The transmission may be classified into manual and automatic types. The manual transmissions are conventionally called gearboxes. Their mechanical efficiency in direct drive is about 98%, whereas in reduction gears, it is slightly greater than 90%. As most of the time the driving is done in direct drive, frictional losses in manual transmissions are very small. That coupled with simplicity, lower initial cost and requiring little maintenance, is the reason these are still popular particularly in fuel efficient automobiles. On the other hand the operation of engaging and disengaging the clutch along with changing of gears while driving over a crowded highway means a lot of fatigue to the driver. Moreover, there is interruption of torque caused when the driver declutches causing discomfort to passengers and in extreme cases, instability of the vehicle. It is also difficult for the drive to know when to change gear to optimise fuel economy. Therefore, in luxury vehicles automatic transmissions are employed which simplify the driving operation considerably.

The modern, planetary automatic transmissions shift gears smoothly and since these are regulated by the transmission control unit, the best gear is always selected for the operating conditions, depending on whether the driver desires performance or economy. However, there are disadvantages also. They imcure parasitic losses due to the hydraulic pump required to operate the clutches, and slip in the torque converter generating heat. Most modern transmissions having lockup clutches to bypass torque converter during low efficiency operation, have up to 85% efficiency over the drive cycle. The latest types are the Continuously Variable Transmissions (CVTs) and the Automated Manual Transmissions (AMTs).