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Recently bough a Toyota Highlander v6 3.0 4wd, it has an engine knock. I was wondering if I could use a Toyota Camry's engine instead of buying a new one for the Highlander. If I do this, what will be the difference in performance if any?

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There are three different engines offered for the Highlander & Camry which are the 3.0L V6. All three are of the 1MZ-FE model. It appears one version of the engine was used from 1994-2006 in the Camry. It produced 168–190 hp @ 5200–5400 rpm with 183–193 lb·ft of torque at 4400 rpm. Wikipedia says:

Horsepower ratings dropped after the Society of Automotive Engineers implemented a new power measurement system for vehicle engines.

The 1997–2000 Camry had a second engine which was fit with a supercharger from Toyota Racing Development (TRD). This engine produced 242 hp and 242 lb-ft of torque.

The latest engine, which appears to be the one which the Highlander uses, is the one with VVT-i (the engine has it emblazoned across the top of itself). This engine produced 210 hp @ 5800 rpm and 222 lb-ft @ 4400 rpm. This is the engine you need if you want to keep everything as it should be. It was found in the 2001-2003 Highlander and in the 2003-2006 Camry.

There may be differences in how the engines are handled. The same Wiki article states:

Early versions of the VVT-i 1MZ used a dual throttle body, cast aluminum intake manifold, and EGR block off plates on the exhaust manifolds. Later versions used a drive-by-wire/electronic throttle control.

The base of the engine itself (the long block), will be the same between the engines. Things like intake manifold, accessory drives and brackets, flywheel/flexplate, motor mounts, exhaust manifolds, etc., will be different. You'd need to strip the new engine down to the long block (if it doesn't come that way already), then take all of the stuff off of your old engine and install it on the new. Remember you'll need new gaskets to do this or your new engine will have plenty of issues (like vacuum leaks in the intake which will allow unmetered air into the intake system, and exhaust leaks which will allow air into the exhaust track allowing for really crappy gas mileage.).

If done right with the correct engine, you'll not have any issues. It should bolt up to your Highlander and run just like it should. If you go outside of the year range, it will probably bolt up, but will not run as it should.

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