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have a 2004 silverado 1500 with a 4.3 and a automatic trans with a tow package ( shifter reads, 1st,2nd,3rd and D ). I find when I drive local and at lower speeds the trans. will shift into overdrive at about 45 and being that Im not going over that speed , it drives sluggish, so, when I know Im driving local I drive in 3rd which I believe is direct drive, Then recently another chevy owner with the same set up said , when He drives local and at lower speeds he drives with the tow pkg on and this keeps the transmission from shifting into overdrive until the truck reaches about 60 mph. My questions : is this okay to drive this way ? Am I harming the Trans ? Which way is better to drive at lower speeds ?
 

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You won't hurt the transmission either way.

But, using tow/haul will hurt your pocket, the longer you stay in a lower gear, the more gas you use.

The rest of us just gear down as you thought was best.
 

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I don't know, but I'm willing to bet your putting too much thinking into this transmission shifting thing. I have the same trans as you do and when I start off in the morning I put it into 'Od' or 4th gear. Being an automatic the transmission and PCM decide when to shift or not. You should look into your owners manual and you'll see it says to put the shifter in" Od ". The trans should shift fine, but you may be having trouble downshifting, in which case it's a cheap part a "Down shift" cable. Costs like 35.00 and have a good trans shop

The only time you should be driving in 3 gear is if your hauling 1000 pounds of mulch or if you are towing something heavy, like a car & trainer. But you gotta make sure you don't go over the Gross weight combination of your truck and all of the load. I have a 1990 with a 305 and a 700R/4 and my max is 10.700 pounds. Electric brakes helps alot. The transmission knows the when and where to shift.
 
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