The transfer case is used in both 4wheel and all wheel drive vehicles. It is attached to the rear of the transmission and receives power directly from the transmission. If the driver selects 4wheel drive mode, the transfer case (using a set of gears or chains) will transfer the power to both the front and rear axles as to supply power to all four wheels. The primary difference between the transfer case in a 4wheel drive vehicle and that of an all wheel drive vehicle is that the latter does not offer an additional torque multiplying low gear ratio.
In true off-road 4wheel drive vehicles, the transfer case has two gear ranges. If the driver selects 4-Hi, power is supplied to all four wheels, but a gear ratio of 1:1 is generally used, which supplies no torque multiplication. If the driver selects 4-Lo, power is supplied to all four wheels using a lower gear ratio, which multiplies the torque from the transmission. This makes climbing hills considerably easier. For example, a gear ratio of 3:1 might be used for the low range. This means the transmission input turns three times for every turn of the output driveshafts.
Generally, a transfer case using gears is noisier and heavier, but the gears tend to be stronger than chain driven units. Gear driven cases are generally better for extreme use in off road situations because they can withstand larger torque loads and they do not stretch like chains. Chain driven units have become a standard for most vehicles in production today. They are used on both small and full-size trucks and SUVs. Chains are quieter and smoother making them more suitable for vehicles that are primarily meant for the road.
In all wheel drive cars, there is a need to allow for driveline slip to avoid binding the driveline. This is generally accomplished by including differential gears inside the case. These gears can also be locked to provide maximum traction.
In hybrid systems such as the Jeep Quadra Trac, the transfer case is designed to allow automatic electronic engagement of a clutch pack to direct engine torque to the axle with the most traction. Normally, the rear wheels will be given 100% torque, but if they should lose traction, the Quadra Trac will supply torque to the front wheels instead.