It's either the thermostat or the gauge. Since you describe less than stellar heating I would suspect the thermostat. They do get stuck open. My 300CD was when I bought it and had the same symptoms. A new thermostat solved it and now it has plenty of heat. The part is cheap and it is an easy one to replace...just be sure to get all of the air out of the system when you refill it. There are plenty of threads about that.

Your lack of cabin heat could also be caused by the auxilliary coolant pump being bad. I think that when the monovalves fail they usually fail open causing excessive heat...not sure though. I do know that if the aux coolant pump isn't working it can cause weak cabin heating.

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Marty D.

2013 C300 4Matic
1984 BMW 733i
2013 Lincoln MKz