So I bought my 1981 240 DL wagon 2 months ago...it leaks oil, but all in all is in pretty great shape. The only issue is that when the engine gets warm I can't get it to reverse. I can put the stick into reverse (It's a manual with overdrive), and when I let the clutch out it starts to move as normal, but will almost immediate give this awful grinding noise and stop moving backward. The clutch does not pop out, and it stays in gear, and this only happens after is has been driven for a bit, never when the engine is just freshly turned on.

Any ideas about what may be going on?

 

Have you checked your fluid? The manual transmission still takes ATF just like the automatics do. I would first start by checking the quality and level of the ATF. I would advise you to add lucas trans additive the real thick kind. When the car gets warm so does the ATF and it thins out sometimes not providing the friction the tranny needs to shift into gear especially if your gears are worn. Also make sure your clutch cable is adjusted properly and not worn out. A bad clutch cable will make the clutch very hard to press in and if not adjusted properly will not engage clutch correctly. Also, is the shifter sloppy at all? When was the last clutch done? A bad clutch can also cause this. Check fluid and clutch cable first if cable has no room left for adjustment you know you have a bad clutch. Where's the pedal at when clutch engages? Should not be on the floor...

 

It's a manual transmission, low fluid level is not going to affect shifting into reverse.