This was a new sector for Mercedes, a car manufacturer that specialised in executive barges that many thought to be the best cars in the world.
A long wheelbase version was introduced last year to give the A-class more of the practicality of a mini-MPV and this year the A160 CDI was de-tuned to improve fuel economy.
Audi's attempt at a small car always seemed a little more appealing, though. The lightweight A2 also carried four people in comfort and was available with a 60-plus mpg version from its launch.
So in a way the Mercedes-Benz A160 CDI represents a bit of catching up on the part of the Stuttgart firm.
The result is a car with a combined fuel consumption rating of 62.8mpg and carbon dioxide emissions of 119g/km.
A CO2 figure as low as this allows fleets to claim back enhanced capital allowances on 'clean' vehicles – a key selling point for fleet business.
Until March 31, 2008, all businesses can claim a first-year allowance of 100% (enhanced capital allowances) on the operation of business cars which emit 120g/km of CO2 or less. Capital allowances give tax relief for the depreciation in the value of an asset, spread over a number of years – typically 25% a year on a reducing-balance basis.
The rules also mean that for companies leasing vehicles, the traditional £12,000 expensive car disallowance will be removed, so the entire rental cost can be offset against taxable profits.
So that's the financial argument out of the way. How does it feel to drive a 74bhp diesel Mercedes-Benz? Well, not bad – as long as you don't need to arrive anywhere in a hurry.
Acceleration to 62mph from rest takes more than 15 seconds and you come to realise how important momentum is on the motorway.
The diesel engine is also rather noisy compared with larger Mercedes-Benz models, but not significantly noisier than other frugal small oil-burners.
Most cars with 60mpg potential seem to be designed with a tall top gear to aid fuel consumption and help reduce high-speed noise intrusion.
Changes made to ensure the A-class is safe in the 'elk test' mean a firm ride, but neat handling with little body roll in corners.
Steering is a little too vague to make driving the A160 a truly enjoyable experience and the sometimes frustrating lack of straight-line speed also hampers things. However, the five-speed manual gearchange is short and slick – unusual for a Mercedes-Benz. The rear seats can be removed, which means the car could double up as a compact load carrier if necessary.
Mercedes-Benz A160 CDI
Delivered price, standard car (P11D value): £14,155
CO2 emissions (g/km): 119
BIK % of P11D in 2003/04: 18%
Graduated VED rate: £85
Insurance group: 5
Combined mpg: 62.8
CAP Monitor residual value: £5,150/36%
Depreciation (16.47 pence per mile x 60,000): £8,316
Maintenance (2.70 pence per mile x 60,000): £1,650
Fuel (16.16 pence per mile x 60,000): £3,696
Wholelife cost (22.77 pence per mile x 60,000): £13,662
Typical contract hire rate: £317
Three rivals to consider
THE Mercedes-Benz A160 CDI undercuts its only premium rival in this comparison on P11d price, although both are still closely matched. The new common-rail diesel Vauxhall Astra 1.7 CDTi in a special ECO4 version is close behind. The trouble is, Renault's Megane 1.5 dCi is a little more powerful than the other cars here and is not significantly less frugal on fuel – and its P11d price is nearly £1,500 lower than the A-class.
The A160 CDI is the most expensive to maintain over 60,000 miles, according to our figures, and the difference between the A-class and the least expensive – the Audi A2 – adds up to £528 over three years. The A2 even beats the Renault Megane – a manufacturer unlikely to charge premium prices for servicing, especially on the least powerful diesel version of its volume seller. The Astra works out at £300 more than the Megane over three years/60,000 miles.
ALL four cars achieve more than 60mpg on the combined cycle according to the official figures, so each of them would be a good choice as a frugal company car. The Mercedes-Benz A160 CDI works out at £3,696 over 60,000 miles, which is £84 less expensive than the Renault Megane over the same distance and £78 more expensive than the Audi A2 1.4 TDI and Vauxhall Astra ECO4 1.7 CDTi.
Renault beats Mercedes-Benz on depreciation! In pence per mile costs this is true, but we must remember that the A160 CDI is £1,500 more expensive in terms of P11d. This is where the Astra begins to lose the battle. It is priced close to the two premium-badged cars but is expected to retain a much lower percentage of its original value – 26% against 34% for the Megane, 36% for the A160 and 38% for the Audi, according to CAP Monitor, over three years/60,000 miles.
THE Mercedes-Benz works out at £300 more expensive than the Audi A2 over three years/ 60,000 miles, but the Renault Megane – strong on list price, depreciation and SMR costs – is the winner in this comparison. The Vauxhall Astra 1.7 CDTi ECO4 is £1,686 more expensive than the Megane for a typical fleet operator, simply because it is relatively expensive on all but fuel costs. This puts it out of the running, at least until the new Astra arrives in eight months' time.
Emissions and BIK tax rates
LIKE the Renault, the Mercedes-Benz A160 CDI does not yet comply with Euro IV emissions requirements, so it carries the 3% supplement in benefit-in-kind tax. The Audi and the Vauxhall both comply with Euro IV emissions, which for a 22% company car taxpayer means the Astra has the lowest tax liability at £38 a month, compared with £39 for the A2. Next is the Megane on £42, with the A160 CDI bringing up the rear at £47.
THE A160 CDI opens up more customers to the Mercedes-Benz badge, but for the money, the Audi A2 might be a better investment for most fleets. However, if you are prepared to look beyond a premium badge into the mainstream, the Renault Megane wins with better performance, good equipment levels and much lower running costs.