Differential Gear Ratio determines the number of times the drive shaft (or pinion) will rotate for each turn of the wheels (or ring gear). So if you have a 3.73:1 gear ratio the drive shaft turns 3.73 times for every turn of the wheel. Gear ratio is calculated by dividing the number of teeth on the ring gear by the number of teeth on the pinion gear. The higher the number, the lower the ratio: a 5.29 gear has a lower ratio than a 4.10 gear. With a lower gear ratio the drive shaft (and thus the engine) turns more for each revolution of the wheel, delivering more power and torque to the wheel for any given speed. Lower ratios are generally desirable when going off-road. Higher ratios are better for freeway driving since they run at lower RPM’s and offer better fuel economy.
Changing tire size affects the final drive ratio. Switching from a 30" tire to a 35" tire changes the final drive ratio by about 17%. This may drop the engine out of its' "power band" and result in poor performance and fuel economy. To restore performance you must change the gear ratio to compensate for the change in tire size. If you originally had 3.07 gears you need a ratio that is approximately 17% lower, such as 3.55. If you want to increase off road performance you might want a 4.10 or lower ratio.
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