what happens if I don't replace the O2 sensor?

Hello everyone,
My 1988 taurus check engine light comes on sometimes so I took the car to autozone and they found a code for a bad O2 sensor. I don't notice any performance problems, though. The gas mileage is about the same as always around 20 mpg.
Will I damage anything by just leaving the old O2 sensor in there? A new one costs around 40 bucks and I'd rather not throw more dough at this car than I have to. It may be on its last legs.
Thanks in advance.

You see cars on the street that aren't taken care of. The broken parts aren't replaced, they never get washed, lights are out, and fall into disrepair. The choice is yours to keep up your vehicle or let it deteriorate into a junker. If your state has no emission testing you likely won't have to replace the O2 sensor but where they test, it will fail and you won't be able to renew your registration.

You see cars on the street that aren't taken care of. The broken parts aren't replaced, they never get washed, lights are out, and fall into disrepair. The choice is yours to keep up your vehicle or let it deteriorate into a junker. If your state has no emission testing you likely won't have to replace the O2 sensor but where they test, it will fail and you won't be able to renew your registration.

A car is a machine, it doesn't have any feelings. :)

The o2 is a pretty major contributor to the air fuel mixture. Right now it might be good, but as the fuel mixure riches, the worse your fuel mileage is going to get. On top of that, it creates extra heat in the exhaust. You're creating unecessary wear on the catalyic converter, which you must have in ALL states. If you let it go too long, you're going to be paying more money for repairs, than if you just got it replaced in the first place. It's going to leave some nasty black carbon in your engine, this stuff is extremely nasty. I am not sure of the tolerance, but it must be getting bad if the ECU is complaining about it. Do you know when the last time it's been replaced? From what I understand, they need replaced every 40,000 miles, but this figure could be off. I am not sure where the o2 is on that, but if you think you can do it yourself, it would cost a total of around $40.

Pete

I agree, replace it. Remember, "You can pay me now, or you can pay me later".

Alright, you guys talked me into it. I should be able to replace it myself--its kind of hard to get to but I had to do it three years ago.

By the way, if I get a new car, how much could I reasonably expect to sell this one for? The condition is as follows:
It is an '88 wagon, 3.0 L, 168K miles, gray paint with peeling clear coat, rusted through passenger-side rear fender, rust on driver-side rear door, jerry-rigged heater core installed in the fresh air intake under the windshield wipers (the original leaked and too hard to replace). Interior in decent shape although no interior lights work. Now with AC broken and a new O2 sensor. A real beauty.
What would sell for? Any ideas?