Davard:
Only a couple of problems with the Magnum. He's on a budget, and try and find a used one with the trailering package.
If you don't mind black and white, a used Crown Vic should have most of the right equipment for cheap. It'll even come with searchlights on the A-pillars.
The older Chevy/Buick have the more powerful LT motor (conservatively rated at 260hp), and can be had as a station wagon, but might be hard to find.
Some random thoughts:
1. Going the Vic route
A couple years ago I bought a 97 P71 Interceptor Vic with the intention of making it into a tow vehicle. Due to running out of room for vehicles and other things, that never materialized. After some basic upgrades (like Tokico blue shocks) and various maintenance bits, I got rid of it before it even got a hitch.
Get a P71. In the hood, shadetree lots of have 'em on every streetcorner, and I believe they have at least one or more auxiliary fluid coolers (crucial for towing). But, even the P71's had 3.27's. So I'd get some LT rated tires (remember, this thing rides on near-truck-size tires to begin with!) and 3.73's or something.
Mileage isn't great (averaged 14 mpg with 50/50 city/highway, lead foot) and watch out for the earlier Vics with the plastic intake manifolds. They crack and leak from everywhere. The later ones had reinforced aluminum intakes.
2. Newer full size trucks are better than sedans as out of the box tow vehicles and get about the same mileage
My Dodge Ram (4.7 VIN "N"/NV3500/3.55) averaged 14 mpg like the Vic, and it's probably an all-around better tow vehicle than the Vic, with zero upgrades necessary... I got rid of the Ram because I don't have anything to pull for the next year or two, and even at that point 5000+ lbs of towing capacity will be overkill.
I also had a 4.3L/4L60E/3.23 x-cab sierra 1500; it averaged 15 mpg in murderous traffic, loaded down, and it had 3600# of towing capacity. Once I had SS brake lines installed, its handling and braking were top-notch (for a truck, anyway). With a trans cooler and temp gauge it might've be a nice medium tow vehicle with OK mileage.
I have a hunch, no real-world data to back it up, that a late-model 4.2 or 4.6 F150 would get better mileage than either the GM or Dodge, based partly on how the 4R70W? automatic holds gears for longer and upshifts quickly.
3. 4cyl compact truck as tow vehicle?
In the next year or two, I'm going to experiment in stretching my ~2200# MTW 2rz-fe (2.4L)/A340 2000 Tacoma to tow about 2700# (i.e., 500# tow dolly + 2200# civic). Loaded down (no trailer) I got 24 mpg doing 90 on the highway, and get 22 around town in murderous traffic. The truck was cheap; as a theft/pick-n-pull recovery, it had a rebuilt title, but mechanically was perfect.
Basic suspension and brake upgrades, aftermarket cruise control, LT rated tires, and an oil/trans cooler (+associated hardware and gauge stuff) are going to run about $1500 before labor. Assuming labor might be $1500 or so, that's about $3,000 to turn my Tacoma into a cheap, safe, durable, light tow vehicle that also gets decent MPG around town.
4. Is it worth spending money on upgrading a compact 4cyl truck when nowadays you could get a REAL truck cheap...
For $3,000 or so, in a year or two, I figure could get a nice, severely depreciated gas-guzzling truck or van with all the heavy duty hardware, trailer towing bits (including the all-important trans cooler) already installed. Dealers are taking stratospheric losses on big gas guzzling trucks, banks are not doing full financing on anything with a V8, and it's only getting worse. If you up the price range from $3 large, a 2004+ F150 with the factory tow package (which includes a trans cooler) would be a wonderful, Cadillac-like tow vehicle.
5. Astro van - in between a full-size truck and a compact
I'm eyeing some late-model Astro vans with hitches and trans coolers for $3 - 7k. The size and maneuverability in a crowded urban area is about right, it has benches for the occasional sleep-over, and and lots of secure, dry room for gear and tools. It is built on a truck frame and has good power and load capacity. Although Steve said the brakes were good, the one we had in the past had scary brakes.
Adam Wosneski
91 240sx (S13) -- ITS/DSP in 09
Looking for funds, tow vehicle