I recently purchased a 2001 ZO6. I did my own inspection and had them put it on a lift. I found a little oil splashed on the right rear axle/boot and asked them about it, and the salesman said he thought they replaced a seal back there. I asked them for paperwork, and he came back with the things they fixed on the car. It showed both the rear end links (which I noticed weren't OEM also) and the right rear diff output seal. I assumed they simply hadn't cleaned up the existing oil splash. I purchased the car and drove home (160mi).

Took the car out this weekend for the 2nd drive in a month, and 20min into the drive the rear starts howling very loud. Pitch would change with speed, and sounded like straight cut gears at a high speed. Brought the car home and put it on jack stands and there is oil all over the exhaust, electrical connections, axle, fender, etc. I drained the oil and there and it sparkles/glimmers, so I assumed they were metal shavings. However, nothing was attached to the drain plug (is it magnetic??) and I also grabbed a magnet from my tool box and put it in the oil to double check. Nothing appeared to stick to it, and then I put it directly into the diff and nothing stuck to it there either. I'm curious about what I'm seeing here and what the material must be, or if there is a way to determine if the diff is damaged enough to need inspection/rebuild before I replace the seal and button it up and calling it done.

Here are some photos and a video. I've contacted the dealer and they are calling me back this morning. What do you guys think?

Video:

 

Dealer agreed that it looks like their repair has failed or wasn't done correctly and will be paying for the inspection, parts, and repair.

 

Those "sparkles/glimmers are probably pieces of the housing. The aluminum housing probably cracked. Look at the mating surfaces near where it bolts up to the transmission. Pay especially close attention to where the bolts are. That would be the likely point of failure.

 

The oil is coming from the right output shaft. That's the ONLY place oil is coming from and can be found. The front of the casing and trans area are bone dry. The only place oil can be found is on the boot connected to the diff, directly below it, and the exhaust pipes around it as shown in the photos.

If I'm missing something, let me know. I don't understand what you're telling me in relation to where the oil is actually found.

 

 

I'm saying those non-ferrous metal flakes are probably aluminum from the diff housing. I think that the diff housing has cracked somewhere. The likely place for the crack is at the diff to transmission joint. Its probably a hairline crack and can be hard to see. If it is leaking from just the axle seal there would be not metal flakes from the seal leak......but I have been wrong before...