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BWM M3

Greg JaremphotographersPreston Lernerwriters

Most compromises are just that-compromised. Not the E36 M3. It combines blistering performance with impeccable manners and oozes sex appeal while serving as an everyday beater. Best of all, it manages this unlikely balancing act without breaking the bank. Named our Automobile of the Year when it debuted in 1995, the E36 M3 is the apogee of BMW's Ultimate Driving Machine ethos. Even today, it remains arguably the best performance-car bargain on the planet.

Ever since the 320i-known internally as the E21-arrived in 1977, the 3-series has been not only BMW's most successful model but also the soul of the company. Although the current 3-series looks incomparably large and lavish next to the sprightly 320i, they share the same DNA. For five generations, whether two-wheel drive or four, configured as a coupe, a hatchback, a sedan, a convertible, or a station wagon, the 3-series has offered an unrivaled synthesis of athleticism and engineering. It's no coincidence that the latest 3-series, the E90, was recently honored as our 2006 Automobile of the Year.

The E30, introduced in 1984, brought BMW to the masses. In 1987, it underwent an M-for-Motorsport makeover. But this first M3 was a homologation special, and it was too rude and high-strung for the American market. The E36 was bigger, stronger, and better than the E30, and the new M3 was better still. To hold prices below $37,000, BMW equipped the U.S. version with a less exotic engine than the Euro-spec model. But what the American powerplant-a 3.0-liter in-line six later punched out to 3.2 liters-lacked in top end, it made up for with turbine smoothness and midrange grunt. With 240 hp and 225 lb-ft of torque running through a close-ratio gearbox, the M3 rips off 0-to-60-mph times in the mid-fives and muscles through the quarter-mile in fourteen seconds. But numbers tell only part of the story.

From the moment you sit in the fighter-style cockpit, you know you're in a car designed for hard-core driving. The steering, the pedals, and the shift lever have a solid, hefty feel that seem to say, "This is a serious machine, ja?" Around town, the ride is luxury-car supple. And, in fact, BMW added a four-door sedan and a convertible to the original two-door coupe, not to mention an optional manu-matic transmission and a wood-trimmed luxury package. But no matter what form it takes, the M3 behaves like a sports car, leaping forward on the throttle, hunkering down under heavy braking, and taking a confidence-inspiring set during hard cornering.

The E46 3-series debuted in 1999, the current M3 two years later. It's bigger, more powerful, and more luxurious than the E36 M3. But better? I don't think so. To me, the E46 M3 is too good-too quick, too capable, too refined. The E36 strikes the perfect balance between savage and civilized. It's not as fast as its successor, but, for my money, it's more fun. And that's no idle figure of speech, by the way. Yep, I own one.