, it's a SE, guessing the sunroof is installed). A new A/C compressor and install is probably nearly 1/2 your total quote, and windows can work fine till September, then it won't even be an issue for the next 6 months after that (depending on where in the country you live... I'm in Wisconsin, A/C's really only a big deal 4 months a year this far North). It's even power windows, I had to crank the windows by hand in my first car (and it wasn't even THAT long ago).
Nick in Milwaukee
current -'97SE
priors - '95SE, '90SPG, '90S parts car
posted by 69.174.5...
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