My car drives fine while in First and Second gear, but once I reach 40 MPH, the transmission seems to slip, and the car loses some of its power and seems sluggish.
The transmission seems to be slipping internally. The 3-4 clutches are most likely bad, causing the transmission to slip. The transmission would likely need to be overhauled or replaced. I recommend that you have a mechanic, like the ones from YourMechanic, come by to diagnose the cause of your car's sluggish running, and recommend a repair.
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