Nah, don't be confused about what to do.

If you need money for "necessary" things don't hesitate to convert your BTC if you currently DON'T have any choices to cover your expenses. If you can live or work properly without a car, then that's good to save your precious BTC. You have mentioned that you have emergency cash if that's enough to cover the expenses then good used it first.

Going to your concern about the car, analyze the cost of replacing Piston Rings and labor fees. Also, consult with other mechanics to have their second opinion. See if it's worth to spend for replacement or just add a bit for working second-hand car. Consider also how old the car is. Both of your BTC and emergency cash is at stake here so see if it's worth to spend it for replacement.

Bitcoin has a great future but you don't need to overreact to the point you won't sell anything even if it's badly needed. You can re-purchase BTC anytime if you really believed that holding for long will be paid off.