I have a 98 Subaru Outback with 260K on it. My mechanic says one cylinder has an exhaust valve leaking (down to 30% compression), which causes the oxygen sensors to starve the other cylinders with a lean mixture, so it runs like crud. But it only does this sometimes. Sometimes it runs just fine. (it usually runs ok when it’s first started). He says it will cost more to fix than the car’s worth, but I just put a new timing belt in it about 6 mos ago and just had the front brakes replaced. Plus, I love the car and don’t really want to scrap it. What options do I have? And if I must replace it, what are the reviews on 2002-2007 Outbacks?
You haven’t told us what the mechanic will charge you to repair the car, so we can’t really comment on whether or not it’s worth it to do that repair.
Subarus in general are known for blowing head gaskets. They are not going to be as cheap to maintain as some other brands. If you’re looking for the best reliability in a used car, Honda and Toyota are good bets.
Boy, 260 k miles looks pretty darn good. Given what else could go wrong, thank your mechanic for not taking your money and start saving. If you want used AWD, I would sooner trust Honda CRVs and RAVs as per @shadowfox good suggestions.
Redoing the cylinder head is usually pretty pricey, but these days you can sometimes save some $$ by purchasing rebuilt heads that are ready to install. It’s pricey either way, but something to think about. As @shadowfax noted, we have no idea if you were given any ideas about that or estimates so it’s hard to say.
If you are on the verge of not having it fixed and calling the scrap yard, there is this little discussed - somewhat weird and old-fashioned - way of “steam cleaning” the inside of an engine. It involves introducing small amounts of water into the engine while it is running. If the exhaust valve(s) or its seat is mechanically damaged it won’t do a thing. But if its just really gunked up with carbon it could help. Ask your mechanic is s/he’s ever heard of this. (Be prepared for an “are you nuts?!” look).
I’m not saying whether I’d recommend that or not. I’ve never done it - just heard of it. And I would only do it as a last shot right before sending it to the scrap yard. It doesn’t really cost anything to do it and if things go oddly, nothing really lost.
Thanks so much. The mechanic said it would probably cost over $1200 to pull the head(s)- he said it would be silly not to do the other cylinders with that many miles on it, but he said he would if I wanted- grind valves and install new guides. Thanks for the suggestions on other AWDs too. Does VW make an AWD diesel wagon?
I’m no subaru expert . . .
But I believe you don’t have to pull heads to check that valve lash
I’m not disputing the 30% leakage, but it might be interesting to see if it’s due to tight valve lash
I’m just saying you might want to rule out valve lash before pulling heads
db4690 is correct; the valve lash can be inspected and adjusted with the heads in place. If you’re lucky and the problem is a tight intake valve instead of an exhaust it’s possible the car can go many more miles once the adjustment has been done.
If an exhaust valve is tight that puts a big of a snag in the works and it’s a bit more iffy how many more miles the engine can go without work.
Seeing as how this sounds like a mild case, you should definitely follow db’s advice about the valve lash.
The reason why it’s fine on startup is because the lash is probably just getting snug. Once the engine warms up the metal in the valve train expands due to heat and the snug lash becomes too snug which then keeps the valve from seating and lowers the compression.
Don’t despair just yet… 
Thanks! I’ll check into that. I’d love to see it turn 300k!
Does VW make an Awd diesel ? If they did and it was as reliable and as reasonably priced as a Subaru, it would sell like hot cakes. I would not even go there.
I have a 2002 Outback and LOVE IT! I have had the car for just over 5 years. About a 1 week after buying it the check engine light came on. I had $2,225 worth of work done to it so it could pass inspection. Not long after the check engine light was on again, but I was in the process of moving from Tx to Oregon. I held off doing repairs until after the move. This time the cost was just over $700. Two years down the road the light is back on and due for inspection 
Again I had it repaired to the tune of $680. Hoping this time it lasts longer. BUT other than that I haven’t had an issues with the vehicle and it runs like a dream. Gets me where ever I need/want to go, mountains to the beach. When I asked the mechanic, 2 of them, if it was worth the cost of repair they said in unison “YES!” The vehicle is in great condition other than the O2 sensor and cat con issues I had.
Also when I think how much a new car would run I think I am coming out on the winning end.