I have a used 2002 Outback Limited Wagon we picked up with 115,000 miles as a third car for the dogs and trips to the mall and supermarket. It was an upgrade for our 1996 Legacy Wagon since the birth of our daughter. Hands down the 1996 was a sound car but we needed to upgrade for power, etc. The 2002 is loaded and has lots more power. We both notice it has the same smell of oil burning (faint to moderate periodically). My Mechanic told me the same as your Dealer did: as long as it doesn't lose oil it will run a long. long time. We do not have any drops or puddles of oil on the garage floor but it just smells at times- especially at stops. I try to keep it clean underneath by spraying it with carb cleaner when it gets serviced and it helps for periods of time. I also get a little engine "noise" (rattle/ticking) and have also been told by dealers and my mechanic that it is normal for a Subaru- at least some and a nature of the beast. All in all- considering I drive a 2004 Denali and my wife a 2006 Lexus GX470...high end SUVs-----this car has been a work horse and perfect for everyday use. Please let me know if any one has the same problem and other than head gasket- has found a better solution to get rid of the smell. MTKEG@rocketmail.com
I own a 99 Outback and now have the head gasket issue as well. I think that if a dealer is surprised by this issue, they haven't been listening to their customers, or visiting the service bays enough!
We love the outback, yet are not enjoying this potential 3500 bill!!
These model years of Subaru are notorious for headgasket problems from the factory. If you have it replaced by a reputable shop there is a really good chance that you won't have any other issues with it. It truly is one of the only flaws that these cars have mechanically, and in my opinion isn't reason enough not to buy these cars.