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I can certainly vouch for 128i as a track car. It may not be the fastest but it is very easy to make them bulletproof, cheap and fun on track. Just need an n54 oil cooler depending on climate along with a proper brake pad and fluids to make the car run endless laps without having to worry about anything besides tire temps and fuel because at track pace I average about 7mpg.
There is plenty of room for the suspension to be improved, but most of that is fixed with decent coil overs and camber plates. everything else like bushings and adjustable arms will make noticeable improvements but won't be a complete game-changer.
If you have the money the m3 would be worth it in my opinion simply because of the noise. You can get a 328i/335i to handle like an m3 but you can't make the 328i sound like an m3
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