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its interesting, ive noticed my four stroke stopped making oil after a few seasons of use. maybe its how i run the boat and or using the better merc oil which is part synthetic 25 - 40 . dont know what the former owner used. i feel the engine improves with time now. i have taken it from 350 hours to approx 750 to 800 hours over the past 5 years.
Sounds like the rings didn't get seated properly, possibly because the original owner did not follow the breakin procedure. The dealer I bought my motor from encouraged me to work it pretty hard for the first 25 hours or so (following the 1 hour initial run-in) and I certainly have had no problems in 7 years of ownership.
