2006 Audi A3

Is the premium-small-car trend going anywhere? It's been big in Europe for years, but $30K hatchbacks still have limited appeal in the United States. Wherever the nation's automotive zeitgeist is headed, enthusiasts will like the A3. It's a tight, light, tossable small car with one of the best engines in the business, the 2.0-liter FSI turbo four. Thanks to the VW Group's innovative six-speed direct-shift gearbox, you can click off lightning-fast up- and downshifts with the F1-style paddles, or you can let the transmission do the thinking and waft along with smoothness and silence that rivals a conventional automatic. Once you've used the DSG, you won't want any other transmission. The A3 proved a rare find among our sportier Car of the Year nominees; it's as much fun on our short, tight test course as it is on mountain roads, although the howling, low-grip all-season Pirelli tires--and the VW Golf-based chassis--let us down on both track and road.

The A3's interior is like those of other Audis, only smaller and with less glitz. Expensive-looking materials and tight instrument panel fit set a benchmark for the segment. The rotary dials that open and close the dashboard vents are a nice reminder of the TT. There's head- and legroom for four or for two and plenty of luggage in back with the rear seats down. Outside, the tightly drawn sheetmetal and gaping corporate grille clearly link the littlest Audi with its larger siblings, right up to the 6.0-liter W-12-powered A8. Ultimately, the A3 is part of an emerging downsizing trend, joining the Honda Civic and Mazda5 in this year's competition in proving you're not driving a rolling Port-A-Potty just because your car is small. But are the right style and the right badge enough?