Bought my first last year, and I absolutely love it!! I think they were getting a little better up there in the 99 - 00 range, but you have to remember, this is essentially an off road vehicle with highway capabilities, it lacks a whole lot in the creature comforts department!! They rattle, they clank, they roar, they don't drive real pretty, they don't have the best heater or AC, the seats aren't the most comfortable, the wipers are eternally in the middle of the windshield, and the mirrors don't match, but damm are they fun to drive!! Just don't plan any cross country trips!!
The authorities ~~>
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#1 on the list... Look out for wannabe Jeep mechanics! Some people should not be allowed to touch a wrench, and many of them like to drive jeeps, since they are fairly simple to work on.
Check the frame and under the body well for rust. Jeeps are notorius for rusting; frame rot is not even a little uncommon. Frame usually rusts through around the rear spring hanger on the rear end. On a jeep of that age, you're probably not going to see a problem there, unless you check inside the frame tube, but be sure to check underneath the body for rust.
While the transfer case itself can occasionally cause problems, (some years this was more of a problem than others), much more commonly, the vacuuum actuator to lock the front axle causes you grief. And, while that can be fixed, many folks, like myself, opt for the Posi-Lok system, a cable operated control to lock the front end from the driver's seat. It runs around $170 for the kit, takes 2 - 3 hours to install. The Posi Lok system also allows you high/low range in 2 wheel drive when installed. Simply, put the transfer case in 4 low, and don't lock the front end.
Lift kits I wouldn't be too suspicious of; if done right, they don't hurt a lot. But look closely at the installation, and make sure they are done right. If it's sporting 2x4 or 4x4 technology, and I'm talking the pressure treated, bought at Lowes or Home Depot kind there, then you probably want to shy away from it! Seriously folks, I have seen it done! Likewise if it has 12 inch spring shackles, you probably don't want to go there either.
The lift itself isn't what kills the front end components, its the added tire width, which mandates wheel spacers, and/or rim offset to compensate for said width, that changes weight distribution on the front end, and causes the wear yfzduner450 is talking about. And, you don't even have to have lift to run into those issues. Anything up to 33s and you're pretty safe, when you start getting into 35s and 38s you can definitely start seeing issues. Mine has a shallow dish rim, running 32 x 10.5s, thus keeping center of gravity on the tire the same as stock, on the front end. However, it tends to rub the spring shackles when you crank it tight around the corners, which is really hard on the inside of the tire about where the tread meets the belts on the sidewall.
Uneven tire pressure can cause them to wander all over the road at highway speeds. If it feels a little squirrely around 55-60, check the tires first. Mine wandered all over when I first bought it, found 1 tire 10 PSI low to be the culprit. Night and day difference in the way it drives at highway speed.
Year range you're looking at, I'd opt for the 4.0. In fact I was looking for a 4.0 in an older model myself. Found an '88 YJ that the price was hard to say no too, but it had a 2.5 in it. I kicked it around, researched the engine a little. Figured I could change it over if it didn't suit me... (Later learned changing drive train in a jeep encompasses engine/transmission/transfer case swap as a rule. You just don't put a 4.0 in one designed for 2.5, kinda like big block and small block chevy stuff.) The late CJs/early YJ's used a GM designed 4 cylinder, Jeep later attempted to replicate it, and from what I've read got close, but it's not quite as durable. The 4.0 shines forever, in that respect, always has!!
I absolutely love mine! Beating around the prairie, off road, 4 wheelin, running back and forth to work (a whopping 3 blocks) and around town otherwise... Averaging 18.6 miles per gallon!! With the vacuum actuator broke, in 2 wheel drive, I'd go to where everyone else turned around in the snow drifts in 4 wheel drive, and make another half mile to a mile more. And, it's simple to work on; not much in the way of computers on board an '88 Jeep!