Since the Mercedes-Benz C-Class' last full redesign in 2001, the entry-level luxury sedan landscape has changed dramatically. Newer models have been offering ever higher levels of creature comforts and driving excitement. As such, Mercedes' entry-level car has been at an increasing disadvantage, with its small backseat, uninspiring handling and ordinary cabin furnishings being the notable drawbacks. American consumers would seem to agree, with the C-Class' archnemesis, the BMW 3 Series, outselling the C-Class by a considerable margin last year.

Mercedes-Benz's cavalry arrives this year in the form of the fully redesigned 2008 C-Class. It's meant to address many of the previous car's faults. The wheelbase has been stretched slightly, improving interior space, especially in the rear seat. It's not a massive gain, but the resulting cabin is certainly larger and feels airier than it did before. The C-Class interior also benefits from new features, including a very impressive optional hard-drive-based navigation and surround-sound audio system, along with a much-improved version of the COMAND interface.

As before, there are Sport and Luxury trim levels, but this year Mercedes has put in extra effort to make the trims more distinctive. The C300 and C350 Sport models feature more aggressive exterior styling and suspension tuning than the classically styled C300 Luxury. Inside, this sort of differentiation continues, with the materials and overall ambience tailored specifically to each version.

Underneath, the C-Class' basic suspension design is the same as the previous model, but the components are lighter for improved handling and ride comfort. Steering feel and quickness have also been noticeably improved. Thankfully, high-speed stability and a comfortable ride, qualities always associated with Mercedes-Benz, are still intact.

Mercedes-Benz has chosen to carry over last year's V6 engines and will again offer all-wheel drive. Notably, there will be a new AMG model coming out in the spring or summer of calendar-year 2008. It features a 6.2-liter V8 and the usual high-performance modifications to improve handling and braking.

Overall, the new 2008 Mercedes-Benz C-Class is a welcome improvement. The distinct Luxury and Sport trims should help attract a wide array of new and traditional buyers, while the interior is now fully up to date in terms of features and design. Plus, the 457-horsepower C63 AMG is bound to give the vaunted M3 a serious run for its money. However, the C-Class still exists in an incredibly competitive segment. Audi, BMW, Infiniti and Lexus (among others) offer very good luxury performance sedans, which are often less expensive and more powerful than a comparatively equipped Benz. All of these cars deserve a long look, but with its mix of driving involvement, comfort and high-tech goodies, the all-new C-Class is a fine choice for an entry-luxury sedan.

The 2008 Mercedes-Benz C-Class is an entry-level luxury sedan available in five trim levels. The C300 Luxury and C300 Sport share the same engine, but differ in exterior styling elements, interior trim, front seat design and standard transmission. Both C300 trims' standard equipment includes 17-inch wheels, a sunroof, eight-way power front seats, a tilt-telescoping steering wheel, dual-zone automatic climate control, MB-Tex cloth upholstery, the COMAND control interface with a pop-up display screen, Bluetooth connectivity and a CD stereo with an auxiliary audio jack. The C300 4Matic Luxury and C300 4Matic Sport trim levels feature exactly the same features but add all-wheel drive.

All C300s can be equipped with the Premium I Package that adds rain-sensing wipers, auto-dimming mirrors, heated front seats and satellite radio. In terms of standard equipment, the C350 Sport is essentially a C300 Sport with the Premium I Package and black bird's-eye maple wood interior trim.

Options available on all five C-Class trim levels are the Premium II Package that adds split-folding rear seats, a power rear window sunshade and bi-xenon headlamps. The Multimedia Package includes a hard-drive-based navigation system, voice controls and a premium Harman Kardon surround-sound audio system that adds an in-dash six-CD changer. Stand-alone options include leather upholstery, a panorama sunroof, TeleAid satellite communications, 18-inch wheels, an iPod integration kit and the in-dash CD changer.

All 2008 C300 models are powered by a 3.0-liter V6 that produces 228 hp and 221 pound-feet of torque. A seven-speed automatic is standard on the C300 Luxury and optional on the C300 Sport, which comes with a six-speed manual. Mercedes estimates a 0-60-mph time of around 7 seconds. All C-Class models come standard with rear-wheel drive except for the C300 4Matics, which are all-wheel-drive.

The C350 Sport is powered by a 3.5-liter V6 that makes 268 hp and 258 lb-ft of torque. The seven-speed automatic is the only transmission choice. In track testing, we clocked the C350 from zero to 60 mph in 6.2 seconds, which is certainly quick, but unremarkable compared to the BMW 335i and Infiniti G35. Mercedes estimates fuel economy to be 17 mpg city and 25 mpg highway for the C350 and 18/25 mpg for a rear-drive C300 with an automatic transmission.

The 2008 Mercedes-Benz C-Class comes with a full load of standard safety equipment, including front side airbags, full-length curtain airbags, active front head restraints, stability control, traction control and adaptive antilock brakes that feature brake assist, brake drying, pre-pressure and hill-start assist.

In a straight line, the new 2008 Mercedes-Benz C300 and C350 are no quicker than the cars they replace. However, the C-Class' substantially revised chassis has dramatically improved the steering's precision and feel. There's now useful information channeled through the chunky steering wheel. In terms of overall dynamics, this C-Class comes closer to the vaunted BMW 3 Series than ever before. Despite its sportier character, the C-Class is never harsh on the road, and gobbles up miles of freeway with aplomb. The C300 Luxury rides a little softer than the Sport versions and has a quieter exhaust system, resulting in a more serene driving environment.

Read our 2008 Mercedes-Benz C300 Long-Term 20,000-Mile Test

Although beautifully crafted, the C-Class cabin can come off as a little austere and a bit bland. The previous and awkward-to-use version of Mercedes' COMAND system has been replaced by a smart new iteration that combines physical dash buttons with a mouselike controller and a large LCD screen that pops out of the dash upon startup. When equipped with the Multimedia Package, the C-Class is transformed into a mobile sound studio -- and movie theater. A built-in hard drive not only powers the navigation system, it can also store up to 4GB (almost 1,000 songs) of MP3 files. With the car in park, the car can also play DVDs through the pop-up LCD screen and superb Logic 7 surround-sound system. The 2008 C-Class has grown up only ever so slightly from the last generation, so it's still on the small side compared to others in its class. Trunk capacity is 12.4 cubic feet, which can be expanded with the optional split-folding rear seats.