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A quick background: I come from an automotive background and have no experience with bikes/quads. I bought a 91 trx250x a few weeks ago for $350. This is my first atv. It had been sitting a long time and needs some work. No spark, missing front plastic, sun rotted seat. It looks like the tires have very little use, the frame and suspension looks really straight, engine has good compression and no oil leaks anywhere. The engine runs pretty good now that i have solved the no spark issue (CDI box). It has all its gears and the clutch feels good.

I took it for a first testdrive (about 1/4 mile) and there was a metal grinding noise from the rear. I replaced the brake pads because the one pad was worn to metal. It still had a grinding sound. I then noticed the axle had a lot of play in it. I took apart the rear end and the aluminum bearing housing was broken and the bearing on the right side of the swingarm was in pieces. The inner bearing actually friction welded itself to the brake rotor hub. I will be getting a new loaded carrier next month. I ordered a used brake hub from a motorcycle graveyard and the used hub is definitely better than my original but the sealing surface is grooved.

I have a 15 day return policy on this part if i need to return it. A new hub is $90 shipped, i got this used one for $29 and it came with the rotor (which I could use anyway). So since this is sealing out grease and not gear lube or oil could i smooth out this used hub with some emery and then polish it, or even chuck it in a lathe and take a few thousanths off. It would make it slightly undersized but it is sealing out heavy grease. What do you guys think? Money is kind of tight and I really don't want to shell out the money for a new hub. Any advice would be appreciated.
 

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That hub is pretty badly grooved and the seal it is not sealing out grease - it seals out water and dirt from getting in. Since you are on a budget, turn the hub smooth and see if the new seal touches. better yet, get it welded up and turned back down to the original size. Better yet (if you intend to keep it for more than a year) buy a new hub and fix it right. The rotor was worth what you paid for the hub.
 
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