Although it remained on sale until early this year, the Compact was based on the previous 3-series and dynamically had fallen behind the current saloon introduced almost three years ago.
Now it returns to find stiff competition from two new rivals — at the lower end of the range there is the seductive Alfa Romeo 147 and the at the top end, the Mercedes-Benz C-class Sports Coupe.
Initially, the Compact will be available in the UK with a new 1.8-litre Valvetronic engine in the 316ti, and six-cylinder 2.5- litre in the 325ti.
Company car drivers will be interested in the new 320td version with a new 150bhp common rail version of the 2.0-litre diesel which will come later in the year, and at the same time, a 318ti will go on sale using a 2.0-litre Valvetronic.
The 3-series Compact was introduced to give potential BMW customers the chance to drive the badge for less money.
And far from diluting the brand, the entry-level BMW became well-established, accounting for 21% of all 3-series sales from its launch in 1994 until production stopped last year.
In the UK more than two thirds of Compact buyers were new to BMW, and a similar number has remained loyal to the marque.
BMW has appeal for the user-chooser aspiring to an upmarket brand and evidence shows nearly a quarter of Compact buyers are under 30 and nearly half are women.
Historically, Compact drivers have chosen many options to create their own small luxury car so BMW has obliged with the new model including 70 optional extras on the price list.
However, standard equipment in the entry-level model includes electric windows and mirrors, seat height adjustment and a CD radio. The manufacturer has also decided to distinguish the new Compact from the rest of the 3-series range with a new-look front and rear end.
It's 21cm shorter than the 3-series saloon on the same wheelbase, but is a little taller, wider and longer than the previous Compact.
BMW claims that with its wider rear hatch the Compact is capable of transporting items as large as a washing machine after folding the rear seats forward.
In addition to the two initial engine choices, there will also be 18 different interior colours and a design option which allows interior trim to be matched to the exterior colour.
Despite the changes the interior is still typical 3-series, the only difference being a metallic strip around the dashboard and doors with a machined pattern seemingly created by a GCSE metalwork student.
However, the overall ambience and quality are first rate. Although it's short in body, rear passengers don't have much to complain about with adequate legroom and the rear compartment is significantly wider than the previous Compact.
Prices for the new car will begin at £16,265, which seems expensive compared with the Alfa Romeo 147 1.6 Lusso at £14,250 on-the-road. Although the Compact has had a loyal following, anyone reaching the end of a lease in the last six months will have either had to arrange an extension or look elsewhere.
However, there should be no reason why the new car doesn't sell as strongly as its predecessor and to many drivers it will be the first aspirational step on the BMW ladder.
THE 3-series has always been a favourite with driving enthusiasts, thanks to rear-wheel drive and crisp handling. With an extensive 280-mile round trip test route from Inverness to the western side of Skye on a variety of roads the new Compact came in for a harsh trial.
The outward section was in the 325ti with optional automatic transmission, which included a five-speed sequential gearchange.
Its short overhangs and firm suspension mean agile handling, although, despite sharing the same wheelbase as the saloon, it doesn't seem to cope quite as well over undulating surfaces with the ride becoming unsettled.
Steering is sharper than in its predecessor and this car can be thrown round bends with some enthusiasm.
The gearchange is seamless, but there is also fun to be had from the DIY section of the gate, although the red line is at a relatively low 6,200rpm.
The Compact's six cylinder might not be as melodious as an Alfa Romeo's but it is supremely refined and offers plenty of mid-range urge. The return leg of the test route was completed in a 316ti which felt a little more nimble, possibly because of the manual gearbox. It certainly felt faster than the figures suggest.
It might not have the exotic bark of an Alfa Romeo Twin Spark, and a similarly powered Alfa 147 or Audi A3 would edge ahead in the sprint to 60mph, but the Compact doesn't feel at any great disadvantage. The new Valvetronic engine offers an improvement in performance and fuel consumption over the previous units and should be good for more than 40mpg under normal driving.
The latest Compact has an attractive new look, and when the range is completed will offer a variety of desirable two-doors for the image conscious user chooser – including a diesel. It is more responsive than the model it replaces and will prove easier to live with thanks to greater cabin and luggage space.