We have a 96 Taurus wagon since '96, with 185,000 miles.

A recent inspection from a GM dealership resulted in:

1) Small oil seeping on oil pan

2) Small transmission fluid seeping through Transmission seal

3) Small front crank seal leak

4) Upper strut mount bushing/bearings worn.

5) Head Gaskets leaking

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Earlier, the Ford dealership performed a similar check and non of the above needed immediate attention (which raised the question "how do I know when a head gasket is leaking and needs replacing).

In the last 12 months we have:

Repaired the A/C (approx $1000)
Replaced inner and outer front tie rods ($700)
Replaced spark plugs ($300)

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We have been subscribing to the "Dave Ramsey" approach in saving cash everyone to set aside for either repairs or to purchase a replacement used car. It seems each year we spend $500 to $1500 on repairs, which is still lower than any car payment would be. (We paid cash for the 96 Taurus and have had no payments in the last 18 years)

But the price of a very good used car has risen from $3000 upwards to $5000, and now seems to be creeping up to $7000.00 . If we need to save up for a replacement of the Taurus, at what point would we say "no" to the next repair?

Below are similar photos of our Taurus and color:

 

Your car looks better than many newer ones. Eventually you may need to replace it unless you can get some things done before they catch you at a bad time. As you already know they are very dependable and come with some usual problems.
Many times I have seen where the car was sold for fear of a major expense and the buyer drove it many more years without any problems due to the excellent care it received previously.

 

The GM dealer advertised a free check-up without an appointment. I waited about an hour and then they gave me the "list". How could they detect that the head gaskets are leaking?

Time is money for the dealer, and I doubt they did a compression test. On YouTube I have seen various devices to check for head gasket leakage, but they all see to be based on coolant mixing with engine oil. Is that what the dealer saw that led them to believe there is leakage in the head gaskets?

I have also heard of Blue Devil to seal up the water system.

I am not sure if I should invest $1300.00 in new gaskets, not knowing if the engine may or may not have other flaws at 185,000 miles.

 

Even if the is oil in the coolant, they cannot be positive that it is a leaking head gasket. There are other possibilities. Sounds like they are fishing for repairs. You can put a lot of oil and trans fluid for the price of repair or replacing the vehicle.

 

No doubt, they were looking into scaring people to buy new cars or get repairs done.
Look for an independent shop and get second opinions, in particular to the oil in the coolant issue.

If you live were they put salt on the road you should have a good look at the underside for rust. This too should figure in your calculations. If the rust has progressed so far that the car is only good for maybe 2 more years, then avoid repairs and keep driving until it dies or you find your next car. If you do that assume your car is worthless. Sell it privately or give it to a charity. I mean in a trade in situation they may offer $500. That was the offer I got for a '03 Windstar with similar mileage. I sold mine privately for $1300. In fact I was appalled by the dealership and bought my new used car off Craigslist.

Vsitor: congrats, you are financially savvy!