I had an 83 300D and had a hitch installed (Draw Tite) which attached to the bumper and the area underneath the spare tire. It cost $150 about five years ago. I pulled a small U-Haul with 1500 lbs of cargo in it from south Florida to Denver once and still got 19mpg on the trip. My wife used it for towing furnitiure around the southeast US many times after that with absolutely no problems.

Towing with diesels is a little different. You must realize it takes awhile to get going and accept that but after reaching cruise speed I could engage the cruise control and it would maintain speed on all but the steepest hills and inclines.

One recommendation would be to change the transmission fluid more often than normal if you do lots of towing with your diesel.

I'll install a hitch on my 99 E300 as soon as it goes out of warranty. In fact JC Whitney has a Class II hitch for it which sells for only $110. Good luck with your 300SD.

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