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I got my 2000 323i end of august 2009 with 103631 miles. Previous owner replaced the engine with a 84000 mile salvage engine after the original overheated and cracked leaving oil in the coolant system. He said it was flushed but I found lots of oil still there and flushed it repeatedly with hot water and a little cascade. Added Preston and distilled water. Drove from Arizona to Bergen county New Jersey 2500 mile and four days with 28-30 miles per gallon of 87 or 91 fuel. Noticed no difference between the two octanes. Great driving.
First drive here day after christmas in slow traffic on route 4 west of Washington Bridge the low coolant sign went on. I managed to get off the road and added 1 gallon! that I luckily had with me. Low coolant sign on again and overheating after a few miles. Steam coming out somewhere by the firewall behind the engine. Added gallons before getting back. Got an appointment at Bergen Imports on the 30th telling I lost coolant. They claimed leakage of radiator and bottom of expansion tank. I had already a new expansion tank and waterpump that I had meant to install before leaving Arizona but never did. They accepted to use these without any extra charge but radiator plus thermostats etc amounted to $600 +$300 for labor. I got to talk to the mechanic who did the work and I think he said (his english was worse than mine!) that the heater-hose was swollen and that he cut it and clamped it back at the intake by the firewall but that it might slide off again ??. It seems that was where the leakage really was. Damage to injury was however also caused by a 10F freeze the night before I brought it in so that the coolant turned into ice sludge because it was diluted by the water, that I added when I ran out of Preston. Got my car back yesterday (New Years Eve) with BMW antifreeze but afraid to go anywhere far. Was told I should replace all hoses within 2-3 weeks at a total cost of $775. (Should have listened to all you guys who have repeatedly said to do that.) By the way, my old waterpump looks fine with steel impeller and I see nothing wrong with my old expansion tank either but..
One thing surprises me: The heaterhose is attached with a regular clamp and not the BMW type!!!???.
Happy New Year and any advice and/or comments are welcome.
 

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Adding coolant or water to a hot engine can be very dangerous; it could cause a cracked block. See if you can complete all the repairs before any more driving.
 
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