Other signs that the transmission is failing include noises. In the event that the transmission fails, you can often detect a “knocking” or “bumping” noise, particularly when you are in neutral. The cars smoke may also smell bad, this could possibly be the smell of burnt transmission fluid. This fluid is intended to keep the moving parts lubricated and also cool the system. A leak can lead to low fluid levels, which could cause overheating and burning of the fluid. Resulting in transmission failure.