Fix it or junk it?

I just received an old boat with Mercury engine 50HP MERC500 from my friend but the lower unit is leaking oil and does not go any where when placed in water.* When the engine is out of the water the propeller is spinning fine but when submerged in water the boat goes no where.* It doesn't seems like the propeller is working under water.* Also, when putting it in reverse gear the propeller doesn't change the direction which it spins at all.* It continues spinning in the same direction as in the forward gear.* Do I need to get a new lower unit for it?* I've searched online for a lower unit and it is not cheap.* I'm not sure if it is worth fixing it.* Should I just junk it or fix it?* How much would you think it will cost to repair it?* Please advise.* Thanks.

Sounds to me like the gears are messed up in the lower unit but don't take my word for it and I would hit up ebay or craigslist to find a used lower unit for a good price. Sorry to hear that but I been through the same on my lower unit and it was my favorite day that's for sure.

Remove the lower unit and see if it shifts.-------this may be as simple as the shift rod splines stripped or not adjusted properly.-------------Test it before you " throw it out " ---that is the way to go about it.

If I take the lower unit out how should I put it back together so that the shifting are correct? Is there a certain procedure that I should follow when putting back together? What about the leaking? Will a new gasket fix it?

racerone said:

Remove the lower unit and see if it shifts.-------this may be as simple as the shift rod splines stripped or not adjusted properly.-------------Test it before you " throw it out " ---that is the way to go about it.

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Step # 1 is to pull the lower unit and determine whether is shifts.--------------After that you will get coaching on what to do next !---Take this a small step at a time.

This maybe a dumb question but how can you tell if it is still shifting after you take down the lower unit? Also, in the first picture, is the rod circled in red the shifting rod? If not, what is the purpose of this rod? There is a black plastic molding piece that this rod was inserted into through the lower unit which was damaged on one side. The damage looked to be like it was due to shifting. I'm not sure what that piece is called but I will post a picture of it later. Also, the gasket is all worn out. Could this be the reason for the leaking?

The rod is the mechanism for the reverse lock.-It is not the shift rod.-------------There is no gasket where you see the leak.----Oil seals are leaking.---------Take the lower unit off and you will see how you shift it by turning the small shaft.------------Other than a hidden bolt under the trim tab there is nothing magic or tricky here.

OK. I finally took down the lower unit and here is what I found.
First, there is this black thing by the small gear looking rod that has a damage on it as you see the picture below. Looks to me like something has been grinding on it. As for the rod, I can turn it from side-to-side just fine.

Secondly, when I turned the big long rod the propeller is spinning as I turned the rod. It worked on both directions. However, if I hold the propeller steady with one hand and tried turning the rod then the rod continues to turn but the propeller doesn't move. Does this mean the gear is messed up? If you hold the propeller steady shouldn't you not be able to turn the rod?

Finally, oil is leaking all over from the oil seal. Does replacing the O ring and the gasket fix this issue?

The damage on the plastic piece is of no concern at this time.---------------------Turn the driveshaft ( big long rod to you ) the way it turns with the engine running and turn the small shift rod at the same time to see if you get---------- forward ----nuetral ------------and reverse.-------The seal on the shift rod appears to be leaking.

Racerone, thanks for all your help but I'm a bit confused here. Are you saying that I need to have the engine running while try turning the drivershaft and the shifting rod? Do I do this while the lower unit is off or do I need to install the lower unit back on? Also do I need to put the throttle in any particular position when trying to turn the drive shaft and the shifting rod? If I install the lower unit back on then I won't be able to get to the drive shaft or the shifting rod. So, how should I do it? Also, where can I find a replacement seal for the shifting rod to prevent the leaking? Any idea how much it will cost?

Here is a brief history of the problem:
I talked to the previous owner which is my friend and he said that the boat was working fine until last spring when he started the engine out of the water for the first time and not realizing the the throttle was in full forward position. As soon as he starts the engine the engine revs really loud and he heard clunking noises. He shuts off the engine and took it to test on the water and that's when the boat doesn't go anywhere. He took it back home and decided to take down the lower unit to check into it. At that time both the forward gear and reverse gear are still shifting correctly. But after he put the lower unit back on, the reverse gear doesn't work anymore. He hasn't used the boat since and have decided to pass it onto me.

With the clunking noises, does it mean the gear is broken? Also, could it be that he didn't installed the lower unit back on correctly that's why the reverse gear is not working? Is there specific procedure that you have to follow when putting the lower unit back on?

Turn the shafts with a vicegrip ( lightly clamped ) ----------you are doing this to check the operation of the lower unit !!!------------Once you establish that the lower unit is turning and shifting we can go to the next steps.-------Simple trouble shooting is what you need to do.

Thanks for all the help guys. Sorry for the long delay. The battery was out after sitting all winter long. I finally got the battery charged up and started the motor. However I'm still confused as to how I would go about turning the drive shaft. I don't see a way of getting to the drive shaft (The big long rod) after the lower unit is installed back on. It's all enclosed inside the unit already. Can't get to it from anywhere. The only small rod that I can get to is the shifting rod (small rod behind the reverse locked rod.) I have to remove the reverse lock rod in order to get to it. I tried turning it with a vise grip but it wouldn't turn. I don't want to use force, I'm afraid I might break it. The prop will only spin in one direction regardless the shifting handle is on forward, neutral or reverse. Did I not do it correctly? Is there any video out there that shows how it should be done?

racerone said:

Turn the shafts with a vicegrip ( lightly clamped ) ----------you are doing this to check the operation of the lower unit !!!------------Once you establish that the lower unit is turning and shifting we can go to the next steps.-------Simple trouble shooting is what you need to do.

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It was suggested to you to do these tests with the lower unit OFF the motor , the picture showed the unit OFF the motor.---Not sure why you would put it together without testing !

Sorry, I misunderstood you. I thought I was suppose to have the engine running while trying to turn the rod. That's why I'm all confused. Please correct me if I'm wrong. To find the forward, neutral and reverse, I need to turn both the drive shaft and the shifting rod at the same time? How can I tell which position I'm in by turning the two rods?

racerone said:

It was suggested to you to do these tests with the lower unit OFF the motor , the picture showed the unit OFF the motor.---Not sure why you would put it together without testing !

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Have an assistant slowly turn the driveshaft the way the motor runs.---------------Turn the shift shaft to find the forward / nuetral / reverse positions.-----------------May help to try and hold the prop to see if you have a positive drive.