BMW Australia says the all-new BMW 1 Series hatch is targeted at “city folk with options”. The world’s largest luxury vehicle manufacturer believes most new 1 Series buyers will be stepping into a BMW for the first time, up from cheaper cars like the Volkswagen Golf. The rest are likely to be ‘empty nesters’, downsizing from larger luxury cars but without wanting to sacrifice quality, driving dynamics or that all-important propeller badge.

The new BMW 1 Series is priced from $36,900 before on-roads, making it $2100 cheaper than the model it replaces. You’ll be parting with a figure in the low-$40,000s, however, once you get the base model 116i on the road with the optional eight-speed automatic transmission.

It’s a lot to spend on a small car, especially when there are so many capable offerings for up to $10,000 less – like the Golf. If you plan to spend between $40,000 and $50,000 (driveaway) on a new car, your options include everything from sportier small cars and well-equipped large cars to high-end mid-sized SUVs.

The amount of choice is incredible, but if you’ve got your heart set on a small luxury car, the all-new BMW 1 Series may prove impossible to go past.

The second-generation 1 Series delivers everything you’d expect from an all-new model: it’s cheaper, faster, more efficient, more comfortable, more functional and better equipped than ever before. And despite rampant speculation that front-wheel drive is coming, the BMW 1 Series is still the only rear-wheel drive vehicle in its class, arguably making it the most balanced and composed small car on the market.

Overshadowing all of this, however, has been the BMW 1 Series’ new look. CarAdvice’s own readers have described it as a glorified Volkswagen Polo at the back, and “a bit three-eyed fish from the Simpsons” at the front (thanks Nada).

While you may not be completely sold on the new look, you’d be doing yourself and the designers an injustice if you didn’t check one out in the flesh before crossing it off your list. Although the pronounced shark snout and droopy headlights may still not be your cup of tea, at least up close you can appreciate the long, low bonnet, the expressive character lines and contours, and, perhaps best of all, the supreme fit and finish and attention to detail.

The look can be enhanced by a new personalisation concept BMW calls ‘Lines’. On top of the standard design, you can choose either the Urban Line or the Sport Line. Both cost $1600 and BMW says they simplify the customisation process without increasing lead times. Cars with the Urban Line (no doubt plenty will be nicknamed ‘Keith’) are highlighted by a unique white/chrome grille, white alloy wheels, and further white contrast paint at the front, rear, and inside across the door grabs, dash fascia and centre console. The Sport Line swaps the white for black (the alloys are grey), and also adds red stitching and upholstery highlights and sporty touches to the instrument cluster and switchgear.

Unfortunately, BMW Australia didn’t provide us with any base model 116i hatches to drive (or any six-speed manuals either), which meant our drive program between Melbourne and Healesville was split between the more powerful 118i petrol model and the sole 118d diesel variant.

The 116i and 118i are powered by an all-new 1.6-litre turbocharged direct-injection four-cylinder petrol engine. The 116i produces 100kW of power and 220Nm of torque, while the 118i generates 125kW and 250Nm. Teamed with the automatic transmission, the 118i is 1.6 seconds faster than the 116i (7.5 seconds vs 9.1 seconds), yet surprisingly their combined cycle fuel consumption is identical at 5.8 litres/100km (116i manual: 5.7 litres/100km, 118i manual: 5.9 litres/100km).

The 118d features an enhanced version of the old 1 Series’ 2.0-litre diesel engine. The new model produces 105kW and 320Nm (up 20Nm), leading to combined cycle economy of 4.5 litres/100km (both transmissions) and a 0-100km/h sprint time of 8.9 seconds.

All powertrains incorporate auto start/stop, brake energy recuperation and electric power steering for greater efficiency. Also standard is the new Driving Experience Control, which allows drivers to select between Sport, Normal and ECO PRO driving modes to balance the responsiveness of the accelerator and optimise the gearshift patterns.

Pushed close to their limits on our drive loop, we couldn’t get any worse than 8.2 litres/100km out of the 118i and 6.6 litres/100km from the 118d. In more relaxed driving circumstances in the city and on the highway, both came within a few tenths of their official fuel ratings.

The 118i is a good little engine with more kick than most would expect given its diminutive 1598cc displacement. Its real strength is in the mid-range, where acceleration is progressive and continuous thanks to a broad max torque range (1500-4500rpm). The petrol engine sounds blissfully metallic near the top of the rev range, but will disappoint those after a growly performance note.

