When you push the MODE button on the radio, does it cycle through all of the sources (AM/FM, Tape or in-dash CD, CD Changer, AUX, etc.)? If mode cycles through everything else, but you never see AUX, then you probably have a problem with the Aux cable. Or, the previous owner could have replaced the radio with an earlier version that lacks the aux input feature.

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SOLD
2000 E38 750iL Highline Edition, Upgraded with the lastest 2006 X5 Electronics
MKIV Navigation, 16:9 Display, Bluetooth, TV/Video with Backup Camera, Sirius, and Aux Input