The gauge on my '91 124 reads fine above 1/2. Below that it becomes erratic. The light works fine, of course, since it is operated by a different signal on the sending unit.

I replaced the sending unit and it made NO DIFFERENCE. I also tried a different gauge and that made no difference either. I cleaned tightened every ground connection in the car that I could find. That made no difference either.

So, I guess there are ghosts in my electrical system.

YMMV

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2012 E350
2006 Callaway SC560