The 118d doesn’t quite have the instant punch of the petrol, but there’s more immediacy from 1750rpm when its 70Nm advantage becomes apparent. Thanks to the 1 Series’ rear-wheel drive layout, there’s the tremendous sensation that all of the power is surging from behind you – pushing you forwards rather than pulling you along.

The ZF eight-speed automatic teams smoothly with both engines. Shifts are rarely perceptible, and only noticed when you stick the boot in, requiring the gearbox to drop multiple gears at once. The powertrain’s only gruff moments occur when auto start/stop kicks the engine back to life. BMW’s system is still not quite as refined as some of its competitors.

Driving dynamics is where the BMW 1 Series shines. The steering is superbly weighted. Around town, the electric system lightens up for easy manoeuvrability, and there’s a solid, confidence-inspiring feel at highway speeds. The sensitive, compact steering wheel means there’s less busy work for your hands in corners, and there’s only a bit of nasty kickback when you hit rough patches mid-bend. The brake pedal has a progressive feel after an initial light touch.

Heightening the quality drive is the 1 Series’ involving seating position. It’s simple to adjust the seat height and steering wheel to get yourself into a commanding vantage point. There are a couple of nagging points, however. The data at the base of the trip computer is difficult to see over the wheel without craning your neck. Rear visibility is also a little restricted due to wide C-pillars, a compact and high rear windscreen and a small rear-view mirror. Visibility out the front is excellent, however, thanks to narrow A-pillars and deep side windows.

The new BMW 1 Series hatch is 85mm longer and 17mm wider than the previous model. The wheelbase has grown 30mm, with rear legroom growing by 21mm. The old model was criticised for its tight back seat, and while it’s still no 7 Series back there, six-footers can now sit comfortably in the outer-rear seats without their heads or knees rubbing on the roof liner and seatbacks. The seats themselves are firm but supportive, though perhaps a little flat in the back. The upshot is the 40:20:40 split-fold rear seatbacks can be folded completely flat, opening up the 360-litre boot (30 litres larger than the old model) to an accommodating 1200 litres.

Adding to the comfort of the interior is the 1 Series’ class-leading noise suppression, which betters even the classy Lexus CT 200h. Next to no engine, road or tyre noise enters the cabin, giving you a drone-free environment to listen to the audio system, which is high quality and gives great sound.

Unfortunately, if you want to stream your music from your smartphone using Bluetooth, you’ll have to option in the $385 Extended Connectivity package. The standard six-speaker system includes Bluetooth phone connectivity, USB/AUX ports and a single CD player.

Bringing these functions and many more together is a 6.5-inch central colour display and the iDrive controller. The combination allows you to navigate between audio, telephone, and vehicle information and settings. The 1 Series also facilitates internet connectivity, and unlike some other manufacturers’ systems it integrates well with iPhones. It’s a $154 option on its own, but can only be fitted when Extended Connectivity and $2693 Navigation System Professional are also optioned, meaning you have to spend $3232 for the privilege to update your status and ‘like’ things from the driver’s seat.

My only hesitation with the iDrive system is that it takes away the simplicity that is inherent in small cars. While many will appreciate the click-wheel functionality, iDrive is likely to be a little overwhelming for those in the market for a simple small car.

Overall, the interior exudes an irresistible sense of class and quality, with the only blight a tacky feel to the glove box.

The BMW 116i comes standard with 16-inch alloy wheels, run-flat tyres with run-flat indicator (no spare wheel), dynamic brake lights, cruise control with braking function, keyless ignition and a manual air conditioner.

The 118i and 118d add 17-inch alloys, rear parking sensors, front fog lights, rain-sensing wipers, anti-dazzle interior mirror, climate control and the storage package, which includes segmented cup holders, rear seat nets and pockets and two additional 12V sockets.

The new BMW 1 Series is one of the most complete small cars available in Australia. It’s among the cheapest cars in its class, and offers driving dynamics and interior quality beyond its competitors. If you’ve ever dreamed of owning a brand new BMW, or want a small car with the lot, the new 1 Series could be perfect for you.

BMW 1 Series manufacturer’s list prices (excluding government and dealer prices):

• 116i six-speed manual – $36,900
• 116i eight-speed automatic – $39,593
• 118i six-speed manual – $42,800
• 118i eight-speed automatic – $45,493
• 118d six-speed manual – $43,500
• 118d six-speed automatic – $46,193