I Bought Volkswagen’s Most Overcomplicated Car For Just $2,000. Here’s Everything That’s Broken

Someone once told me that I probably have Stockholm syndrome for Ferdinand Piëch-era Volkswagens. They keep breaking on me and costing me money, yet I keep running back to them and asking for more. I want to tell that person that they’re wrong, but my latest purchase seems to betray that notion. I just picked up the cheapest running and driving Volkswagen Phaeton in America, proving I haven’t learned my lesson from the last Phaeton I owned. And just like the last Phaeton I owned, this depreciated German boat carries a lot of broken baggage for the ride. But this $2,000 Autobahn cruiser, even in its faulty state, remains better than many new vehicles I’ve driven. Here we go!

Yes, you read that intro correctly. This 2004 Volkswagen Phaeton isn’t even the first Phaeton I’ve purchased for less than $3,000. Back in 2021, I paid $2,500 for another Phaeton and it took all of an hour for it to leave me on the side of the road. That car was an unmitigated disaster. It overheated, its transmission flared its shifts, the air suspension had a blown bag and multiple major leaks, parts fell off on the highway, and the trunk broke in a way that prevented it from closing. As if to add insult to injury, the dome light also ejected and hit me in the face. Then, the Phaeton’s characteristic HVAC doors all jammed pretty much at the same time.

Later, I learned that my 160,000-mile Phaeton was really three dead Phaetons and a dead Porsche Cayenne reanimated as a single car.

I knew I was out of my depth and sold it to my mechanic. Last I heard, he put over $4,000 in parts into getting it back on the road, then it broke again soon after, costing more piles of money. I can’t imagine what that dollar figure would have been including labor costs. The car now drives fine, but nobody wants to buy it for anywhere close to the $5,000 he wants for it. Even at $5,000, my mechanic will not be getting back what he paid in fixing the car.

So, you would think that after going through that nightmare, I’d swear off Phaeton ownership. See, I don’t make good automotive decisions. When a reader named Aaron reached out to me about his 250,000-mile Volkswagen Phaeton coming up for sale–we chatted about the car in the past–a bad idea was concocted in my brain. Aaron told me that the fundamentals were there, the car just needed a few bits fixed. I couldn’t say no and I even made space for it in my fleet. Remember that 2005 Volkswagen Touareg VR6 I bought in 2021 as a tow pig and Gambler 500 beater? I decided it was time to send it to a new home.

I listed it for sale and a flipper bought it just two hours later. Unfortunately, I have to warn our Milwaukee readers that my Touareg was almost immediately relisted with a description saying “literally nothing wrong with it except the 02 sensor.” But that couldn’t be further from the truth. The thing leaks gas, has a worn power steering rack, worn shocks, a trashed transmission valve body, and more. So, if you see this Touareg for sale, beware that it’s not as perfect as represented.

Anyway, on Saturday, I drove about four and a half hours north into Wisconsin to pick up my latest iffy decision. I bet many of you are wondering why on Earth would I drive so far to spend $2,000 on a car I know has issues.

Better Than Some Of Today’s Flagships

The story of the Volkswagen Phaeton is fascinating if only for the fact that it happened in the first place. Madman executive Ferdinand Piëch decided that Volkswagen, the brand best known in the early 2000s for the New Beetle, needed a flagship befitting a Bentley badge. And in America, you’d buy this flagship at the same dealership selling used Jettas.

Let’s go back to the 1990s. At the helm of Volkswagen Group was the now infamous Piëch, a grandson of Ferdinand Porsche, an engineer, and a guy who would have probably lived in a volcano if given the chance.

Piëch’s legacy includes turning the Volkswagen Group into an engineering and racing powerhouse that produced several iconic vehicles of the 2000s. I’m not just talking about the cute New Beetle, but the Bugatti Veyron, the incredible W-engine, and equally impressive diesel engines. Volkswagen Group was so convinced that diesel was the future that it fielded the Audi R10 TDI racer to a class win in Le Mans. The diesel racer then continued to win. Sadly, Piëch’s legacy is also marred by the reported culture Piëch installed at Volkswagen Group where employees were expected to get things done or be fired. This culture was sometimes linked as a possible contributing factor in the Dieselgate scandal.

