The BMW E36/5 Compact shares its suspension with the BMW Z3, M Coupe/Roadster, which has E36 front suspension and rear suspension based on the E30. From front bumper to A pillar, the Compact looks identical to the E36 sedan, sharing both front fenders, bumpers, lights and the hood.
In order to save space, the E36/5 made use of a smaller semi-trailing arm rear axle derived from the older 3-series (E30). The inherent design of the trailing arm suspension was that it favoured oversteer. Consequently, the Compact received mixed reviews from the automotive press, some claiming the chassis was the most balanced of the E36 range, while others said that the car wandered and darted in a straight line, and was uncomposed in the corners.
In North America, these models were equipped with a 1.8 litre, 138bhp (103kW; 140PS) four-cylinder M42 engine for the 1995 model year. In 1996, the engine was expanded to 1.9 liters (M44), a treatment given to all 318i/318is. As some changes were required to make the car compliant with OBD-II, power curve adjustments occurred at the same time. European buyers had the option of a smaller 1.6 litre engine, a four-cylinder diesel, and German buyers had the exclusive and rare 323ti option with a 2.5L, 170PS (125kW; 168hp) Inline-6.
The interior was all BMW: apart from a simple one piece dashboard, it shared the same seats and trim as the full-sized 3-series. 318ti came in different trim levels, including the base, Active and Sport. Sport package is similar to the ones offered to coupe/sedan models, giving the car the suspension upgrade, colour coded bumpers, foglights, alloy wheels, sport seats and the like. Active package offered comfort items such as OBC(On-board computer), cruise control, sunroof and remote keyless entry.
The Clubsport edition was only offered in the model year 1995. It received the treatment of BMW Individual, much like the 1995 M3 lightweight and 1995 BMW E34 540i M-sport. The car had upgraded suspension, limited slip differential, sport seats, and full M-aerodynamic package including front and rear bumpers as well as side mirrors. It should be noted the Sport package for 1995 318ti had all the performance upgrade with no exterior distinction from the base model. Starting 1996, the sport package included the M-aerodynamic package like the Clubsport model, with the exception using the standard side mirror. Also there is a rare California edition of the vehicle, introduced in 1996, featured a Webasto style folding canvas roof reminiscent of those used in the Citroën 2CV. 1999 is a unique year for 318ti in US, since the introduction of E46 sedan/coupe models, BMW has made a decision not to offer the four-cylindered cars available to the rest of the world. All 1999 318ti's came with the sport package. It is the rarest and most sought after of the E36 318 lineup by enthusiasts, being the lightest, fastest, best handling and least expensive.