The lip on both rear wheel arches has rust, but not too bad, there is also some rust on the rear valence.
I will be replacing one of the rear arches as it is dented, I've patched up the valence with kurust, P38 and some paint. I will give the whole underneath a coat of hammerite & waxoyl before the winter though.
Below is what i've done to the car since buying it:
Timing Belt
Camshaft
Rocker Arms
Tappets
Rotor arm
dizzy cap
spark plugs
blue temp sender
Viscous fan coupling
Replaced batterys in the SI Board
Inlet manifold gaskets
Replaced all rubber fuel lines
Lots more to do yet before i start making her look better, but the engine is now absolutely sweet as a nut, no top end ticking noise at all, which seems to be an achievement on an M40
