*Disclaimer: this post relates to the nice W204 Sedan, not the fugly C204 Coupe.

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Everybody here should already know how highly I feel about the 328i that I test drove. The drive was almost unthinkably brilliant considering the specs the car was working with. The only things I didn't like are the looks (don't dislike them except for the not-very-nice-looking front, just think it's "meh"), and the cheesily kiddish plasty-looking wood in the modern trim car (though it's different and playful to have as an Option, I agree).
I just had a C250 as a Loaner for a couple of days. Thoughts:
Complete dog. It performs how you'd expect a 4 cylinder to, unlike the 328i who makes you scratch your head and think.... "how the ffffff"???? The takeoff and acceleration are lazy and lethargic. I am not a speed demon by any means, I don't need much power in a car, and I'm a conservative driver for the most part, however, I need *effortless* motion. The C250 strains and isn't effortless to me. Also, both cars suffer from one of my most hated sounds, the "mini diesel tractor" 4-Banger "tick", and the C's was very bad.
Handling? Not bad, but nothing as exhilarating as the 3-Series.
What do I like about the C over the 3? I was VERY impressed by how well of an environment the C's interior is now (after the putrid pre-facelift's interior especially). I feel that the 3 is a little busier and more "tech-oriented", not as relaxing and soothing as the C's. The C is a very mature and elegant car to drive around in now, I feel.... though my GF, who may be spoiled by my E, yet isn't a car fanatic in the least (the opposite of one), said the interior reminded her of a "Honda, not a luxury car at all".
Also, the chassis of the C is absolutely STELLAR, it literally feels bomb-proof. That thing would go over anything on the roads, and not a hitch or harsh element transmitted to the frame. I can't say enough how sturdy and incredibly solid this car feels. My E-Class has 18" wheels, and honestly, they make the ride quite harshly upsetting for an E-Class when I go over rough patches (though it's absolutely sublime over smooth roads), yet the C250 with the Sport Package comes with 17's.... And they absorb SO MUCH more harshness than even the E with 18's does.
All in all, I still gotta say the 3 has this segment down pat, but the new C is a true "Mercedes alternative", and does certain things that the 3 doesn't, in terms of what you'd expect from a Benz. In short, those things are what make me pick the E over a 5, or an S over a 7, but in this case, by a small margin, not a C over a 3.