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I have had a problem with my ABS brake light staying on. I took it to the dealer and they said it was the computer ($800). They said it was no big deal to not fix it. I noticed around the same time time that my Auto 4wd light started blinking when I selected A4WD. Since I rarely use this feature I have not worried about it. The normal 4wd works. All of a sudden my ABS light does not come on about 50% of the time when I drive the vehicle and the A4wd works almost every time.
Are these items linked together some how? Both actually work when the lights show the proper condition.
More than likely you have a bad ABS sensor. And since the A4WD systems uses the ABS sensors to monitor wheel speed that is most likely the problem. Most of the guys on this forum, present company included, have found it to be the one in the rear axle housing. Part should run around $80 and can be changed out in about 20 minutes.
If I recall on my 99 the rear diff sensor is for ABS and the two on the transfer case output shafts are for the a4wd.
My abs light would come on after driving forward about 10 feet and stay on until the next time you cycled power off/on.
I picked up the rear sensor for $22.84 from the dealer. Took care of my problem.
My understanding is that if the light comes on and STAYS on from startup then it may be another problem--computer.
There were some changes between the 98 and 99 years... I think the 98 has a 2wd selection whereas mine doesn't.