I just bought a 525i with SMG which has about 70k miles on it. It shifts fine and all, the only problem is that sometimes when you are in 5th and slowing down at the lights it goes 5-4-3-2-N. It happens whenever you are slowing down form a high gear. It just jumps to N. Anybody has this problem? Its a 2004 525i.

 

It shouldn't go into Neutral. My SMG doesn't. According to owner's manual somewhere stats that SMG computer will automatically shifts to N even though you are in 1 after x seconds of idle to extend the life of a clutch but the display should remain 1 regardless you are in auto mode or manual.

 

Yep, it shouldn't but it does... its really irritating and dangerous, sometimes if you slow down and try to make a turn, it jumps to n too..

 

According to my experience (sometime it showed the gear but it was in N, the gear came off), you could try to replace the actuator (+ pump that is cheap).
I cannot guarantee this will solve the situation, but I'd consider to try.