With prices so low, the Jaguar XJ40 is a tempting buy. The cars were well built for their day, but the earliest are 20+years old, so bound to have problems. The early cars can be identified by the a mix of traditional and digital instruments. They are often rusty almost everywhere - but in particular, structural areas such as the front suspension subframe, sills and floors are the biggest worries. The bonnets can also rust around the hinges and the bootlids often rust along the rear, above the number plate. In addition, they can rust around the front and rear windscreen - not easy to fix as the screens are bonded in. Also worth checking the bolt on panel below the radiator. It's mades of thin metal and rusts through. In extreme cases, the radiator can fall out. Early cars had 2.9 or 3.6 litre engines and very expensive metric tyres. I owned a 2.9 when it was nearly new - performance is rather pathetic. They were designed for leaded petrol and had a very high compression ratio - also prone to pre-ignition (pinking). Best to buy the later 3.2 or 4.0 litre cars (from 1990 onwards) they are better built, faster and less rust prone. Engines will do over 200,000 miles if looked after. Running costs will be high - e.g. cheapest tyres around £100 each and an oil change needs 10 litres. Specialists like David Manners are excellent for spares and service items. Expect 18-25 mpg. Service history is a nice to have - but best judge on condition. A/c is nearly always inoperable and expensive to fix - so be prepared to drive with the windows open in summer! Tracing electrical problems can be time consuming as the system is very complex and uses a multitude of relays and 'logic' modules. Happily, Jaguar went to a lot of trouble to raise quality compared with earlier cars - using aircraft spec electrical connectors from the start. Because the cars were produced in large volumes, secondhand parts are also cheap and easy to come by - although you often need to quote your chassis number to ensure compatability as there were many design changes during the production run.
All this said, the XJ40 is fantastic to drive and if you are careful you can get a sound car for £1,000 - £1,500. Best choice is probably the 3.2 model (4.0 not much faster in practice). The last cars produced were the 'Gold' special edition - best built and best equipped of the lot.