Some of this is subjective and it's my perspective as a 5 year owner of an S204 and a couple of test drives in an S205.
- 205 looks better outside, I prefer the pre-facelift though especially the grille.
- 205 rides better even in the stiffer suspension modes. 205 handles way better, I think it moved to double wishbone front suspension.
- Seats are better in the 204. Amazing comfy buckets with the biggest side bolsters I know of. 205 sports seats look cool but 204 are more comfortable. Both cars you sit too high, even more so in the 204. You only have to step into a BMW to realise how it should be.
- 205 interior is more chintzy. I like both the 204 and 205 interior.
- People cite better tech on the 205 but quite frankly I'm not missing anything in the 204. It has cruise control, Bluetooth audio, speed limiter and decent enough maps or you can add a box for Android Auto. Not interested in lane keeping assist etc although HUD would be nice.
- Steering is delicious on the 204 with its hydraulic rack. On the 205 it's too light a lot of the time but alright at speed.
- I think the 204 creaks and rattles less from the number of people I've seen moan about the 205 compared to the 204.
- I'm not head over heels in love with the M156 sound, it's a bit too American like for me. However, it does sound epic with the windows down/boot cracked open. Driven normally it's too quiet inside and you don't get to enjoy it as much as I'd like. The 205 has less variation in the noise it makes but it sounds nice too.
- The 204 only really flies when you rev it out. The 205 is more torquey and is better suited to use as a family car.
- The 204 is more of an event more of the time, including at low speed. For this reason it makes a compelling argument for a low use special car. The fuel consumption is high, low twenties driving like a granny and mid to low teens pressing on. With lowish miles per annum that's not an issue.
- The 205 is quite a lot more money, which may be a consideration.
On balance I'd pick the 204 if you're doing under 10k miles a year and you want something different. It feels like nothing else and is a visceral experience. The 205 feels quite like an ordinary car in normal driving but it's ultimate capablities are epic.
I'm selling my S204 if you're interested here:
Auto Trader UK - New and Used Cars For Sale