If you add too much transmission fluid, you will notice that it may foam, and that can bring about erratic gear shifting. Some other problems that may arise include oil starvation and transmission damage.
In an engine or a transmission, foaming occurs when rotating parts (rotating gears in a tranny, crank-shaft weights in an engine) splash in the overfilled fluid/oil crankcase or reservoir. This splashing results to excessive fluid temps, the transmission end up failing, and the tranny fluid as well degrades very quickly.
When an automatic transmission is overfilled, the fluid foams, leading to gear shifting problems, oil starvation as well as transmission damage. On the other hand, an overfilled manual transmission results in fluid-leak from the vent and the shifting the gear becomes a problem when the clutch is depressed. All transmissions, auto or manual, have some ways to relieve excess pressure.
Adding too much transmission fluid can also cause early failure and damage of parts as result of excess pressure. The pressure in shift from low to maximum in this condition making some parts of your vehicle completely unstable. A pressure jump from very low to 300 PSI gauge’s or more is what we are talking about in this situation.
When you try to change the gears more so on the 3-4 and 2-3 as well as the reverse gears this condition can become even worse. You can easily guess how that could do a lot of damages to your transmission. The pressure would result in friction and easily push out snap rings, break parts, etc. Causing sudden failures and/or serious damage.
Modern vehicles have transmissions that include a pressure valve which regulates pressure after the pump. However, as previously mentioned excess pressure can result to pre-mature wearing out of some parts – the valve included, thus causing it to fail. Failure of the valve can in turn create pressure related problems in other engine components.
So yes, adding too much transmission fluid can lead to pre-mature failure of the car’s system over time, and may most likely void any warranty you may be having, if reason for the failure is found to be the presence of excess fluid.
However, there are vehicles that are equipped with transmissions that cannot be overfilled due to their design. They may have a hole on the side to allow any extra fluid to flow out.