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The factory exhaust on the gen 1 AWD model does go under the rear axle. However, it should not hang that low. Most likely the center section where the resonator is (middle section of pipe between the secondary catalytic converter and the rear axle) has rotted out. Worst case the muffler has also rotted out, but that flange near the axle looks in decent condition. I couldn’t tell you prices but if a muffler shop quotes you more than $500-$700, they’re wanting to replace the entire exhaust from the primary catalytic converter back to the muffler, basically everything under the car including the secondary catalytic converter.
 
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