BMW 3-Series

Or rather it did, until BMW countered with a 2.0-litre turbodiesel edition of its 3-Series Compact, the 320td. BMW's newcomer matches the Golf's 150bhp and, crucially, betters the VW in the torque department with a whopping 330Nm at only 2,000rpm - that's more than either a Porsche Boxster S or a Subaru Impreza WRX can muster.

This power comes from the way the unit breathes. A variable turbocharger and new intercooler combine with innovative common-rail injection to improve efficiency and response across the range, while twin balancer shafts mean cabin noise is only half that of the larger 320d between 3,500 and 4,000rpm.

As a result of all this, the 320td feels as fast as the Golf through the gears. Its 0-62mph time of 8.9 seconds is similar to the VW's, but the BMW's performance is easier to exploit. And while it lacks the Golf's sixth gear, the Compact's five-speed box is more rewarding to use. Hard acceleration betrays the engine's diesel origins, yet only the forthcoming Ford Focus TDCi rivals its refinement. And with the new C02-linked tax system due in April, the car's ultra-clean emissions rating of 148g/km will make it a hit with fleet drivers. As we reported in Issue 669, the BMW is way ahead in terms of chassis dynamics. Its 50:50 weight distribution and rear-drive layout deliver a more accomplished drive than even the all-conquering 3-Series saloon. Sharp steering, supreme body control and a supple yet sporty ride are a few of the car's highlights - and in the new engine it has found an ideal partner.

Our ί¿½20,865 SE had traction control, ABS, six airbags, climate and cruise control - even parking sensors. But with the metallic paint and 'Youngline' interior adding ί¿½1,880 to the price, personalising your Compact won't come cheap.

While the 320td SE is the best Compact, it's not cheap. But when a car drives this well and returns 51.4mpg, you must be impressed.

At a glance

*BMW 320td Compact on sale now, priced from ί¿½19,355

*2.0 common-rail diesel offers 150bhp and 330Nm of torque

*Capable of 0-62mph in 8.9 seconds; top speed of 133mph