"It was a fantasy. It was just something we talked about. It was nothing we were going to do. We did not plan it - it was just talk," Brett Tyler told police in a videoed interview after his arrest.
"I never thought we were really going to do it. I did not think Tim Morss did either."
Tyler said he and Morss would drive around "and just talk and fantasise about grabbing a boy, taking him hostage and do anything you ever dreamt about - any sexual perversion you could think of".
The fantasy involved either blindfolding a boy so he could not see and then letting him go "or you would have to kill him. When I said 'no' Tim said he could do it," Tyler told officers.
Morss, 33, of Leyton, east London, has admitted murdering, buggering and falsely imprisoning Daniel on 2 October 1994. Tyler, 30, of no fixed address, denies murdering the boy, but admits buggery and false imprisonment.
Daniel was snatched from a London street while riding his bike, taken to a flat, and sexually assaulted. He was then driven towards Bristol, strangled in a lay-by, and buried in woodland. His body was unearthed by animals six months later
Tyler said Morss had said he was getting frustrated and would "love to do a snatch".
"I just went along with the fantasy." He said they had filmed each other taking it in turns to bugger the boy. Tyler had smoked cannabis and had a vodka and tonic before.
Tyler told police that, when he asked Morss whether he had dreams or thought about the killing, his friend had replied "no". "He just said he wished he had more time with Daniel. He said it was a waste and he wanted another one."
The trial continues on Monday.Reuse content