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"Under what circumstances do synthetic lubricants not make sense? My understanding is that high-quality synthetic lubricants can result in cost savings and engine efficiency improvements through reduced friction/heat, engine wear, lubricant breakdowns, lubricant change intervals, etc. What is best way to make these choices?"
You are right about the benefits of synthetic oils. Reduced friction/heat, engine wear, lubricant breakdowns and lubricant change intervals can all lead to lower costs for repairs and even better gas mileage in some cases.
The real question is when to choose an expensive synthetic oil over a lower priced mineral oil. The truth is that it depends on the way the engine is used and how many miles it has.
Synthetic oils may not be ideal for a vehicle that has very high mileage (engine hours) and has only used mineral base oils during its lifespan. If you were to change the oil to a synthetic in this type of vehicle, it could lead to a number of problems. The oil’s natural detergent action could wash off varnish and other soot deposits that are sometimes left behind with certain mineral oils. This action of cleaning deposits off cylinder walls not only can cause the engine to use more oil but also can reduce cylinder wall thickness and allow small amounts of oil to bypass the piston rings and burn up in the cylinder head.
In older cars, synthetic oils can even affect the seals or elastomers, causing them to shrink and leak. Therefore, continuing to use the same mineral oil is a good idea in many situations.
On the other hand, synthetic oils are a wise choice for vehicles and engines that experience frequent stops and starts, operate in extreme heat and cold, or have extended lengths of service between oil changes.
If you were to buy a new vehicle, you should consider using a high-quality synthetic oil from the start. This can make a big difference in the life of the engine, especially if you use the oil in conjunction with a high-grade, low-micron filter.
So while synthetic oil does not always make sense, when it does, there can be significant cost savings in the long run. Keep in mind that there are good mineral oil products on the market as well. Determining what your situation requires will depend on the condition of your engine or machinery.