How to fix BMW E36 squeaking and grinding steering wheel
If you hear a squeaking noise coming from behind your 1991 to 1998 BMW 3 series steering wheel, or possibly the steering doesn't feel so smooth and maybe binds every now and then, then there's something you can do fairly easily to try and fix it.
You will need some lubricant in an aerosol can with an extension tube. People say not to use WD40 but even that will probably work, for a short period at least. I used an aerosol chain oil.
You need to lubricate the lower steering column bearing, which you will find in the engine bay. It's part way down the firewall on the left side, alongside the engine. You should see the steering joint and behind that is the shaft with what looks like a spring. Most likely it looks rusty too. See the picture below. You need to spray the lubricant on this part, and up the tube.
On my 318is with M44 engine it was fairly easy to access. So that I could get the oil as far up as possible, I removed the coil pack and the bracket that holds the ignition leads against the engine. This gave me enough room to get the aerosol can right down in front of the area.
Mine had been squeaking for some time and had given me a couple of scares when the steering wheel had resisted turning without using extra force. After lubricating the squeak has gone away and I haven't felt any resistance to turning. In fact, the steering feels significantly lighter.
This should be something that you should lubricate regularly, probably at each oil change.
If that doesn't fix your problem then there are other possibilities. You can try removing the steering wheel and lubricating the top bearing. You should also check the "clock spring" (late model E36) as these can bind. Sometimes they can be cleaned or lubricated, sometimes they will need to be replaced.