We have a local mechanic here in town who only works on BMWs and Mercedes - he does our work for us after the cars are out of warranty usually. He couldn't believe that the transfer case had to be replaced in my X3 at 85,000 miles. But he did say that the fluid should have been changed by BMW at one of the service intervals and it never was. If you've never had the transfer case fluid changed I would definitely get that done!
Before my transfer case went bad the car wasn't performing poorly at all. I never would have known except every warning light in the car came on!