What is leaking?

[Tyleryac]

What is leaking?

 

[Sock Puppet]

Could be the angle/light, but is sure looks like a pinion seal to me. It appears you have fluid coating the bottom of your differential that's running down from the pinion seal. Once it gets to the lip of the rear cover while driving, air kicks it up all over the place.

That is where I would start.

 

[Exproblems]

What is leaking?

I agree with Sock Puppet, probably a leak in the front diff "pinion seal" and common to leak. I would safely get under the front of the vehicle and wipe off all the oil, then check to see a fresh gear oil droplet hanging off of the bottom edge of the rear pinion seal area of the diff. This is the area where the front drive shaft for the 4x4 connects to the front diff housing. The pinion seal is located there. The front drive shaft needs to be disconnected at the U-joint from the pinion gear shaft and the pinion gear/shaft removed from the diff housing, then the seal comes out after that. The seal is just tapped into place. Not a big job to do, you are probably looking at around $100 parts and labor ($15 for seal, $85 Labor) to have a mechanic do the repair. A little more money if you have the gear oil swapped out at this time. Prices vary depending on where you live.
BTW, I noticed in your pic there is only one plug hole in the diff cover, leading me to believe that this is the front diff cover. The rear diff has 2 plugs in the diff cover, a small plug hole to add new fluid or check the fluid level and a large "drain plug" near the bottom to drain out the rear diff of fluid when changing the gear oil.

 

[2Trux]

I would first determine what kind of oil it is. Gear oil has a smell that is different than motor oil. My front diff cover was covered with oil from a leak at the oil filter adapter, and a leaking seal on the steering rack.
Knowing what is leaking helps with finding its source.

 

[Tyleryac]

Thanks for your replies. The guy I bought the truck from is taking it to his mechanic to get looked at.