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For more on marking an answer as the "Best Answer", please visit our FAQ.I'd pick Audi over BMW, but that's my personal preference. Having said that I love the BMW 1 series, but have yet to actually drive one!
Doing 10,000 miles a year, you wouldn't significantly benefit from choosing a deisel over petrol, but I have to echo and generalise Impret-Sir's comment in saying that the new diesels are brilliant - they're so much quieter now and the torque on a lot of them is incredible in comparison to their petrol counterparts...
Personally given the choice (and wouldn't I love that) I'd go for a 2.5 TDI A4, or, if I haven't talked you into a diesel, then a 2.0 T quattro A4.
A friend of mine has a new shape 5 series 3.0d and the mid range accelleration is fantastic so I guess in a 3 series it would be even better. He rates it as a real drivers car and he should know he has had two TVR's. I personaly think the 3 series are a bit cramped but I guess it depends on wether you have kids etc. I dont no much about the Audi's except ny neighbour has a new 3.0 quatro and the Audi assist team always seem to be out doing some repair work to it.
It also depends somewhat on the driving conditions you experience. I really like the BMW but because of the snow and icy roads sometimes experienced, I would go with the Audi front wheel drive. Had an audi 5000S a number of years ago as well as an Audi A-8 Quattro and were probably the best cars I've ever owned. If you're not familiar with it, check this site: http://www.edmunds.com/
You can do a side by side comparison if you navigate through it...
No one can tell you what you like. We all have different tastes. I have an Audi A4 FSI. Its nice, my next will be an A6 3.0dti Quattro. If I had a company car and they paid the bills, I would choose a bottom range A6. Most extras are just toys anyway and the basic A6 is well equipped.They all have V6 engines too. My neighbour has a 5 series BMW and it has had two new gearboxes in 8 months. Having said that, all makes have these blips and I would like a BMW if offered one. Enjoy your car whatever it is.