2001 Jeep Cherokee, XJ, 2WD, with 240.000ish miles, it has 6" lift kit and bigger tires installed. Just purchased this as a project, this is what i was told by the previous owner. "Heard a loud bang and then nothing, was beating on it a little while four wheel'en off road." I had it towed to my property to work on it. This is what i found, it will not go into any gear and move. As i played with it trying to move the jeep there was a clanking noise like something spinning and hitting something at on spot. Kind of like a soda can jammed between your bike frame and the tire ? Kinda ? Also the jeep will roll forward but seem like the back wheels lock up in reverse when trying to roll it backward ? I drained the rear gear oil and popped off the cover and everything seems ok except dirty gear oil ? Does anyone have any advice on what to dig into next ? Really hoping it is not going to be an interior transmission issue ?

 

It's either the transmission or the transfer case. My money is on the transmission. Drain it and see what the fluid looks like. If you see pieces.... well, start looking for a used transmission.

Manual or automatic?

 

My first thought was the seller engaged part-time on dry pavement and got stupid with it.

 

Sounds like the transmission is done for, drain it and check for fragments/pieces before you write a bill for a new one though, as BlueRidge said, there is a chance it could be the transfer case.