I'm afraid I already know what the answer on this is, but hopefully I'm wrong. My 89 240 wagon is collecting a red fluid behind the distributor in a tiny pool. I stuck my fingers in this a million times and wiped it on my white paint just to make sure of the color. It feels and looks like transmission fluid which I did change a few months ago.

What I did was drive the car maybe 10 miles on country roads, staying around 50-55 mph. When I returned there was a tiny tiny bit of this fluid again. It looks like it's running down the block coming from the head gasket, and I have no idea how long it has been doing this. If the car does not get used I don't see any fluid.

The catch is I get no overheating, no loss of fluid, no smoke from the tailpipe, no sludge, mixing of fluids, etc. It has been dealing with 90+ degree Tennessee weather and everything holds. Regardless I'm a bit worried about this and the cost or getting it back going or doing the job myself with no experience on head gaskets.

There is a very good Volvo shop in Knoxville I was tempted to go to, but since I have done jobs like the timing belt, exhaust manifold gasket, intake manifold gasket, and other odds and ends needed to remove the head I think they'll kill me in shop time. On top of that since I need this car for school I won't be able to do anything until december.

 

If it is indeed transmission fluid, I would be concerned about coolant mixing with the transmission fluid via the trans cooler in the radiator. What is more concerning is if the coolant gets into the transmission. A head gasket is not too bad of a job for a do it yourself project but you will have to consider a replacement radiator as well.

Check your transmission oil for contamination. I would drain the pan and see if there is any coolant in it. If there is, I would do a full flush.

 

I have had a few people check this out and it does seem to be a very very small head leak. Years ago the white streak on the block was pointed out to me but I was told not to worry about it, so it slipped my mind for maybe 4 years. Coolant is clean, oil is clean, and the trans fluid is new (well, maybe like 2 months) and also clean.

I have a friend who is ready to tear this car apart with me but I have been told to just leave it until the head becomes and issue.

On the bright side I have done the exhaust manifold, intake manifold, and timing belts on these cars, so everything leading up to removing the head is familillar. I've just never had the chance to pull a head. I did however drive it for 20 miles at 55mph (state country highways) and noticed no fluid. Just that little white line.

Locally I'm well known for this car so when the hood goes up people gather. A diesel mechanic stopped by and said the white line was aluminum oxide, meaning someone at some point has put a stop leak of sorts in it.

 

I agree the head isn't the most urgent problem. However, if it is transmission fluid leaking there it means that transmission fluid and coolant are mixing due to an internal leak within your radiator. This means that coolant may be getting into your transmission which could ruin it. Check the trans fluid for coolant.