Under Piëch’s rule, Volkswagen purchased Bentley, Lamborghini, Rolls-Royce Motors, and launched the modern incarnation of Bugatti. Piëch moved the Volkswagen Group upmarket and along the way produced memorable vehicles including the the off-road sleeper Volkswagen Touareg and Porsche Cayenne, the aforementioned Bugatti Veyron, the Volkswagen Golf R32, the Audi A8, the Audi TT, the Volkswagen Lupo 3L, the Volkswagen XL1, and so many more. Volkswagen Group took big swings and hit home runs, even if some of the vehicles would come to be known for comically bad unreliability and sometimes, crayon-like aroma.

And those are just the cars that made production. Remember when VW put a W12 in a Golf or that EcoRacer diesel sports car concept?

Some Piëch-era Volkswagen fans covet what they call the “Piëch Trifecta,” or three wacky vehicles that came from the mind of the madman. Those cars are the Passat W8, a family car with an overly complex, but glorious engine, the Volkswagen Touareg V10 TDI, the mid-size SUV with a ridiculous twin-turbo diesel engine, and the Phaeton, the over-engineered high-luxury Volkswagen flagship.

Volkswagen explains how the Phaeton went from an idea in Piëch’s head to an actual car:

In the late 1990s, Ferdinand Piëch’s time as Volkswagen AG CEO was nearing an end. Rather than quietly fade into retirement, Piëch pursued an ambition of introducing a Volkswagen model to the luxury segment. An early look at the shape that ambition would take was the Concept D sedan Volkswagen brought to the 1999 Frankfurt Motor Show. The Concept D featured a 5.0-liter, direct-injection V10 engine and directly previewed the look of the Phaeton—save for the hatchback element of its design. Just two years later, the Phaeton would enter production, looking to establish itself among other luxury sedans of the day through a combination of superior comfort, technological advancements, and performance from a wide range of engines.

Such was Volkswagen’s commitment to the Phaeton, in fact, that an entire facility—the “Transparent Factory” in Dresden—was built especially for its production. At the Dresden factory, the construction of the Phaeton in itself was unlike anything else in the automotive world: components of the luxury sedan would arrive as sequenced deliveries immediately before assembly. Parts and modules would traverse the factory in boxes via driverless transport system, and an electric overhead conveyor would bring each Phaeton through the three vertical levels on which it would be assembled. The precision, compartmentalization, and extraordinarily clean environment of the “Transparent Factory” resulted in truly world-class construction for Volkswagen’s world-class luxury sedan.

It wasn’t enough to just build a great luxury car. This was the halo of Volkswagen and everything about the Phaeton needed to be over-the-top. The Phaeton in other markets came with engines as small as the 3.2-liter VR6 that powered my old Touareg. However, the best engines made available were the 5.0-liter V10 TDI and the 6.0-liter W12. The burly diesel made 310 HP and 553 lb-ft of torque while the novel W12 delivered a 444 HP and 413 lb-ft punch. A loaded Phaeton weighs about 5,400 pounds, but that W12 still punched the slab of glass and metal to 60 mph in just 5.5 seconds. We didn’t get the V10 diesel in America, but we did get the W12.

There’s more, because while the Phaeton was electronically limited to 155 mph, it was engineered to go much faster. From my previous retrospective:

Piëch allegedly set ten standards for which the Phaeton was to meet. Apparently, most of these standards never reached the public, but the few that did perfectly illustrate why the Phaeton is adored by hardcore Volkswagen fans. One requirement doesn’t sound all that sexy, but it was that the vehicle needed a torsional rigidity of 37,000 N·m/degree.

Another is that the Phaeton needed to reach 190 mph without vibrations. And maybe the most absurd, but the Phaeton needed to able to drive all day at 186 mph in 120 degree temperatures while keeping the cabin at a cozy 71.6 degrees. Volkswagen’s attention to detail throughout the Phaeton was incredible from the LED taillights to the trunk hinges. The hinges were legitimately pieces of art and were created by Campagnolo, an Italian bicycle company.

