This was true until the '17 model year. Now I cannot find a Golf R (Base MSRP $39,375) for less than $40,xxx. and attempted to negotiate with only getting $300.00 under MSRP. With the S3 (Base MSRP 42,900) and Golf R only $3000.00 difference in price, I feel like I could negotiate the S3 to a price lower than the Golf R, since the local dealers won't budge on the price.
My only issues is that I cannot justify spending $40K on a compact car.
Yeah but that S3 wouldn't be as well equipped as the R for the price, so you'd be paying nearly the same amount, for less features, less utility, and a badge with 4 rings instead of 2 letters.
Also, what's your issue with spending money like that on a compact? Compacts weigh less, so they're more nimble/sporty. You'd rather get a BMW 5 series? I guess it's just a matter of what you value but I will never drive a "luxury car." I need fun on my commute, and not just in a straight line.