Small and trendy city cars are big business so Toyota has grown its Aygo's appeal, says motoring editor Andy Russell.

There's a bold new spirit at Toyota – one that is all about fun and playfulness rather than being conservative and playing it safe. If you need any proof, look no further than the all new Aygo.

Not that you are likely to look beyond this new second-generation city car's eye-catching, funky, youthful styling which makes it stand out from the crowd. That's just what Toyota wanted to achieve, especially as the Aygo, on sale from Tuesday, is again part of a tie-up as the Peugeot 108 and Citroen C1.

While they share about 65% of parts – mainly platform, running gear, mechanicals and much of the interior – Toyota has gone to great lengths, and amid much secrecy during the exterior design phase, to give the three and five-door Aygo its own character this time with only front doors and windscreen shared.

With a design, dubbed J-Playful, based on Japanese youth culture and – an interesting move for a car sold only in Europe and built in the Czech Republic – there's something of the X factor about the Aygo's face with a bold 'X' stretching from the front wheel to the opposite side wing mirror and, with the ability to have it in contrasting colours as part of a wealth of customising options, it can be highlighted to great effect. One Scots colleague fancied creating the St Andrew's flag – a blue car with a white cross – and then suggested a tartan interior. Probably not something those J-Playful creators envisaged.

The contrasting colour panels are also on the back of the car while affordable and accessible interior and exterior styling packs also offer coloured fascia panels, exterior roof decals and some very smart alloy wheels. Customising is all the rage now and the Aygo is not going to be a party-pooper in the car park.

Toyota calls it the all-new Aygo for, although it retains the 1.0-litre petrol engine, the unit has been reworked to be more efficient and economical. Power rises slightly to 69bhp along with economy. The manual model now achieves 68.9mpg combined (up from 65.7) and the x-shift automated manual 67.3mpg (was 62.7) while CO2 emissions drop to 95 and 97g/km respectively (from 99 and 104) so all models now avoid annual road tax.

The peppy, three-cylinder engine makes up for its small capacity with a willingness to rev freely – accompanied by a delightful rorty, sporty engine note – so easily keeps up with the cut and thrust of urban driving, able to nip in and out of gaps in the traffic.

Most owners will go for the five-speed manual gearbox which has a light shift and easy-action clutch pedal to take the strain out of urban driving. The five-speed automatic is in its element in the urban jungle but not as adept on the open road where, under hard acceleration, it tends to hang on to the gears before lurching into the next one even when shifting via the gear lever or flappy paddles behind the steering wheel. Drive it with a light foot and the experience is much smoother and less frenetic.

What impresses most about the new Aygo is how grown up and civilised it feels, whether hacking along motorways or bumbling around town.

Much of the credit goes to the new platform, more direct steering and chassis tuned to be fun to drive and more stable with a flat comfortable ride. Just because people are down-sizing to smaller cars they still expect a decent level of refinement and the Aygo delivers.

Slightly longer, wider but lower than its predecessor, the Aygo feels firmly planted through corners, even when driven with gusto, and by the time body roll is really noticeable so is the squealing from the thin tyres. Most owners won't push the Aygo so hard but it's good to know that it can cope. The ride is composed and comfortable – a big plus on a little city car – whether poodling along rippled roads or munching motorway miles.

The bigger body and some clever packaging have created a little more interior space but while passengers up front have plenty of room they are going to have to compromise to get even average-sized adults in the back and, even with the double-bubble roof design, headroom in the back is tight. That said, this is a city car likely to be doing shorter journeys which makes its bearable.

The boot is 29 litres bigger at 168 litres but still small compared to some rivals, virtually filled by a couple of cabin flight cases, but the 50/50 rear seat backs fold flat for larger loads.

The driving position has a good range of adjustment and feels natural while the simple, uncluttered fascia makes it easy to take in information at a glance and keep your eyes on the road. The new x-touch multimedia system – standard on x-pression and special edition x-cite and x-clusiv – is fun and functional.

It's easy to see where Toyota has kept the price down with some cheap, hard cabin plastics but the look can be disguised on lower-spec models with optional body-colour fascia panels as part of the INspire and INtense customising packs.

The original Aygo has built a loyal following and, despite now having 20 city car rivals compared to seven when launched in 2005, still achieved record UK sales last year with more than 16,500 registrations and sales up again so far this year. With the fresh-faced new model Toyota is looking for 19,350 UK sales this year and nearly 24,000 in 2015 as the new model woos new and younger buyers to the brand.