I am not familiar with the ultragauge, but I assume it needs to be calibrated to be accurate. Check that first. and do some full tank averages for a real mpg.
The mpg numbers for your car indicate you have some real issues. I am sure you are aware.
First, Ross Tech is the source for the real deal vcds and vag-com. I can't post a link because I am a noob. Sorry. Google will get you to the ross tech store and the KII USB vag com you need.
I would start with all the basics. Alignment. Go through the brakes and wheel bearings. Check tires. Change air and fuel filters.
Photo and examine everything for leaks. Degrease and clean everything and drive around a bit and find out where you are leaking.
Moving on to older tdi stuff, yes, replace the k&n with the factory cold weather filter. Then cut out your snow screen. Easy to do when you have it up in the air doing your brakes.
Check online for how to reseal the pump while on the engine. TDIClub or vortex or both have the writeups. I have not done the job but I read that it is possible.
How well do you know/trust the person who said the timing belt was changed 1000 miles ago?
Specific to the alh, you need to run the variable turbo vanes through their range of motion. With the engine warm and out on the highway onramp, gun it from put put speed all the way to really speeding. You want to get full rpm range under load. Italian tuneup! If your turbo sticks because of this and spits a code, know it had to be fixed anyway and was probably going to do that to you on a road trip somewhere and some time not of your choosing. The alh was made to be revved occasionaly, and must be. I do it a couple times a week. If you never do it you will have problems.
You might want to do this at night for 2 reasons. First, if you and the PO have been babying the car it is going to blow smoke. If running sort of correctly, it will clear up with only one or two blasts. Second and more scary, your intercooler might be filled with oil which will lead to a temporary runaway as it inhales the oil. On the highway, easy and drive through it. In your driveway in park... well, you dont want that.
Read what I typed, google my words and understand what you are doing. You could get a band clamp tool and take your intercooler off to drain it, or install a drain screw, but what is the fun in that?
Blasting through the revs also gives you the chance to log with vcds and check on the real health of things.
But for that car to get 20mpg it has to be dripping fuel and more.
So, I am a betting man and my money is on a clogged snow screen, clogged intake manifold, fuel leaks, poor alignment, dragging brakes and pressure side intake leaks thrown in for a bonus. Auto trans? Yeah...
And if you are modding for efficiency, just remember these cars just need to be running correctly. It is almost impossible to get the mods to pay for themselves unless they are cheap(cloroplast/tape/delete aeromods) or changes when parts need replacing(injectors or trans swap).
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