A center differential is found in all wheel drive cars. The distinction between a four wheel drive vehicle and an all wheel drive vehicle is this differential.

In a conventional 4WD vehicle, power is transmitted between the front and rear wheels equally, and is distributed amongst the two wheels sharing an axle through a differential mechanism. This results in poor handling characteristics on paved roads. When a car is traveling through a turn, the front wheels travel a different distance than the rear wheels, in addition to the inside wheels traveling a shorter distance than the outside wheels. This means that all wheels on the car need to move different amounts. When the front and rear have power equally distributed amongst them, this means they'll be fighting each other at the pavement. This puts stress on the drive train and means that the tires must slip to make the turn. Most such vehicles typically have a mechanism allowing the driver to only drive two wheels at a time. Note that off the road, which is where much of such vehicle's use is marketed, there are surfaces with far less friction (gravel, dirt roads, mud puddles) and thus this combat amongst tires becomes much less of a problem. In some situations, it's more beneficial.

In an AWD vehicle, the power is distributed between the front and back through a center differential, and then once against distributed at each axle by another differential. This allows each wheel to turn differently depending on the character of the turn the car is executing. One gets the benefits of 4WD traction without sacrificing handling.

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