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I keep it in Auto most of the time. Our 4x4's don't really have a transfer case disconnect, so the front diff and axles spin all the time anyway, it only disconnects at the hubs.

In 2WD you are hub disconnected but everything else is still spinning. In "Auto" you are still in the same condition, but if the sensors detect that there is slippage at the rear then it can electrically lock the front hubs and transfer power to the front as needed to "pull" you out of trouble as well as to correct for erroneous steering input.

It's just my personal opinion, but our VDC system will work best if you are in "Auto" mode when it makes a correction. That way it can not only use selective braking, but can also transfer power to the front when needed.

I can discern no difference in gas mileage when running in 2WD as compared to "Auto" and that seems to make sense realizing that the transfer case, front diff and front axles are all spinning all the time anyway. Nor would 2WD mode really reduce wear on the drive train, except for those times that VDC kicked in the front hubs.

Maybe I'm missing something, but this is how I understand the system to work.
 
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