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We looked at both for almost the exact same reasons you are looking. We went with the X3 and are glad we did. I ran in to a local X5 owner and said they are getting like 16miles to the gallon! For the bit of space you gain, I think over all you are looking at a vehicle that is a lot worse on gas. The X3 will be just what we need for our soon to be 3 old and the shopping trips. Plus if we need more cargo, we can always put a cargo bin up top.
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