Transfer case fluid is a special oil that keeps the internal components of the transfer case cool, lubricated, and protected from corrosion and wear. This fluid, which can be synthetic or mineral-based, is thicker than engine oil and splashes around inside the transfer case as the vehicle moves. Over time, exposure to heat and friction breaks down the fluid, reducing its ability to lubricate. When the fluid becomes dark or gritty, it’s time for a replacement, typically at the service interval.
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