Dexron III or VI in a 1995 E320?
 

I know the VI has better protection and additives but I've read where it may cause problems in older transmissions even though it's backward compatible.

I've used mobil one atf for 250,000 miles,never burns

Manual specifies Dexron 3.

DEX-MERC is a replacement for Dexron 3. That's what I use.

can't buy Dexron 3 anymore.

For worn pumps and seals, the newer lightweight ATF's are no good. Keep with the older specs. If looking for synthetic, the redline D4 is definitely better off than the D6 and the hi-temp stuff is even more viscous yet.

If you're really trying to get the clutch packs to clamp down on a worn out trans, the Racing ATF is a synthetic version of Type-F fluid (high viscosity, no friction modifiers for less slip, high resistance to thinning) and what I'm using for a trans that would lose 4th then 3rd as it got hot while being driven aggressively; I later found other issues as well but increasing the viscosity helped immensely. With the superior shift kit springs, a modulator adjustment, and the special fluid, it shifts pretty muscle car like. It's pretty hilarious actually, 2nd chirps tire and the 3-4 will now snap off every time at WOT. The heavier fluid even made a difference in torque converter stall speed... huge believer in the heavy weight stuff.

take this with a grain of salt.

The closest you will get to DexronIII-H rating is Ford Mercon V - it infact is a few steps ahead of it. Pricey - but its synthetic and can take a real solid beating before wearing out.

The absolute best DexronIII type oil is castrol Transynd or Mobil Delvac ATF or similar stuff like citgo quatrasyn etc. (phillips66 also makes a similar product), It will almost never wear out in these older cars, just drop the pan every 40,000 miles, collect the old oil and replace the filter, refill the old stuff back and you are good to go. These oils are very pricey though. (expect at minimum 200 dollars for a 5 gallon bucket)

The compatible and also cheapest would be dex/merc from walmart - and for added quality you can add some lubegard red bottle product - it does actually help it run cooler and really quickens the shifts (time between shifts - not the rpm or anything).

I have found this last combination to work good. However I have a freind whose W124 e320 wagon I filled citgo quatrasyn in. Its been 45,000 miles - and a month ago at we did just as I wrote, collected the old oil in the sump, removed sump to change filter, admired the perfection of cleanliness inside, replaced the new looking filter for a brand new one - the magnet that we put inside was also very clean - less than a light dusting of material on it. (The magnet was the round one bought online) - placed near the drain as we didnt want to interfere with any valve action in the valvebody from magnetism.