ok so i know it is a common problem for the fuel guage to not work on a stang i have an 88 and the gas guage used to have the needle past full all the time but the low gas light would come on when the gas would get low,

i replaced the sending unit and now the guage reads accuratley if there is more than half tank when it get to half tank it stops, then after a while the gas light will come on and off till it stays on for good once more fuel is used,

my car has run out of fuel 3 times and its always been on the 1/4 tank mark,

what would make the guage that far off yet still allow the low fuel light to come on

 

The level is measured electronically, and when it reaches under (or over, one of the two) a threshold, it activates the light. The tiny servo controlling the needle may have become damaged.