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By the early 1980's, numerous vehicles were using electronics and on-board computers to control many of the engine's control systems, such as fuel and ignition. Sensors and actuators sense the operation of specific components (oxygen sensors) and actuate others (fuel injectors) to maintain optimal engine control. An on-board computer, known sometimes as a "powertrain control module" or an "engine control unit," controls all of these systems.

With proper computer software, the on-board computer is capable of monitoring all of the sensors and actuators to determine whether they are working as intended. It can detect a malfunction or deterioration of the various sensors and actuators, usually well before the driver becomes aware of the problem through a loss in vehicle performance or driveability.

Vehicle manufacturers had to develop ways to diagnose problems generated by the new electronic hardware found under the hood. The sensors and actuators, along with the diagnostic computer software in the on-board computer, make up what is called the On Board Diagnostic or OBD system.

The purpose of OBD was to monitor the many systems in the car. When the computer system of the car sees a fault, three things are supposed to happen.
  • Set off a warning light on the dashboard to inform the driver that a problem existed.
  • Set a code in the computer.
  • Record the code in the computer's memory that can later be retrieved by a technician for diagnosis and repair.
There are circumstances under which the vehicle computer will detect a system problem before the driver notices a driveability problem. Furthermore, OBD can detect problems that may not be noticeable upon visual inspection because many component failures that impact emissions can be electrical or even chemical in nature. By detecting these emission-related failures and alerting the driver to the need for potential repair, the EPA hopes that vehicles will be properly repaired before emissions become a problem.

This system worked so well that in 1986 California mandated that all cars sold in the state be equipped with OBD. This then became an industry standard throughout the nation, and all cars sold in the nation had some form of OBD.

The Clean Air Act of 1990 mandated that, beginning with the 1996 model year, all vehicles less than 14,000 lbs. (e.g., passenger cars, pickup trucks, sport utility vehicles) will be equipped with a new version of on board diagnostics This system became known as OBD II. The manufacturers beat the deadline and almost all cars were equipped with OBD II in the 1995 model year.

The OBD II system monitors virtually every component that can affect the emission performance of the vehicle to ensure that the vehicle remains as clean as possible over its entire life, and assists repair technicians in diagnosing and fixing problems with the computerized engine controls. If a problem is detected, the OBD II system illuminates a warning lamp on the vehicle instrument panel to alert the driver. This warning lamp typically contains the phrase "Check Engine" or "Service Engine Soon".

The system will also store important information about the detected malfunction so that a repair technician can accurately find and fix the problem.

The intent of OBD systems is to assure proper emission system operation of each and every vehicle and light truck for its lifetime by monitoring emission-related components and systems for malfunction and/or deterioration. An important aspect of OBD is its ability to notify the driver of a problem before the vehicle's emissions have increased significantly. If the vehicle is taken to a repair shop in a timely fashion, it can be properly repaired before any significant emission increase occurs. OBD systems will also provide automobile manufacturers with valuable feedback from their customers' vehicles that can be used to improve vehicle and emission control system designs.

OBD systems are designed to alert drivers when something in the emission control system begins to deteriorate or fails. Early diagnosis followed by timely repair can often prevent more costly repairs on both emission control systems and other vehicle systems that may affect vehicle performance such as fuel economy.