Both four-cylinder and six-cylinder Toyota engines have been prone to oil gelling or "sludging." This can affect cars that are only a couple of years old. Before buying a used Toyota, it may pay to look under the valve covers for "sludged" oil. Blue smoke may be one symptom. We recommend that you use synthetic oil.
In some situations, oil additives are burned off or otherwise made useless; then oxidation occurs and various pollutants congregate in the oil, producing sludge and varnish. Originally, it was thought that the oil was being "burned" by excessive heat, but the problem appears to be caused by problems with crankcase ventilation, at least in some cases. The problem is not particular to Toyota and Lexus - Mercedes, Volkswagen, and Chrysler have all had problems (Chrysler's with the 2.7 V6, and cured soon after it surfaced) - but Toyota appears to have been afflicted more than any other automaker, and it affected both V6 and four cylinder engines (built from 1996 to 2001), but still, only about 1% of cars made appear to have had problems (keeping in mind that reported cases are probably fewer than total cases). To a smaller extent, any engine by any manufacturer can be damaged by the problem.
Making it worse, the volume of rubbish in the engine (including oil that's become heavy and burned, or sludged) can plug filters, the oil pickup screen, and oil passages, causing precisely machined parts to fail. Toyota's solution has been to extend warranties on the engines of these cars to eight years and unlimited miles, but originally blamed the owners for extending time between oil changes, and for a time refused to pay at all for engine damage. Mercedes raised their warranty to 150,000 miles after a lawsuit.
Here is Toyota's new policy. The moral: keep your oil change receipts (or have oil changes done by a dealer) and use synthetic oil.
Toyota wrote that it "is taking this action because a very small number of customers have reported engine damage from motor oil breakdown, also known as oil gelling or 'sludging,' a result of oil change intervals delayed beyond the factory-recommended schedule. While any make vehicle can suffer from this condition if the oil is not changed often enough, Toyota has initiated this program to ensure owner peace of mind." We note that this is a handy way to blame the owners for a design flaw - since it doesn't affect earlier vehicles or other engines, and is in fact quite rare on other automakers' engines - and this can happen even if you follow Toyota's recommendations on oil changes. It is, to be fair, a design flaw that would be hard to uncover during testing.
Toyota continues: "To make sure that customers have absolute confidence in their vehicles, this program will cover repair costs and incidental expenses for which a customer has paid or could incur as a result of damage due to oil gelling for a period of eight years from the date of first sale or lease without a mileage limitation. In addition to the costs of repairs, reasonable incidental expenses, such as car rental, and other out-of-pocket expenses will be covered."
Customers whose engines have needed repair in the past should contact Toyota at 888-802-9436 or Lexus at 888-654-6421 for details on obtaining reimbursement. If it happens to you in the future, see your dealer for repairs.
Toyota is clever enough to understand that dealers are not everyone's friend, and that some dealers may want to steal some parts from customers; so all parts required in service have to be returned to Toyota, or they will not get paid for the rather expensive repairs. Here is what they need to replace:
The customer needs to pay for any wear items replaced in the process, such as the timing belt (not a bad time to do it) and spark plugs. Consider it to be an opportunity to have maintenance done without labor charges (or with very small labor charges).