We aren't sure if we should trade or spend the money on this repair.

Hello, As you stated that you are a client loyal to your local dealership, I would absolutely pursue goodwill assistance from Subaru. Ask your dealership (who should indeed consider you a loyal service client) to advocate to Subaru on your behalf to assist in the cost of this repair. Additionally, if that isn't helpful, contact Subaru customer service directly. That is honestly the answer. Neither dealership suggestion -- trade in or engine repair -- seems very customer focused. It seems advantageous. Take it from me. I run parts and service at a dealership (not currently Subaru, but another brand). I would jump through all kinds of hoops to take care of a client like you, and so would my particular manufacturer. Loyalty to my dealership service department is all the difference on how much help I can get my clients. You have leverage. You are loyal. You spend your hard earned money. Your vehicle does not appear to be that old nor have a tremendous amount of miles. The least Subaru could do is assist in the repairs. And the least your dealership can do is be willing to advocate for you. Good luck!