You drained the lower unit oil and it looks like a chocolate milkshake. That's not normal. Water has gotten into your gearcase, and if you keep running it, you're looking at corroded bearings, pitted gears, and a repair bill that starts at $800 and goes up from there.
Here's how to find the leak and decide what to do about it.
Table of Contents
What Milky Oil Means
Lower unit oil should be amber to light brown and translucent. When water mixes with gear oil, it emulsifies—creating a milky, opaque fluid that can range from light gray to the color of coffee with cream.
Severity by appearance:
| Oil Color | Water Content | Urgency |
|---|---|---|
| Amber with slight haze | Trace moisture | Change oil, monitor |
| Light gray, translucent | Moderate water | Find and fix leak soon |
| Milky white/gray, opaque | Significant water | Fix immediately, check for damage |
| Gray with metal particles | Water + wear debris | Likely internal damage, professional inspection needed |
Why it matters: Water doesn't lubricate. When water displaces oil on gear teeth and bearing surfaces, metal contacts metal. One season of running with water in the lower unit can destroy gears that would otherwise last 20 years.
Where Water Gets In
Water enters the lower unit through failed seals. The most common failure points:
1. Prop Shaft Seal
This is the most common culprit. The prop shaft spins inside a double-lip seal that keeps water out and oil in. When fishing line, weeds, or debris wrap around the shaft, they can cut the seal lip.
Signs: Oil on the prop shaft behind the prop. Water intrusion that gets worse the more you run.
2. Shift Shaft Seal
The shift rod that connects to the gearcase passes through another seal. This one fails less often, but when it does, water comes in every time you're in the water.
Signs: Oil seepage around the shift rod where it enters the lower unit housing.
3. Drain/Vent Plug Gaskets
The simplest failure: worn or missing gaskets on the plugs. Every time you drain and refill, you should install new gaskets. Reusing old gaskets is asking for leaks.
Signs: Oil weeping from around plug threads.
4. Lower Unit Housing Damage
Impact damage can crack the housing or damage sealing surfaces. If you hit a rock or submerged object, the housing itself may be compromised.
Signs: Visible cracks, dents near sealing surfaces, water intrusion that started after an impact.
5. Water Pump Seals
The water pump housing has seals that can fail, allowing water to migrate down the driveshaft into the lower unit.
Signs: Overheating issues combined with water in lower unit oil.
Diagnosis Steps
Step 1: Drain and Inspect the Oil
Note the color and consistency. Save a sample in a clear container for reference. Check for metal particles—swirl the oil in a white container under good light.
Step 2: Pressure Test
The definitive test. A marine shop can pressurize the lower unit to 10-15 PSI and look for air bubbles in water. This pinpoints exactly where the leak is.
DIY version: Seal all openings except one, connect an air source, and submerge the lower unit. Watch for bubbles. This requires removing the lower unit.
Step 3: Visual Inspection
- Remove the prop and inspect the prop shaft seal area
- Look for oil residue behind the prop—indicates prop shaft seal failure
- Check for cracks or damage to the housing
- Inspect all plug gaskets
Step 4: Check for Damage
If water has been in there a while, gear teeth may show pitting or corrosion. Bearings may feel rough when you spin them. Turn the prop by hand—grinding or roughness indicates internal damage.
Repair Options
Seal Replacement Only ($50-150 DIY, $200-400 shop)
If caught early and no internal damage:
- Replace prop shaft seal
- Replace shift shaft seal
- Replace all O-rings and gaskets
- Refill with fresh gear oil
A lower unit seal kit contains all the seals and O-rings you need.
Seal Kit + Bearing Replacement ($300-600 shop)
If bearings show wear:
- All seals replaced
- Carrier bearings replaced
- May require special tools and pressing
Full Lower Unit Rebuild ($800-1500+ shop)
If gears are damaged:
- New or remanufactured gears
- All bearings
- All seals
- Precision shimming for gear mesh
Lower Unit Replacement ($1500-3000+)
If housing is damaged or rebuild cost exceeds replacement:
- New or remanufactured complete lower unit
- Swap and go—less labor than full rebuild
- Often the smart choice on older engines
When It's Too Late
Signs that simple seal replacement won't fix it:
- Metal flakes in the oil: Gears or bearings are shedding material
- Grinding when turning the prop: Internal damage has occurred
- Gears won't engage properly: Shift mechanism damaged
- Visible corrosion on gear teeth: Prolonged water exposure
- Significant play in the prop shaft: Worn bearings
At this point, you need a professional diagnosis to determine if rebuild or replacement makes more sense.
Prevention
-
Change gear oil at least annually. This catches water intrusion early.
-
Always use new plug gaskets. $2 prevents a $2,000 problem.
-
Clear the prop shaft regularly. Fishing line cuts seals. Remove it before it causes damage.
-
Fix leaks immediately. Don't "wait until next season." Water damage compounds quickly.
-
Use quality seals. Aftermarket seals from reputable suppliers like SeaSierra are made to OEM specs. Cheap no-name seals often fail within months.
FAQ
Can I just change the oil and keep running?
Short-term, maybe. But water will keep coming in, and each hour of operation accelerates gear and bearing wear. Fix the leak—don't just treat the symptom.
How long can I run with milky oil?
The less, the better. Some owners run an entire season before noticing, but damage accumulates. Once you see milky oil, assume internal components are at risk.
Should I flush the lower unit before adding new oil?
Yes. Some technicians run a light flush oil (like ATF) through briefly to carry out remaining water and debris. Then drain completely and fill with proper gear oil.
Is milky oil covered under warranty?
Usually not. Water intrusion is considered user-serviceable maintenance unless there's a manufacturing defect. Warranties cover failed parts, not failed seals due to debris.
Can I check the oil without draining it?
Remove the vent plug when the engine is level. A little oil should seep out. Check its color. If it's milky, you have water contamination.
Bottom Line
Milky gear oil is a warning that water is destroying your lower unit from the inside. Caught early, it's a $100-200 seal job. Ignored for a season, it's a $1,000+ rebuild.
Check your oil every 100 hours. Change it annually. Fix leaks immediately.
Find lower unit seal kits for your engine at SeaSierra.
