Double Dark Side! Diesel & 8P
The reason Audi have a 12 year rust warrenty is because they are so confident that their cars wont rust. That car is only 7 years old and we all know that the arches rusting isn't common. I'd say that's had a prang and I'd give it a wide birth if I was you matey. Plenty of decent S3s about at low money now.
I made the mistake of not checking over my motor properly when I bought it and now it has slight bubbling on the roof. I took it to an Audi body shop and they confirmed that it had had the rear quarter sprayed at some point.