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If can cover the 700ish difference it then boils down to your personal preference. Drive both and decide accordingly whether can justify difference in cost.
Point re insurance, I think the 118d is a higher grouping than the 116i, though wouldn't imagine would make a huge difference to the premium. Probably covered by the variance in road tax, in which case stick to Jon's calculation re fuel and final payment value at the end of the four year period.
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