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My speedo is bouncing. Iwas told by one guy that the gear on the tranny was worn. Another guy said that the sensor on the rear axle is a speed sensor and should be replaced. I thought it was only an ABS sensor. The truck is a 95 powerstroke with E4OD
On our Rangers the VSS in the rear diff doesn't control the speedo, I'd assume it was the same on yours.
Every old vehicle I see seems to have a bouncy speedo, never heard of a worn gear causing it. Just thought it was something that came with older vehicles.
Your year should have the VSS on the differential. If it is damaged it will make the speedo jump and can kick the cruise control off and cause the ABS light to come on.
My truck had this problem and at first the speedo was fine but gradually the needle would jump a little and eventually it would go to 0 and then jump to the road speed and of course cut of the cruise.
It is simple to replace and costs something like $15 or so. If the dealer does it they charge about $60 labor.
The sensor itself rarely causes any problems. It's so simple it's almost impossible for it to fail. If you aren't having any other problems with other systems that use this sensor, e.g. the tranny, cruise control, and ABS, then 99% of the time it's the speedo head in the dash.