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Q:

when does the steering need to be replaced on 2001 Mercedes-Benz C320

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My mechanic suggest that I change the rack system on my car. I visual saw where the hose has a hoe in it and leaking the fluid. I think the hose needs to be replaced, let me if I am correct.
(1) Answer
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If you are not having any other problems with your steering other than lose of fluid, and this is the only leak then yes, you only need to replace the hose. I'm sure your mechanic is worried, if that is the only repair he makes, he might be blamed if other problems are present.