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I owned an 06 SMG M3 for a few years and that car was awesome. It has such a raw feel to it that I think you would prefer on the track over a 1 series. Iirc the 1 series chasis was based of the e46 so they are pretty comparable.
I test drove a steptronic 135i when they first came out and it was a really fun car but the m3 just gives you a better driving experience. Plus the SMG tranny is amazing and so fast. Some of the smg pumps have been known to go out on them though so watch for that.
If I had the choice I'd pick the e46 again.
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