Hi - I drove my 2001 land cruiser into the shop after a 3 hour drive - it was making a thud noise (sometimes) when I went from stop to go. Felt like transmission. They called and said they put it on the lift and heard a thud from the transfer case, put it down, and now it cannot go in forward or reverse, just grinds. I said - I drove it in - they replied it must have just gone out when they had it. So… i asked the price. 1250 for the transfer case and 2023 for parts and labor for the repair. Advice on my next steps? Is that price fair?
Have you tried the transfer transmission in High and Low ranges? Have you tried to lock out the center differential? Does any of these change the operation or sound? Locking out the center dirrerential would only give you front wheel drive but that would point to a failed center differential which would still require the unit be removed and parts replaced. Maybe it would be less expensive. If it works in one range only, a replacement unit is probably the best route to go.
In perusing the AllData site, the OEM price for the transfer case is $3976 and the labor to R&R the unit is 3 hours so figure another $450 to $600. The labor charge to R&R the case and overhaul it is 13 hours. This would not include cost of replacement parts. So the price you are being quoted is quite reasonable depending on if a new unit; rebuilt unit; or used unit is being installed.
It would be instructive to split the case; do an inspection; and ascertain what failed. Once knowing what failed, the technician might be able to advise you on how to use the transfer unit to forestall future failures.