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Not entirely true there is usually a fine line where you can bump up hp and mpg a little bit. Then after that you gain hp but lose mpg. Having a tranny that shifts better will get better mpg. I added a tuner to my 5.2 and I saw a increase in power and mpg.
That's because the factory timing curve doesn't allow for a complete burn, so you have to keep your foot in it. Once he moves the timing where it belongs, you get more power, you don't have to be on it as much, you save fuel. Like removing the clutch fan and adding the roller rockers. They add HP a little bit (the rockers), but moreso, they (fan + rockers) reduce drag, which reallocates existing power, as well as making more power.
Really? is that all city driving or some highway too? Do you have any mods done? I think the 2003 4.7 4x4 is rated at 13 mpg city, 14 average, and 17 highway. So that would sound about right if that was all city driving.
Mixed but on the highway I'm pulling a trailer with quads.