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Update time!!!
So the subaru dealership says the engine is toast. Sounds like a spun bearing leading to a conrod failure.
The guys says he has been working there for years and has not seen anything like this.
Apparently, an accumulation of mods (intake, exhaust, and tune) along with hard driving caused the eventual failure.
My take:
So apparently if you buy a sports car and drive it like a sports car, the engine will blow just outside of the warranty. I guess subaru knows what they are doing with that 60k mile warranty.
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