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That's very unfortunate. Sorry to hear it!
I haven't spent an extensive amount of time searching, but the thought of being forced to replace an engine has crossed my mind. The S54 has numerous fatal flaws. I would be hesitant to buy a used engine from anyone other than a reputable shop. I have seen S54's for sale from Lang Racing for around $6k.
If you don't have that kind of money available, there are other ways to get you back on the road, or get the car to a condition where you could sell it. Besides a personal loan (double digit interest rate), you can take out a car loan for more than what you currently owe assuming you owe less than what the car is worth (basically taking equity out on the car, and obviously you pay your current loan off with the new loan). While it's not ideal, sometimes people get stuck. Some banks will only lend you what you currently owe. The Z4M is an older used car, and interest rates can vary significantly. Each time you apply for a loan, it's marked on your credit report.
I was a year away from paying off my first car and had a change in life conditions. I tried to do the smart thing and sell the car. Unfortunately the car was worth more to me than I was offered on trade in, and a private sale might have taken some time. I applied for a loan with a different bank, and ultimately extended the one year of payments I had left into two. I kept the cash as an emergency fund. My interest rate was reduced with the new loan (since I was young and had no credit history when I got the first loan), so it was almost like a net interest-free loan. Fortunately everything worked out and the cash sat in savings while the circumstances passed.
The point is, refinancing is a secondary option if you don't have the liquid assets to repair the car the right way. It may allow you to keep your savings as an emergency fund in case you're laid off, but it will increase the amount you need to stay afloat every month. A Z4M isn't a car that sells quickly. It needs the right buyer, especially if it needs a new engine. So, you may not be able to pull the equity from the car with an outright sale should dire circumstances arise.
I wouldn't advise depleting your emergency fund to fix the car. Personal loans have ridiculous interest rates, so I'd keep that option as a last resort. My advice - refinance, and use the money to fix the car. Cross your fingers and hope things turn around at work. If you get laid off, immediately put the car up for sale.
What does your insurance company say?
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