As of now it looks like my current ride ('97 subaru with 175k) has a head/head gasket issue. The shop that looked at the car isn't 100% sure if that is the problem, but after much googling I think this is correct. Repair will be about $2,500.
Considering the age of the car and the cost of repair it makes sense to replace. It looks like used car prices (assuming I don't want one as old as my current car) start at around 10k.
Here is the issue: I have only about 4k in liquid assets. So I can repair with no problem but if I want to purchase I have to either finance or borrow from my wife :-P . Credit is exceptional but really really don't want to owe more money (already have mortgage and student loans).
I'm looking for opinions to push me in one direction or the other. I will put it out there that my wife gets mad every time I pay for repairs of my car
An old and experienced purchasing agent I worked with had several rules. The primary one was " Get 3 or 4 quotes " You can get this fixed for less than $2500.
As far as fixing vs new, I had the exact same situation with my wife's Mazda 626. The car was paid for and she loved it. We rebuilt the trans twice for about $1500 per time. Keeping the car going allowed us to get to a better place money wise.
The EJ 22 is super easy to do HG on, once the timing belt is off a few intake and exhaust bolts and they are off, you don't even need to pop the valve covers. I would do it for $600 + parts and machining if necessary and make money and so would a lot of other guys, its cake. The whole job not more than $800 unless the head is cracked but those are cheap.
Try to find a subaru specialist. On some of the cars doing a headgasket means pulling the engine which may be leading to the crazy quote, but I think yours is old enough to have SOHC and enough clearance to do it in the car. If no one want to do it and $2500 is still your best quote, you can get a new Versa for $9500... Put your $4k in and add the rest to the mortgage and your wife will only complain once for hopefully quite a few years!
Subarus do have head gasket issues in (approximately) that year.
I'd lean towards fixing it - this one last time (and tell the wife that) - then driving until the liquid budget allows a replacement. Then just wait for another large repair, and sell the Subaru while picking up the new vehicle.