- Slick DSG transmission

- Great driving dynamics

- Versatile interior space

- Powerful and sophisticated engines

- Outstanding safety for a small car

- Cargo and rear-seat legroom a bit tight

- Steep price of 3.2 version nullifies value proposition of Audi's entry-level car

Proving the old adage that good things come in small packages, the 2007 Audi A3 sport hatchback provides an entertaining drive as well as the versatility of a small wagon. Available in Europe for a few years before it debuted in the U.S. for 2006, the A3 offers all the expected Audi attributes, such as a finely finished cabin and agile driving dynamics, in a vehicle with a smaller footprint and a smaller price tag than the company's compact A4 series.

The A3's European breeding is evident in the car's no-nonsense design. This is a chiseled, small wagon/four-door hatchback that exudes class and purpose. Under that taut skin is either a turbocharged inline four ("2.0T") or a muscular V6 ("3.2 quattro"), and either can be matched to a six-speed manual or six-speed DSG (direct shift gearbox). The DSG is a sequential-shift manual transmission, and it can be operated using paddle shifters on the steering wheel or placed in a fully automatic mode. Overall, it's a brilliant piece of equipment and should appeal to buyers interested in combining manual-like fuel economy and fun with the convenience of an automatic.

Starting at around $25,000, the 2007 A3 2.0T is something of a bargain for an upscale sport wagon. That is, if one can resist the charms of the various optional packages that can quickly push the sticker past the 30 grand threshold. As far as the 3.2 quattro model, it's a nice car, but it's not much quicker than the 2.0T model and is simply too pricey for something of its size. At that point, we'd suggest considering a lightly optioned A4 Avant (wagon).

But bigger is not better for everyone. The A3 matches the foot-longer A4 in personality and looks, while being easier to park and giving up just 3 cubic feet of maximum cargo capacity. And although a Mazda 6 or Subaru Legacy GT wagon might seem a better value than an Audi A3 in the cold analytical sense, we doubt anybody would regret their purchase of this finely crafted sport hatch that's just oozing with European personality.

single body style, a four-door hatchback/wagon, is offered on the 2007 Audi A3. There are two trim levels, 2.0T and 3.2 quattro. A wealth of standard features come on the 2.0T, such as 17-inch alloy wheels, dual-zone automatic climate control, one-touch power windows, keyless entry and a 10-speaker audio system. For those wanting more, a trio of option packages are also available. A new "S line" package provides a firmer suspension, foglights, sport seats, aluminum interior trim, unique front and rear fascias and a roof spoiler. A premium package adds leather seating, a power driver seat, an auto-dimming rearview mirror, rain-sensing wipers and HomeLink.

The 3.2 quattro includes virtually all of the equipment from the S-line and premium packages as standard. Optional on both trims is a new technology package that provides Bluetooth capability and bi-xenon headlights. A la carte options include a dual-pane sunroof, a navigation system and a Bose audio system.

A wealth of safety technologies are standard in the Audi A3, including front seat-mounted side airbags, full-length side curtain airbags, antilock brakes and stability control. Seat-mounted side airbags for rear passengers are optional. In IIHS crash testing, the A3 earned ratings of "Good" (the highest possible) in both the frontal-offset and side-impact tests.

True to its Audi lineage, the A3 features a cabin that boasts excellent materials and build quality. Styling cues seen in its siblings, such as real metallic accents and large gauges, are apparent. The interior's total volume is equal to that of the 1996-2001 A4 Avant (wagon). And maximum cargo capacity, at 56 cubic feet, is just 3 cubes less than that of the current A4 wagon.

Whether you choose the 2.0T or 3.2 quattro, brisk performance is at hand for passing and merging maneuvers. When the curves come up, the A3's electromechanical steering does a superb job of quelling vibrations and kickback without marring feedback. In typical Audi fashion, the ride is comfortably firm and the A3's handling is just as sporty as its larger siblings'. The junior Audi's well-tuned suspension keeps the car buttoned down in the turns, even as midcorner pavement imperfections try to knock it off line.

Audi of America, Inc., today reported 8,039 vehicle sales for the month of June, an 11.3 percent increase over year ago sales. This is the fourteenth monthly sales increase over the past 17 months, and a positive indication that Audi will meet its goal of record sales in 2006.

Sales in June were up or on par across the Audi line up. The all-new Q7 performance SUV tallied 1,310 sales in June, the first official month of sales for that vehicle. Sales of the A3 and A6 models were up significantly again, 17.9 percent and 10.5 percent, respectively. The Audi A3 recorded 665 sales in the U.S. , with most sales coming from the all-important Southern California market.

“Clearly our all-new Q7 performance SUV is a hit with consumers,” said Johan de Nysschen, Audi of America, Inc., executive vice president. “Our dealers are telling us that the Q7 is driving increased showroom visits, including all new customers to the brand. Importantly, consumers are reacting well to all of our vehicles, which means we’re not relying on one or two vehicles to carry our volume increase.”

Audi sales for the first half of 2006 totaled 40,455, a 6.8 percent increase over last year. This puts Audi on track with de Nysschen’s goal of earning a sales record in 2006. The previous annual sales record for the brand was in 2003 when Audi dealers sold 86,421 vehicles.

Audi of America is launching 18 all-new models and variants between 2005 and 2007. June marked the official sales launch of the Q7 performance SUV and the 420-horsepower RS4 sports sedan. Later this fall, Audi will introduce the A4 and S4 Cabriolets, and the V-10 S6 and S8 performance sedans.

Audi’s history in America dates to 1969, when the brand was first introduced to the U.S. market. Today, a network of over 260 Audi dealers currently offers a line of premium vehicles that include the nimble Audi A3; the sporty A4 sedan, Avant and Cabriolet models; the high performance S4 sedan, Avant and Cabriolet models; the high-revving RS 4 sports sedan; the design-leading A6 sedan and Avant; the all-new Audi Q7 performance SUV; the all-aluminum Audi A8; and the award-winning TT Coupe and Roadster.