This is a question I have been asking myself for some time now as both cars are on the shortlist for me, but I think the 335i is a far more likely purchase.
Obviously the M3 is... an M3. It's a proper M car, a real precision implement (In BMW terms, at least, pipe down Elise owners!) and if you crave an M Powered BMW nothing else will do. However it also comes with bonkers running costs - even an Inspection 1 is £700 - and it can be very unforgiving. It's also getting older with every passing day and this is especially obvious from the front, where it has the same front lights and basic shape as the plethora of £3k 99 plate E46 Coupe's infesting the local McDonalds carparks lately, which is a real shame.
The M3, though, still stands out, it's still special.
The 335i is a different kettle of fish. Performance wise they are largely the same, the 335i is infact even quicker than an m3 once you've sent it to DMS for a 370bhp remap, but it isn't the weapon the M3 is. It's softer, less hard edged. To be honest, I find this more appealing than the M3. It has a more modern interior, more modern look about the exterior, a newer more modern engine and more kit on the options list. It's also cheaper to run, likely to be more reliable and easier to buy a warranty for.
The downside though is that it looks as near as makes no difference identical to a 320d Coupe. Of which there are approximately 8 billion in the UK alone, 7 billion owned by leasing companies and driven by people who dont know what BMW stand for but thought it looked good and had low company car tax. This is a shame - stand out a 335i absolutely does not. It's undoubtedly an awesome car but it doesn't have the 'Whoa, is that a...' that the M3 does.
That said, I'm erring far more towards the 335i because I feel its just a better all round package. The M3 is a specialist tool, the 335i a crushingly competent all rounder. Barring any last minute 'omg look its mint' E39 M5 madness, I suspect a 2008 335i M Sport will be my next car.
Having said that given you managed to completely destroy an M3 just 5 hours after buying it perhaps a 320d would be better
