So, I will admit I am a newb, I'm also trying to not get scammed.
I got this car new in 2002 and it only has about 50k miles on it. I had taken pretty good care of it, regular oil changes, ran full synthetic on the oil changes and changed oil about every 3000 miles. I can check oil and add oil myself, but I've never changed it out myself.
On Feb 16th, I noticed a strong burning smell which I presumed was oil. Never having smelled this in the car before, first reaction was to check the oil. The oil level was low, but not so low to trigger any warning lights. This was the first surprise because I had checked it about 500-1000 miles before this and it was full (I know, I should check it more often, but right now I want to focus on the future instead of past). Also, this was synthetic oil - my last oil change was 18 months ago and I estimate I had driven about 2000 miles total since that oil change. So, I added a quart of oil and drove it to an instant oil change place to have it changed out. Smell goes away, and I happily think the problem is solved.
Then on Feb 23rd, the burning smell came back. There was also a noise coming from the engine while it was idle, which I hadn't heard before, and I can't really describe. I turn the car off, check the oil, oil level is still full. So, the next morning, I have it towed to the closest dealership (one which I had never done business with before).
The dealership calls me the next day and tells me that the turbo charger is blown and that it will be a minimum of $1800 to fix, but they need to do a compression test to check the condition of the enigne. So they call back a few hours later and tell me cylinders 2 and 4 are not holding compression and they need to rebuild the engine - now looking at a total cost of between $6500 and $7000 to have them to do everything. Simultaneously, the service rep comments on how well I've maintained the car, and says I've taken excellent care of it, and offers me $1500-2000 in *cash*. He explicitly says cash several times. So I get very suspicious at that point, went to pick the car up with a friend and drove it home. The service guy allegedly changed the oil and the spark plugs, which he didn't charge me for. The service guy alerted us as we picked up the car, and said "you can't hear it now, but after like 3 minutes you'll hear the rods knocking".
Upon arriving home safely, neither of us smelled burning oil or heard any strange noise. The service guy said that the tell-tale blue smoke was coming out of the exhaust when he examined it; as we drove home, I didn't really notice this but we kept the RPMs low.
I should note that the handling of the car seems to be fine; I don't notice a change but I don't really go above 4000 rpms much, mostly just suburb driving. And, it's been so icy and cold that I've intentionally reduced my acceleration in case of ice, so is it possible I wouldn't notice a blown turbo? I'll also mention that I live in the Northeast and January and February have been brutally cold, often under 20 F for weeks.
So what is the next step to take? Do I try another dealership or should I try a chain repair place like AAMCO? Is there anything I can try at home to investigate the problem? Thanks in advance.