Audi made a giant leap when it shoehorned a V8 into a compact luxury sedan with the S4. To make sure it wasn't quickly outdone by its perpetual rivals from Munich and Stuttgart, the 2008 Audi RS 4 is its pre-emptive strike of sorts, boasting a manic 420-horsepower V8 attached to a tweaked version of the Quattro all-wheel-drive system that skews power to the rear wheels. Beyond its fiercer V8, the RS 4 further differs from the relatively tame S4 via a more sporting chassis, bigger brakes and 19-inch wheels. These additions create a car that is simply superb in all the areas that make a top-notch performance car: acceleration, braking, ride quality and cornering.

For 2008, the RS 4 sedan is joined by a Cabriolet model that will be available in limited numbers. With the same supremely powerful V8 squeezed under its hood, the RS 4 Cabriolet should provide some of the most topless fun one can have outside the Playboy mansion. Like the tamer S4, the convertible version has less aggressively bolstered sport seats and a slightly different interior design, as well as obvious reductions in body rigidity.

As BMW and Mercedes prepare to up the ante in the ever-increasing horsepower war with their respective new M3 and C63 AMG, Audi can rest assured that it already has a thoroughly awesome weapon ready for battle. In a comparison test, we even picked the RS 4 over the BMW M5. The shocking price tag attached to the 2008 Audi RS 4 (and its new competitors) will probably make some people think twice about ponying up that much for a compact sedan, but between its power, agility and utility, the Audi makes a rational case for itself against similarly priced sports cars and larger luxury sedans.

The 2008 Audi RS 4 is a compact ultra-performance car based on the Audi A4, and it's available in sedan and convertible body styles. Standard features include 19-inch wheels with 255/35 high-performance tires, Dynamic Ride Control suspension, xenon headlights, Recaro sport seats with power adjustment (the Cabriolet has less aggressive, non-Recaro seats) and front seat heaters. Silk napa leather upholstery, carbon-fiber cabin trim, dual-zone automatic climate control, a 10-speaker audio system with six-disc CD changer, a sunroof (on the sedan, obviously) and rear park assist are also standard.

A premium package is optional on the sedan and includes auto-dimming mirrors, a navigation system, an upgraded Bose audio system with satellite radio, heated rear seats, Homelink, a power rear sunshade and Bluetooth capability. These items are all standard on the limited-production RS 4 Cabriolet. Integration for an iPod is a stand-alone option on the sedan and a no-cost option in place of the standard six-CD changer on the Cabriolet. The Titanium and Audi Exclusive Packages add special exterior and interior trim features to the RS 4 sedan.

A 4.2-liter V8 engine powers the RS 4. Equipped with direct fuel injection and sporting a 12.5:1 compression ratio, this powerhouse makes 420 hp and 317 pound-feet of torque. A six-speed manual gearbox (the only transmission offered) sends the power to all four wheels through Audi's Quattro all-wheel-drive system, which has a 40/60 front-to-rear power split in this application. During instrumented testing, an RS 4 sedan shot to 60 mph in 4.5 seconds and ran the quarter-mile in 13 seconds at 107 mph, which should be good enough to hang with the new M3 and C63 AMG.

Stability control, antilock brakes, front-seat side airbags and full-length head curtain airbags are all standard on the 2008 Audi RS 4. (The Cabriolet doesn't have the curtains, though). Official crash tests have not been performed on the RS 4, but one could assume with fair confidence that its scores would be similar to the good ratings achieved by the regular A4 sedan.

With more than 400 hp and the grip of all-wheel drive, the 2008 Audi RS 4 has no problem catapulting itself off the line or out of a corner. With a broad torque spread, there's always power on tap. Apart from the incredible acceleration, the RS 4 makes a strong showing in the braking and handling departments. Through the curves, the RS 4 is a composed master despite its hefty curb weight. Inside Line testers recorded a slalom speed of 70.6 mph, which puts the RS 4 in an elite circle of cars with four doors. In fact, we awarded it first place in a comparison test against the BMW M5. Confidence and grip from the front tires are superb, balance is good and steering feel at speed is better than any Audi we've ever driven.

Audi consistently produces some of the finest automobile interiors, and the 2008 RS 4 is no exception. The sedan design differs slightly from the Cabriolet's, but both models feature superb materials, excellent fit and finish, and efficient controls. The navigation system isn't the most user-friendly design, though. As a serious performance car, the S4 sedan is saddled with standard Recaro front seats, which feature aggressive bolstering to hold one in place when zipping around corners. Although the rear seat is fine for small children, adults seated back there will likely complain about a shortage of legroom. Of course, it's a welcome amount of space compared to sports cars that offer similar performance.