Automatic transmissions, as the name would imply, automatically shift to a higher gear when the engine’s RPMs are too high and shift to a lower gear when the engine’s RPMs are too low.
When the car is in L, the transmission is locked into its lowest gears. In some cars, this just locks the transmission into first gear, regardless of RPMs. In others, it will allow the car to shift into second or third gear at very high RPMs.
The point of high gears in a transmission is that they transfer some of the strain of moving the car off of the engine and onto the transmission – which allows the car to go faster than the engine could otherwise accomplish by itself. By locking the car into L, you’re placing more of the strain on the engine and less on the transmission.
Strain on a transmission generally translates into mechanical strain in the gearbox, which can quite literally destroy it if you’re towing too much weight and give the car too much gas. Strain on the engine, on the other hand, just translates into higher gas usage and a higher rate of wear and tear on the engine. By tying the speed of the car more closely to the speed of the engine, you also increase engine braking and cause the car to feel more responsive to how much gas you’re giving it.
The downside is the aforementioned higher wear on the engine, reduced gas mileage, and the fact that the car is locked to an artificially low top speed due to being unable to shift into higher gears (often ~30 mph). But its better than destroying your transmission because you tried to gun it while towing a giant boat with your old Volvo sedan.
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