When I go to check my ATF level while the engine is running at operating temp I see several little bubbles in the fluid. When I first saw this I figured my level might be a little high and I'm getting some foaming. It seems to be very difficult to get a consistent reading with these trannies. So I drained about half a cup of fluid and now I'm a good 1/4 of an inch below the minn. line and there are still some bubbles. The fluid is bright red and super clean. Since the car is new to me, I don't know the history of the transmission's service intervals, but am wondering if ATF can be clean but maybe worn out. Any thoughts? Thanks

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'81 300SD

If it looks like new and is not foamy it should be fine. Smell is really good indicator.

If you don't know the history, perhaps it is worth changing it on principle?

Try again to get the right level, once thats sorted out look for the bubbles again.

If you still suspect moisture, change it.