About three years ago you wouldn't have been able to get a well-specified premium German car for £20,000, with perhaps the exception of a BMW 316 or a 1.6-litre Audi A4.

And it's all very well to have a basic premium car, but it might come without the kind of equipment that affords such vehicles strong residual values.

BMW's strategy is to introduce a new model in the 3-series range that includes some of the important things from the options list as standard, for the attractive on-the-road price of £19,995 for the saloon. The Tourer version is £20,750 OTR.

At that price, the 318i ES matches entry level versions of the Jaguar X-type and Mercedes-Benz C-class. However, the BMW 318i ES adds sports suspension, 16-inch cross spoke alloy wheels, M leather steering wheel, anthracite headlining, colour-coded door handles, a CD player and a storage compartment package which includes armrests, nets on the back of the front seats and room for keeping sunglasses in the centre console.

Perhaps the £300 for electric rear windows was a bit opulent to include in the price, but it can come as a surprise to a rear seat passenger to have to wind down the window manually in a £20,000 car.

Behind the wheel

The 3-series is still a desirable car, and in the current facelifted saloon, it has never looked better.

Controls are intuitive, everything feels well screwed together and, with the exception of slightly offset pedals, it still provides the best drive in its class. The sports suspension ensures the 318i feels agile when faced with challenging B-roads, allowing the driver to thread the car through twisty sections with supreme confidence. Feedback through the steering wheel is second to none and the driver really feels an integral part of the experience.

Its keen 143bhp engine (with a capacity of 2.0 litres despite the 318i moniker) provides strong performance while being whisper quiet when unstressed. Using Valvetronic technology, the official combined fuel consumption figure of 39.2mpg equates to carbon dioxide emissions of 175g/km, offering drivers benefit-in-kind-tax in the 19% bracket in 2003/04 – a figure only bettered in the range by the impressively frugal 320d.

CAP Monitor claims a strong 40% retained value over three years/60,000 miles, showing that despite its relative age and popularity, the 3-series is still highly sought after as a used by, particularly if fitted with the right equipment.

Passengers tend not to get the same kind of space in these premium models as they would in a volume upper-medium car, but there is more room than you would expect in the rear, despite the car's compact appearance.

Driving verdict

AS a driver's car, the BMW 3-series still cannot be beaten and the keen 2.0-litre engine in the 318i ES offers a balance of performance and fuel economy. Add the extra equipment the ES throws in for a bottom line of £19,995 OTR and it becomes a tough proposition to beat.

Engine (cc): 1,995
Max power (bhp/rpm): 143/6,000
Max torque (lb-ft/rpm): 148/3,750
Max speed (mph): 135
0-62mph (sec): 9.3
Comb fuel consumption (mpg): 39.2
CO2 emissions (g/km): 175
Benefit-in-kind tax 2002/03 (40%): £126 per month
CAP Monitor residual value (3yrs/60,000): £7,875/40%
Typical contract hire rate: £398
Transmission: 5-sp manual
Fuel tank capacity (l/gal): 63/13.9
On sale: now
Prices (OTR): £19,995