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Investigate further
It sounds like a pretty enticing offer. If an M3 enigne (4 cylinders) has been put in and the tranny is also replaced, make sure the rear differential is also replaced. Regular rear diff. ratio on a 325i/is is 3.73:1, whereas the M3 comes with 4.10:1 diff. This is to handle the extra torque the M3 engine puts out. I've been told it's a pretty reliable engine, the only thing I don't like about both the 325 or the M3 engine is that it doesn't have a lot of low-end torque, which makes accelerating from stop a bit sluggish, but once on a highway, it kicks butt! I would also have the suspension checked out on the car, since it comes with a highly tuned susp. setup from Bilstein. The susp. is awesome when everything works, but there are so many adjustable parts that if anything is worn out, you'll hear some horrible noises.
I don't know why your friend swapped out the original engine for an M3 engine, since a stock M3 for that year isn't that much quicker than a 325is. My advice: Take it to a good BMW mechanic and have everything checked out. One last thing: M3 engines are known to be more expensive to fix than the 2.5L engine. Good luck.
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