It went further, from 18-way heated, massaging, and cooled seats to quad-zone climate control, air suspension, motorized doors to reveal or hide the HVAC system, and an overall fit and finish that was nothing like anything else with a Volkswagen badge.

Of course, the Phaeton was available with a wide variety of engines, and the base VR6 engine was even paired with front-wheel-drive for a couple of years. Most of them came with 4Motion Torsen-based all-wheel-drive and those wanting a Phaeton the most capable of meeting Piëch’s crazy standards would be going for that W12 or V10 TDI. Here in America, we got either a 4.2-liter V8 or that W12, and they were sold from just 2004 to 2006. Volkswagen has never published production numbers, but it’s believed that there are somewhere around 3,400 in America. A total of 84,253 Phaetons have been produced over 15 years.

Cheap And Cheerful

My new-to-me 2004 Volkswagen Phaeton has a 4.2-liter V8 engine and it’s making 335 HP and 317 lb-ft of torque. This rockets the still 5,200-pound sedan to 60 mph in 6.3 seconds. Sure, that’s not super fast in a world where the Tesla Model S Plaid exists, but it’s still plenty quick.

Something that immediately excited me about this Phaeton over my last Phaeton is that this one is more than capable of laying down a 60 mph sprint without blowing up its transmission or overheating. Again, 6.3 seconds is not warp speed, but it’s silly for such a heavy and comfortable car. Perhaps even more amazing is how the Phaeton accelerates to and holds just about any speed while maintaining the level of quietness you’d expect from a library. The V8 isn’t super audible even at redline and the suspension soaks up whatever bumps dare to remain in your path of travel.

I did this acceleration test right out of the gate because Aaron told me that while this Phaeton had some issues, the powertrain was great. Indeed, the engine and transmission worked in perfect concert, something that my other Phaeton, which had 90,000 fewer miles on its odometer, couldn’t do. Oh yeah, did I say this Phaeton currently wears 253,000 miles on its odometer?

The mileage shows on the Phaeton’s body, which bears the scars of a two-decade-old and 253,000 miles of rock chips, corrosion, and even an oopsie that led to a dent. The windshield was also peppered with rocks, leading to a large chip that propagated into a crack. The Phaeton has expensive, dual-pane glass throughout, so I’m glad the rest of it is fine. Most estimates I’ve gotten thus far say it’ll be $800 to replace the windshield without getting insurance involved.

The interior is a different story, where the leather is free of tears and nearly every single electronic still works. The quad-zone HVAC system still works, as does the heating and ventilation in all four seats. The motorized shades still do their thing, as do the vehicle’s oh-so-good massage seats. I’m not entirely sure how all of these power gadgets have survived so long without breaking.

Perhaps most important to me is that the car doesn’t air down overnight, so this one doesn’t have any major air leaks to worry about.

A scan of the vehicle’s systems also indicates that the car doesn’t see any issue with its air suspension, either. In fact, I think the most surprising thing about this Phaeton is the fact that the error message display in the instrument cluster is totally free of faults, save for the occasional oil temperature sensor warning. But hey, I paid just $2,000 for this thing, I’m not complaining!

Of Course It’s Broken

Now, this is still a rock-bottom Phaeton. According to the searches I’ve done, it was the cheapest Volkswagen Phaeton in America that was capable of making it home under its own power. That means there are some issues here and there.

Aaron tells me that the car had a few issues when he picked it up. The oil temperature sensor is intermittent, and when it fails a warning will display in the instrument cluster. The TPMS system didn’t want to play nice with the wheels on the car, so that was deactivated. It also had problems with both the motorized trunk and the rear parking sensors. From what I can tell, one or more of the parking sensors are damaged, which likely resulted in the constant tone Aaron heard before yanking the fuse to that system.

As I learned with my last Phaeton, when the motorized trunk lid of a Phaeton fails, the trunk lid is no longer capable of latching. Aaron found a workaround where he removed a gear from the trunk lid, allowing it to close fully and act like a normal, non-motorized trunk lid.

