P0301 misfire, dealer says blown head gasket - options?

I've read thousands of posts on these forums over the years as we've had two Priuses, and have gained so much valuable info, but I guess this is my first post!

A bit of recent history before my current situation will make sense:
Around six weeks ago our 2013 Prius V had CEL P0301, cylinder 1 misfire, and occasionally had brief but serious knocking sounds on cold start-up. I read posts here for hours, watched YouTube videos (thanks Nutz About Bolts!) and dug in. I changed the spark plugs, noticed number 1 was a little oily and dirty but the electrode tip was clean, the others were dry and normal. I poked a light in the spark plug holes, all pistons had a similar thin layer of carbon. I labeled the ingition coils and reinstalled them in reverse order. I cleaned the intake which had almost 1/2" of oil at the base and the EGR ports were a bit clogged. I cleaned the EGR cooler, pipe, valve etc - soaked overnight in a warm solution of PBW (powdered brewery cleaner) and sprayed with a strong hose nozzle, got it all shiny inside without a pressure washer or repeated soaking! The cooler wasn't blocked but had lots of buildup. I cleaned the injectors which seemed super clean already. I replaced the PCV valve and installed an oil catch can. In the process, I drained and refilled the coolant. It took me a week of focused time, around half of which was gathering info here, and cost only $330 in parts and tools. It ran smooth and strong after that, no knocking, and the codes cleared themselves after a few days of driving.

The above paragraph should be its own whole post with lots of photos that I took, but after working on the car I was behind on everything else, and it got out of sight, out of mind. Until last week, when I noticed it knocking some in the same way it had earlier, and after a day the CEL came on. I had it read, and same thing - P0301. I had also tracked the coolant level in the reservoir carefully in the six weeks and ~4000 miles we've driven it since I did the work, and it has dropped a bit - I put it right at the F line which is just above the seam, and after a few weeks it was at the seam, and last week when it started knocking I noticed it just below the seam. This is all consistent with the misfire being caused by a head gasket failure instead of bad coils, dirty injectors, clogged EGR etc - all the stuff I was chasing down the first time the CEL came on.

I don't have tools to diagnose a failed head gasket, so I called around and everyone had a 1-2 week wait except the dealer. They said there's hydrocarbons in the coolant, which in context of the misfire indicates a blown head gasket. I think they're right, since I changed the coolant less than 4k miles ago so hydrocarbons in new coolant is a strong signal. But I thought they'd do a compression test or leak-down test to double check instead of just testing the coolant.

They said they don't recommend replacing head gaskets on Priuses since the aluminum head can warp, so instead they replace engines, and quoted me $7,800 to swap the engine for one from GNR with 90k miles on it and a 1 year warranty. I'm not inclined to do that, mostly because we paid $13k for this car in January 2021 when it had around 90k miles, it has 130k miles now, and I could easily find an OK car for $7,800 and just let this one go. But that feels bad also, mostly because it's the perfect car for our needs, and partly because I put new tires on it just before the first CEL came on, have a set of winter tires for it, and just last year had to do the brake booster repair out of pocket since it was just outside of the TSB extended coverage. At 11 years old and 130k miles, it feels like it shouldn't be nearly totalled by a blown head gasket, and shouldn't be sent to a junkyard. It seems like the right choice is for me to do the head gasket job myself, but I'm hesitant about that - I did it once on a Subaru at a pro auto shop where a friend worked and held a bay open for me, around 20 years ago. Now I'm middle aged and busy, have a garage and can figure it out and get tools if I don't already have them, but it seems like a huge and risky job on the car my wife and I share as our daily driver.

I'll be calling independent shops tomorrow to see what they would recommend and get some ballpark pricing, they may have a palatable option. But I want to know what you all think - should I trust the dealer's diagnosis or get a compression or leak-down test? Does it make sense that the dealer doesn't replace head gaskets and replaces whole motors instead? I don't remember seeing people say that here. What have you paid to have a shop replace the head gasket or swap a motor? How big or hard or risky is it to replace a head gasket in my clean, dry, well-lit garage, given I have a fair bit of amateur mechanic experience and am good at figuring it out? Is there anything I'm not thinking about here?

The car is paid off and we can get a loan to replace it if necessary, we have an older second car we can use in the meantime, and my MIL lives across the street and we can often borrow her car. So this isn't a desperate emergency, but we can't drop $7,800 on a car that's worth around 10k, and trying to sell it and buy something else would be a similar hit, assuming we go for another Prius V since it's the perfect size/capability/efficiency for us. I feel like I have no good options, but I have time and resources, and I hope you have ideas!

 

Very slight, I typically go around 8-9k miles between changes and frequently check the dipstick. It does seem to drop very slightly between changes, like a few millimeters, never enough to get close to adding more. Also, a few months ago when I had an independent shop and then the dealer look at it for the brake booster failure, both said the timing cover gasket has a slight leak. It's usually parked in our clean garage and I've never seen a drop of oil below it, so I'm not worried about that for now, but a slight leak with barely-noticeable drop on the dipstick combines to indicate very little oil consumption.

I had gathered that when I read about the misfire in May before doing the work in June, which is why I cleaned the whole EGR system at that time. None of the EGR passages were clogged, but the cooler blow-through was about twice as good after cleaning (as tested by feeling the back pressure as I blew hard through it) and the small EGR passages in the intake manifold had buildup that left the holes about half their cleaned-out size. I planned to do the EGR clean again somewhat regularly - now that I've done it once and if that's all I need, it would be much quicker. But it turns out that was like shutting the barn door after the horse escaped...

Thanks, I have a folder full of PDFs that I've downloaded from your links on various posts and in your signature. Super helpful, and I don't even have to do the dance with Toyota tech info subscriptions!

I guess my question is more about how much time it might take, how likely I am to do it right the first time, how likely it is that it would fail again - especially since the dealer thinks it's not worth doing. If I have some confidence that I can replace the head gasket and get another 100k miles or whatever on this car, that would be great! But if it's only likely to buy me another 10k miles or whatever, I'd look at other options.

 

I thought that was the case, but had also heard plenty of stories of people doing compression test or leak-down test to confirm. The car is at the dealer and I haven't seen whatever detailed results they got, just a phone call "hydrocarbons in the coolant" but I have other reasons to believe them.

Yeah, those are my concerns about doing it myself. I wouldn't plan to flip it after doing the work myself - any private party buyer who knows things would really hesitate to trust my work, and as you say it would also lose much of its trade-in value. But if I thought the work would be relatively straightforward with a good chance of success, I'd do it so I can keep driving the car another 5 years or more. I'm very careful and have done work like this several times before and tend to do it right the first time, but if the dealer doesn't think it's worth doing...

Thanks, that's the kind of info I need! I checked Hybrid Pit, they have engines available for $2100 plus shipping. I don't have an engine hoist, but aside from that the job doesn't seem harder than a head gasket replacement - or is it?

The JDM engine you mention sounds like exactly what the dealer was offering - again it was just a quick phone call, but they said it has 90k miles on it. Previously they had estimated labor for the engine swap at around $4k, so the cost of engine and related parts they're offering is probably around $3500. Is that just the usual dealer markup? And if I'm going to do the swap myself, I'm inclined to use a JDM motor instead of a new one, since the traction battery, transaxle, inverter etc still have 130k on them. Anyone have experience swapping a JDM motor and how long it lasted?