Audis keep getting better, from the "entry-level" A3 to the top-of-the-line S8. They also keep getting more expensive.

Case in point: Our 2007 A3 3.2 Quattro S line, which carried a price tag of $42,300. You understand why we put the term "entry-level" in quotes.

Outside of the jaw-dropping sticker and a few quibbles, there isn't much to dislike about the A3 3.2 Quattro.

SHE: OK, just let me get this out of the way, so we can heap lots of praise on the A3. But didn't you tell me this compact five-door hatchback shares its basic running gear with the Volkswagen Rabbit? And doesn't the Rabbit start at just over $15,000? I really love the A3, but I'm having trouble figuring out where Audi put that extra $27,000.

HE: I don't have an answer that will satisfy frugal shoppers. Suffice to say the new A3 3.2 Quattro S line is aimed squarely at enthusiasts and affluent young families, and it hits the mark dead on. If you're looking for a sporty economy car, look elsewhere. Although the V-6 engine isn't so bad on gas mileage, with EPA ratings of 21 and 27. I also love that six-speed direct-shift gearbox, which comes with fingertip shift controls on the steering wheel. You won't find that on a Rabbit -- or any other competitor in this segment.

SHE: Oh, there's plenty to like about the A3, starting with the sleek exterior. It looks sportier and more modern than a conventional wagon, but it's just as versatile. The cabin is refined and tastefully trimmed. Audi does a great job, too, on all the little details, things like those knurled rotary knobs on the steering wheel for the audio system. I wish the navigation system weren't quite so complicated; it doesn't seem nearly as intuitive as on some of the Japanese compacts we've tested.

HE: I only have two real beefs with the A3, and they both concern the interior. For one thing, there isn't much legroom front or rear. The other concerns the $1,100 "open sky" panoramic sunroof. Instead of hard covers, Audi has installed crummy mesh screens that look and feel cheap, and let in way too much sun during the daytime.

SHE: Audi certainly didn't scrimp on safety. The standard equipment includes antilock brakes, traction and stability control, side air bags and side curtains. Our test car also came with adaptive headlamps, which were bundled in a $1,250 technology package. It's hard for me to recommend many small cars to families because the companies tend to cut corners by making too much of the safety hardware as an extra-cost option. The A3 gets a hearty endorsement on the safety front.

HE: Enthusiasts will also appreciate the A3's torquey 3.2-liter V-6, which makes 250 horsepower and 236 pounds-feet. It pulls like a draft horse from the get-go, and gallops from zero to 60 in less than seven seconds. SHE: I still can't quite justify a sticker that's nearly three times the base price of a Rabbit. But if you appreciate the functionality and style of a five-door, crave performance and refinement, and won't blanch at a $40,000-plus window sticker, the A3 3.2 Quattro S line is a pretty sensational car.