Everyone here has good points and I'll contribute my two cents as well. The wife has a 12 E92 335i M Sport, my weekend car is a 1M, and my daily is a F10 550i M Sport. All three have a flashed ECU (550, 335 = Dinan, 1M = Cobb) to make the car drive like it was designed.
After test driving both the 535 and 550, the 550 seems to handle and brake significantly better, although the suspension still seems a little soft considering they both had M Sport packages. To me the 535 was the most well balanced .. you can really feel the extra 400 pounds when driving the 550 and I think the brakes on both models are the same hence the worse braking feel in the 550i. Even with this said, I went with the 550 as the tuning potential is significantly better for the N63 versus the N55 (it's so disappointing that they watered down the N54 to cut costs) and -- the main deal breaker for me -- the 535 doesn't have a limited slip differential. How the hell can they offer a +$55k RWD turbo performance sedan and not include an LSD! There are so many less expensive cars that have a LSD it isn't even funny. If performance doesn't really matter to you, then the 535 is probably the better bet.
After thinking about it for a bit, it is my opinion that the 535 is the wrong car to cross shop against the 550. What the current 550 -- all 4,380 pounds of it -- really represents is a Lexus LS460 with a fantastic German drive train. The steering is awful, and the additional weight in the front noticeably affects both breaking and handling (compared to the 535, 335, and especially 1M) but it is extremely solid, smooth and fast (especially with the Dinan stage 2 tune). The 5 series truly is a short wheel base 7 series, which itself shares the same chassis with Rolls Royce. The ride quality and heft definitely communicate this fact and in many ways it is a bargain as a luxury car.
Options like soft closing doors, a remote opening truck, its ability to isolate the driver from the outside environment, and a higher interior material quality (it is a step above the A4 and 3 series) really appeal to the Lexus crowd to make up for its performance shortcomings. Please don't misunderstand me as I don't regret buying the 550 and enjoy it quite often for what it is.
My requirements for a daily driver are luxury, comfort, the ability to handle high speeds (80-100 MPH) with ease, and enthusiast drivetrain (RWD/AWD and forced induction). The 550 fits these requirements perfectly ... although the Audi S6 was not out at the time, it apparently gives the 550 a strong run for the money and is worth considering versus a 550.
If your requirements vary much from the ones above, I'd strongly suggest you consider test driving a '10-13 Audi S4 as it fills the performance and size niche between 3 and 5 series perfectly. My previous daily was a 2010 -- it was fast, got good mileage, has great styling, and (with a few minor modifications) handled very well. Now that it has a supercharged V6, the powerband is very wide and it runs extremely strong at stage 2 (ecu, intercooler, air intake, midpipes, cat back). The optional sport differential is a must and helps the car feel more like a RWD-based AWD car -- something that until recently has been a problem with Audi's.
Until BMW comes out with a true F30 3-series that appeals to enthusiasts, I can't recommend this car to an enthusiast until the next M3 comes out. The N55 stands in the shadow of the N54, the N20 aftermarket is small, and it is impossible to get a factory LSD in any model. Personally, I think it would be neet to see a 328 M Sport with factory LSD and ecu flash (275ish HP would do) or possibly hold off until the 355 LCI where they will hopefully will upgrade the N55.
Last edited by TX1SERIESM; 01-07-2013 at 10:40 PM.