1997 Audi A8 --- "Incorrect Gear Ratio" Code
 

I bought a 1997 Audi A8 that looks like new inside and out, everything works, EXCEPT something funny with the transmission.

I get the code "Incorrect Gear Ratio", and when I put it in Drive it revs, then clunks and goes but it acts like its in 3rd gear or something. Also I noticed a hot smell after driving, and the smell of gear oil. Once its up to a higher speed everything is fine, matter of fact I've had it at 90mph no problem. Its just a slug in town, and acts like its in a higher gear.

I paid $1000 for the car, a hell of a bargain I thought, and I have a $2000 budget to fix the car, plenty of money I thought but a rebuilt transmission cost $2550 + $1000 install. I've looked at used ones but I've heard this is a common issue.

Is it the transmission or something else? Any good spot to obtain a transmission if thats what it is.

Really need help here.

Are all geras lit at the same time on the display?
If so, "limp mode" = One forward gear and reverse.

First check atf level: http://www.audipages.com/Tech_Articl...servicing.html
Proper level check is covered in this article.

There is no cheap dependable alternative to a rebuild. If you're lucky (and it's in limp mode)the problem could be a bad or flooded TCM.
Depending on mileage (I assume it's high), more likely the trans...the previous owner probably already checked and knows the trans price...thus the bargain price.

If I recall all the gears are lit at the same time. And it feels like 3rd gear and reverse. I will have to check the fluid I suppose it has 149k, but I figured that isn't much for an Audi as I've owned many with 250-300k however they were all the 4cyl or 6cyl. I read on here that the 4.2 transmissions were known for issues like this. Its such as shame because the whole car is like new, minus that.

You'd be lucky if it's just a low fluid or clogged filter problem...at 149K, you're smack dab in the middle of the D2 trans failure zone. Without spending a whole lotta $$, it's one of the few things you can try (DIY atf/filter service about $150). Also look at the TCM (moisture/corrosion) and check connections...and check connection of round electrical connector on trans. You might get lucky.

What causes them to fail? I fell in love with the car already thats the worst part... I figured $2000 would be enough to fix her. I think its the trans everything else looks good. I also hear what sounds like a powersteering whine/moan higher with RPM, sounds like a Torque Converter whining or something... I think the trans is gone... I just can't figure why a rebuild is so much is there special things vs a domestic car.

Not really, the transmission is made by ZF, which makes transmissions from audi, volvo, seat, all the way up to Caterpillar front loaders and various construction equipment.

The ZF's internals isn't much different than a standard domestic transmission, however getting the turd out of an A8 is a task, and take down might be a little bit tougher, however the rebuild kits are usually only around $300 thru transtar1. http://www.transtar1.com/default.asp Its all labor.

P.S. The standard rebuild price of an automatic transmission these days is $2000, Ford also uses ZF for thier F series trucks with standard transmissions.
On another note, the transmission went out on my 1 ton chevy work van, and the total cost to install a GM rebuilt unit was $4,400 installed with a 100,000 mile warranty, so $2,500 really isn't that bad.

Well beyond my expertise to explain causes of failure or cost. American cars are Chinese to me...no idea whatever the cost to repair a trans in one.
Over 10 years ago, I had to replace an auto trans in a VW...$3100 was the cheapest rebuilt I could find (trans only...labor not included), with a one year warranty...so the prices don't surprise me, but the common failures (when the engines are not even half used up) bother me...but what can I do...I love my car (now at 107K) and keep my fingers crossed.
The sound you're hearing is the atf pump, mounted right behind the torque converter. If it's sort of loud, it may be straining to pull fluid through a clogged filter or sucking air due VERY low atf level. Mine makes a very subtle whine at low rpms and didn't change much (slightly quieter now) when I changed the atf and filter...but I have no shifting issues at all and actually shifts smoother now. I've heard about a lot of these trans with this quiet whine, with no other issues. But if it gets louder, something is causing it.
First thing you need to do is check level and/or change fluid and filter...it's worth a shot.