Aaron also reported that a bunch of the speakers of the 12-speaker surround sound system were crackling or not working. I have been able to confirm that some of the speakers don’t work, but most of them still do and the sound system is just top-notch. My Phaeton might score the highest yet on my arbitrary list of Mercedes Jam Session-Approved cars. I can only imagine what it’ll sound like when I fix the bad speakers.

That’s what I like about this car. Most of the issues are DIY-friendly. All 12 speakers are located in the door cards, which aren’t hard to remove. If I wanted, I could mess around with that trunk motor, replace the parking sensors, or get the TPMS fixed. It’s not like my last Phaeton where the darn thing couldn’t even drive to a mechanic without blowing an air spring or overheating.

However, I won’t be let off that easy. One issue Aaron informed me of was an oil leak. He didn’t quite figure out where it was coming from, but it caused smoke in the engine bay and a pungent odor of burning oil. Valve cover gasket failures are a known issue with high-mileage 4.2s so that’s where I’ll be looking first.

A second, more alarming issue happened on the way home. About 120 miles into my 280-mile drive home, the Phaeton began smoking. Sheryl reported that grey smoke emanated from the rear of the vehicle once every 15 to 30 seconds or so. The puffs that came out were usually small, but sometimes larger. I had her record me driving and sure enough, the car let out a little puff. Then, I floored it and the car rolled coal.

I stopped multiple times on the journey home and checked out the car’s vitals. The coolant was exactly on point and was a pretty pink. Sheryl also reported that the smoke smelled of oil. I then checked the oil and found it clean, but on the low side. So, it probably isn’t a bad head gasket. But it does appear to be burning oil from somewhere.

I then drove the car on Sunday and it didn’t smoke at all. It didn’t smoke on startup and didn’t smoke when accelerating. I ran a scan with my handy Autel diagnostic tool and was surprised to see that the only active trouble codes worth noting were for the engine running too lean. I expected worse from a smoky, high-mileage Phaeton. I haven’t done much more diagnosis yet, but another common 4.2 failure is with the PCV valve, which is known to cause the smoke I’ve observed. Aaron told me this wasn’t a part he’s touched and the current one does look a bit old and oily. Replacing the valve is super easy, barely an inconvenience, so I’ll just do that to be safe. I’ll also get the valve cover gaskets replaced and go from there. Hopefully, nothing catastrophic happened on the way home.

If you’re familiar with these engines, I am all ears. I know some common problems with these engines, but resolving smoking issues has never been my strong suit.

Even with the smoking, the car was an excellent ride. The Phaeton is so comfortable at high speeds that I sometimes had to look down to make sure I wasn’t dawdling along under the speed limit. Handling? It’s a boat, but who cares, because being the captain of the good ship Phaeton is a grand experience. Car journalists sometimes compare the solidity of a vehicle to that of a bank vault. A Phaeton is like that, seemingly pummeling bumps into submission and your leather-wrapped cocoon is so isolated from the outside world that you won’t even be able to tell there’s an oil barbeque going on under the hood. To put that weight into perspective, a Volkswagen Phaeton weighs almost the same as a Ford F-150 SuperCrew.

Going 80 mph in a Phaeton feels like you’re doing 60 mph in any other car. This car has 20 years and over a quarter of a million miles under its wheels, yet it still rides better than many new cars I’ve driven. It even got 23 mpg on the trip home and I wasn’t even trying. That’s a testament to the wild over-engineering that went into the Phaeton. It also means I’ll probably have to empty some cash from my own vault to keep it on the road.

Hopefully, this Phaeton will work out better than the last one. The fact that it drove 300 miles without totally falling on its face does make me happy. Though, the smoke does not. I suppose I will find out pretty quickly how terrible of a decision I made. Obviously, $2,000 was just a down payment for future repairs. Still, I love this moonshot of a car, the Phaeton is ridiculous in all of the right ways and every modern VW fan should own one at least once in their lives.

(Images: Author)