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There are three types of brake fluid available in the US: DOT3, DOT4, and DOT5 (I don't know the comparable European specifications -- can anyone help with this?). DOT3 and DOT4 are glycol-based, and DOT5 is silicon-based. The upshot of this is that DOT3 and DOT4 absorb water, and DOT5 does not.

One of the most important considerations in choosing brake fluid is its boiling point, because the brake system relies on the brake fluid being incompressible, but if the fluid boils, it (by definition) changes state from a liquid (incompressible) to a gas (compressible), and is less effective. As DOT3 or DOT4 fluid absorbs water, its boiling point decreases, making it more likely to fail -- this is why you should replace your brake fluid periodically, even if it 'looks OK.'

DOT5 fluid, being silicon-based, does not absorb water. This means that its boiling point will remain relatively stable, but it also means that if there is any water in your braking system, it will form pockets, which could cause corrosion.

There are a couple of warnings -- first, DOT3 and DOT4 brake fluid will dissolve paint, so don't get any on your car. Also, none of the different types should be mixed. This is especially important if you want to use DOT5 fluid in a system that used DOT4 previously -- don't do it! You can't get all of the old fluid out, and the DOT5 fluid will react with the DOT4 fluid and cause a lot of corrosion in your braking system.

Audi recommends DOT4 synthetic brake fluid.
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