Transfer Case Leak: Is it a big problem?

So you’ve got a transfer case leak. Sucks to be you! But don’t get too worried. A leaking transfer case is often fairly easy to fix.

The most common reasons why your transfer case is leaking are:

  • Bad output shaft seal
  • Bad input shaft seal
  • Bad housing gasket
  • Loose drain plug

Before we get into each of these reasons for your transfer case leak, let’s take a moment to talk a bit about what a transfer case is.

What is a transfer case?

A transfer case is kind of magical.

You probably already know that an engine creates power and sends said power to a transmission. The transmission then spins a drive shaft that goes into a rear differential (also magical). And the rear differential sends the power to the wheels making them rotate and your car goes vroom-vroom.

Very cool.

But what if you have a 4 wheel drive vehicle? How does the power ALSO get transmitted in the front wheels?

Enter the transfer case.

A transfer case goes in line after the transmission. Power goes into the transfer case through a single shaft. The transfer case then has two output drive shafts – one powers the rear wheels and the other powers the front wheels.

Instead of me trying to explain how it all works, check out this video. It shows you all you need to know in under 4 minutes:

Pretty cool, right?

So why does my transfer case leak?

Let’s keep it simple.

Your transfer case is a metal box full of moving metal parts and fluid. It has 3 holes in it. And each hole has a spinning metal shaft coming out of it.

Your common sense should start waking up from its nap right about now…. Each one of those holes is an opportunity for a transfer case leak. And this brings us to our first possible reason your transfer case is leaking…

Bad output shaft seals

photo of a transfer case output shaft seal
photo courtesy of O’Reilly Auto Parts

The most common reason for a transfer case leak is a bad output shaft seal. These are round seals that prevent fluid from leaking out of the holes in the transfer case where the drive shafts exit.

Time and age will cause your output shaft seals to wear out and leak.

In most 4 wheel drive cars, the rear wheels are typically engaged all the time and the front wheels spin only when needed.

That said, the rear output shaft seal is more likely to fail than the front seal because it is exposed to the drive shaft that is always spinning.

Age isn’t the only thing that can cause an output shaft seal to fail. A wobbling drive shaft can put extra stress on the output shaft seals. This can be caused by a bad bearing inside the transfer case or a bad U-joint.

The unfortunate side effect of a bad bearing or U-joint is that sometimes people fix their transfer case leak by replacing the seal that wore out. But they don’t realize the reason the seal failed is because there’s a bad bearing or U-joint.

The new seal will stop the leak. For now.

Eventually, the transfer case will likely start leaking from the same spot in a matter of months and you’ll have to invest the time and money all over again.
Three Bay Garage Pro Tip: Be sure to inspect your bearings and U-joints when you replace seals on your leaking transfer case!

Bad input shaft seal

Input shaft seals could also fail in the same way as output shaft seals.
Given that an input shaft connects to your vehicle’s transmission, it’s a little trickier to repair. It will cost you a bit more to replace (or take you a little more time if you are a DIY’er.)

Bad housing gasket

Photo of a transfer case housing gasket
image courtesy of

Most transfer cases are made up of two halves. This allows easy access to the internal parts of the transfer case.

Because the transfer case contains oil, a gasket is necessary between the two halves to prevent leaking.

Just like with seals, gaskets can wear out with time and age.

So if your leak is coming from the seam on your transfer case, chances are you’ve got a bad housing gasket.

Loose drain plug

image of a transfer case drain plug
image courtesy of

Transfer cases have a fill plug and a drain plug.

The fill plug generally won’t leak because it sits above the fluid level in your transfer case.

If your transfer case is leaking from the drain plug, you just won the transfer case problem lottery. This is the easiest problem to fix among the four most common causes of transfer case leaks.

Just tighten it up and you should be good to go.

But be sure to keep an eye on it for a few days after you tighten it. If it is still leaking, maybe your plug is bad.

Perhaps it got damaged the last time you went mud bogging.

Or depending on your transfer case, maybe your drain plug uses a gasket and said gasket wore out.

In the case of a loose transfer case drain plug, always be sure to check the level of your transfer case fluid while you’re down there tightening it up. You may have to top off the fluid because some of it leaked out.

Refer to your vehicle’s owner’s manual on what type of fluid to use. Some transfer cases use automatic transmission fluid. Others use gear oil. And some use a specialty lubricant.

Other sources of transfer case leaks

The four things you just learned about are the MOST COMMON sources of transfer case leaks.

There can be other sources of leaks… it all depends on your transfer case.

photo of a transfer case retainer housing
Retainer Housing image courtesy of

The most common “old school” transfer cases are manually engaged with a shift lever on the floor of your vehicle. These are the simplest transfer cases and have fewer opportunities for leaks.

Modern all wheel drive cars can use complex transfer cases that are computer controlled to automatically sense when different wheels need to spin. These transfer cases have more parts and sensors on them, therefore creating more places where leaks could start.

There’s also different designs of transfer cases. Some use retainer housings (or tail cones) that house bearings. Gaskets on these retainer housings can go bad.

I’ve even heard of leaks coming from the area where the shift lever exits the transfer case.

So… sometimes transfer case leaks can be a little complicated.

How serious is a transfer case leak?

A transfer case leak is a pretty serious problem. If you ignore it and let all the fluid leak out, well my friend, you will most certainly be screwed,

The unlubricated metal-on-metal parts will eventually destroy your transfer case and likely make your vehicle undriveable.

If this happens you’ll likely have to replace your entire transfer case. This will be way more expensive than just replacing a bad seal or gasket.

Can you drive with a leaking transfer case?

Yes, you can drive with a leaking transfer case. HOWEVER…

Should you?

It depends on how bad the leak is.

If you are able to maintain a safe level of fluid in the case, you should be OK driving it.

But keep in mind, a transfer case leak is not easy to monitor like an engine oil leak.

If you are leaking engine oil, you can easily monitor your oil level with a dipstick or onboard computer. Adding engine oil is easy too. All you have to do is pop your hood and you’ll have access to the oil filler spout.

Monitoring and filling transfer case oil isn’t as easy. You‘ll have to crawl under your vehicle (or put it on a lift or jack) to access the transfer case. And having to do this every couple of days or weeks can get to be a pain in the ass. So just get your leak fixed as soon as you can!


If you have a transfer case leak, it’s most likely a bad seal or gasket. While it’s not a terribly expensive problem to fix, it’s a problem that DOES need to be fixed. If you don’t, this not-so bad problem can get real ugly real fast.

**header image in this post courtesy of**

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