Overdrive is a 4th gear used to bring down the rpms to get better mileage at high speeds. It should not kick in until your roughly at about 40-43mph, atleast thats when it does it on mine. The only time you dont wanna use it is when your towing or going up really steep hills. Other then that, its nothing to worry about. Although you can turn it off around town too, just gonna cuase higher rpms and eat more gas.
It can create "shift busyness," or the tranny searching for the right gear to use in hilly terrain, which will cause your tranny to overheat and fail prematurely. By turning the OD off you will prevent the tranny from hunting for the right gear.
Rule of thumb, if it jumps gears more than twice in 5 minutes when pulling take it out of OD. If you are driving down the road and it goes into OD when pulling and then it jumps back to 3rd and then goes back into OD then you really should have it off
heat is the biggest problem with overdrive. in o/d (4th gear) the torque convertor is used. it is torque multiplying (impeller driving turbine) creating heat. Lots of heat. add extra load, you add WAY more heat!!! tranny fluid works great but overheating it burns it and shorterns it's life and degrades its abilities to 1:cool 2: lubricate. TURNING OVERDRIVE OFF locks the converter solid(1:1 ratio) eliminating the extra heat generated by the converter slippage. light loads on flat roads you might get away with o/d but why take a chance. a few more dollers in gas or alot more dollars on a trans rebuild when you cook it.
My trannys been acting funny lately. Seems that at one specific speed while accelerating normal when it shifts into second it drops right back into first and then bam right back into second. Im hoping I need to just add some fluid to the tranny because ive had to do this before and its solved it. Today it wanted to shift on its own one time which bothered me, so ill check the fluid level tomorrow after I take her for a good quick highway drive to get it nice and warm.