Mercedes-Benz USA's '08 C-Class makes huge strides but fails to go head-to-head with archrival and segment leader, BMW AG's venerable 3-Series.

Much is right with the fourth-generation C-Class, which comes in two trim levels — Sport and Luxury — and three configurations — the C300 Sport, C300 Luxury and C350 Sport. Pricing — including a $775 destination charge — starts at $31,975 for the entry-level C300 Sport and tops out at $37,275 for the C350 Sport.

Behind the wheel of a C300 Sport, there is a discernible improvement in driving dynamics compared with the outgoing model. The '08 C-Class rides on a new platform, which helps increase rigidity by some 13% vs. its predecessor. The change is most noticeable during hard cornering, where little to no body roll is detected.

Steering is well balanced and responsive but lacks the feeling of “oneness” between driver and vehicle that BMWs possess.

The 7-speed automatic transmission is good, perhaps even great. But it still does not compare with the short, precise and nearly visceral experience offered by the Bimmer's manual transmission. Mercedes does offer a 6-speed manual option on the C300 Sport model, but the vehicle was not available for our test drive.

Mercedes officials defend the decision to only offer one manual in the C-Class lineup by citing studies showing 3-pedal models aren't on customers' shopping lists. Driving enthusiasts beg to differ.

Although it can be operated by hand via the Touch Shift manual option, the 7-speed automatic on our tester is smooth, with nearly imperceptible shift points, much different than the previous-generation C-Class' abrupt shifting.

One nifty feature is the 7-speed's ability to skip up to three gears during downshifting, allowing for quick acceleration while navigating erratic traffic.

The transmission has no discernable lag when punching the accelerator, unlike the previous-generation C-Class. The token time required to transfer input from the accelerator to the road is impressive.

Credit also goes to Mercedes' exquisite 3.0L V-6 tucked under the hood. The mill churns out 228 hp and 221 lb.-ft. (300 Nm) of torque, providing plenty of power for the 3,527-lb. (1,600-kg) C300 Sport.

Even more tempting is the 3.5L powering the C350, which produces 268 hp and 258 lb.-ft. (350 Nm) of torque.

The V-6 is able to run on E85, a blend of 85% ethanol and 15% gasoline. If E85 is not available, which is the case in much of the U.S., the C-Class sips premium.

Our C300 Sport came with Mercedes' upgraded 4MATIC all-wheel-drive system, an $1,800 option that first bowed on the up-level S-Class sedan last year. Inside, Mercedes dials up the luxury factor, with plenty of supple leather and pleasing woods.

The interiors of the Sport and Luxury models are different, with the former done in dark colors and featuring a generous use of aluminum. The latter is available in cashmere beige and accented with burl walnut trim.

The handsome, well-appointed '08 C-Class is markedly improved over its predecessor in nearly every aspect.

[+] PROS/CONS [-]
Great AWD system Pricey option
Burns E85 But needs premium
Better performance No 3-Series

'08 Mercedes-Benz C-Class.

Vehicle type: front-engine, all-wheel-drive, 5-passenger sedan

Engine: 3.0L V-6

Power: (SAE net) 228 hp @ 6,000 rpm

Torque: 221 lb.-ft (300 Nm) @ 2,700-5,000 rpm

Compression ratio: 11.3:1

Transmission: 7-speed auto w/adaptive shift logic and driver shift control

Wheelbase: 108.7 ins. (276 cm)

Overall length: 182.3 ins. (463 cm)

Curb weight: 3,560 lbs./1,615 kg

Base price range: $31,975-$37,275

Fuel economy: 21/28 mpg (11/8 L/100 km)

Market competition: BMW 3-Series, Audi A4, Acura TL, Infiniti G35, Lexus IS