Volkswagen pulled out all the stops for the Phaeton's first year, delivering a luxury vehicle that was designed to be the equal of the best from Mercedes-Benz, BMW, Jaguar, Audi, and even Bentley. In fact, the Phaeton shared a platform  with models from Audi and Bentley, testifying to its luxury pedigree.

For 2004, the Phaeton was available with a choice of two engines -- a 3.2-liter V8 that generated 335 horsepower, and a 6.0-liter W12 engine that pumped out 420 horsepower. The V8 was linked to a six-speed automatic transmission, while the W12 came with a five-speed automatic with the Tiptronic feature that enabled drivers to manually shift gears, depending on driving conditions.

Standard features for the Phaeton were plentiful, and included an innovative 4-Zone Climatronic climate control system that enabled four occupants (two in the front seat and two in the back) to set their own temperature and air-flow preferences. The V8 Phaeton came with 12-way power-adjustable heated seats, while the W12 model's seats were adjustable in 18 different ways, including height, angle, headrest, lumbar, upper and lower body. In addition, reat seats in the W12 were heated, as were the front seats.

The list of features also included power windows, power brakes, power door locks, anti-lock brakes, keyless entry, cruise control, an anti-theft alarm system, four-wheel anti-lock brakes, xenon headlights with headlamp washers, a navigation system, an electrochromatic rear-view mirror, a self-leveling suspension, power retractable mirrors, double-pane safety glass, and 18-inch wheels.

Drivers found a lot to like about the Phaeton, including the car's solidness, luxury features, acceleration, handling, and safety features. Low gas mileage was probably to be expected with engines as powerful as the Phaeton's, but drivers also noted some other negative aspects with the car, such as electrical problems as well as issues with dealers when cars were taken into the shop for repairs.