My fiance owes around $7,000 on a 2001 Subaru Forrester. The transmission has been acting up for a while and finally gave out yesterday. He brought the car to a mechanic, who estimated the damages at a minimum of $2600 and has said there is a possiblity when they open the system that more things may need to be replaced. With a few other problems (electrical, etc), total repair for the car could be around $4,000. We are trying to decide what the best option is. Some things we are considering-Buying a cheaper used car, saving for the repair and selling the Forrester after repaired (to recoup some cost) or selling it as is and taking a loss. Has anyone experienced a similiar problem when the cost of a repair borders the value of the car and a significant amount is owed? Any recommendations?
I should add the car is high mileage (around 120,000) because he drives for work. It had also been in an accident about 2 years ago, but was repaired completely. The current problems are not related to that, but I know this will have an effect on the value of the car and whether or not it may be worth fixing.

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