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Could someone explain what I have wrong here?
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Pretty much all of it. A tach (rpm guage) that doesn't show the actual rpm's is like a metric clock. As you go through the gears, the engine will rev from idle to wherever shifting is done (by the tranny or you, auto or manual). Overdrive saves gas by going into a higher gear. This can be done with a manual too, if you rev a certain car out in 4th, you can be doing 90, but you can go 55 in 5th and save alota gas.