Citroen C2

We're living through one of the most exciting periods in motoring history. Used car prices are the lowest they've ever been, while big manufacturers are falling over themselves to offer cheap finance packages. Good times indeed. And, thanks to Citroen, the life of the youngster is about to get even better.

The Saxo VTR, a favourite with performance fanatics everywhere, is to be replaced by the all-new C2 VTR. Cheaper than its predecessor was at launch six years ago, with 20bhp more under the bonnet, the C2 promises to carry on where the Saxo left off. The top hot hatch sales spot which Citroen has held for the past five years looks assured. With a 110bhp 1.6-litre 16v engine, the new VTR has a healthy bhp advantage over rivals such as the Ford Sportka and Toyota Yaris T Sport.

With peak torque at 4,000rpm, the C2 performs best at high revs and rewards hard work with decent mid and high-range punch. Citroen is taking a gamble by offering only its five-speed SensoDrive semi-auto box, but the good news is that the set-up works surprisingly well. Quicker to shift than the C3's semi-auto, it bangs through the ratios with vigour and blips the throttle on downchanges to keep things smooth.

The chassis is equally impressive. Despite carrying more weight than the Saxo and having a higher centre of gravity, the C2 can be hustled along twisty roads with ease. Improved electric power-steering and a reduced rack ratio give a keener turn-in. As a result, the car feels refreshingly agile and can change directions with none of the C3's numbness and body roll. It may not match the outgoing Saxo for seat-of-the-pants reactions, but the C2 will certainly keep hot hatch fans entertained.

At ΂£10,995, the VTR looks great value - especially taking into account the spec list and the one-year free insurance deal for drivers aged over 18. Add a great cabin that rivals cars such as the Focus for space, and it's difficult to see how Citroen can go wrong. A small but perfectly formed package.