Audi's new A3 Sportback is a compact premium hatchback that's big on quality, desirability and image, says motoring editor Andy Russell.

In these days when smaller is better and MPG more important than MPH people are increasingly down-sizing their cars to cut their runnings costs and impact on the environment.

I'm not saying we're all going to be driving little city cars but if you are looking for some prestige wheels then the compact executive car is coming to the fore with drivers who don't want to shun the brand image they have come to enjoy – but just want someone cleaner and greener.

And that's why cars like the Audi A3 are thriving.

The new five-door Sportback model has now joined the three-door hatdhback and it sets a new benchmark for quality, understated style and desirability in its class.

That should grab the attention of non-Audi drivers but the German marque's evolutionary styling means it will still appeal to current Audi owners looking to upgrade.

The three-door model is attractive, the more practical five-door Sportback is one of those cars that win you over as soon as you drive it – no wonder this premium compact hatchback won What Car? magazine car of the year – one of the most coveted gongs in the motor industry.

Don't be fooled into thinking it's the three-door model with two more squeezed in behind. The latest Sportback is slightly bigger than its predecessor but has even more distance between the front and back wheels which pays big dividends for passengers in the back with ample legroom and headroom.

The deep, square boot is now slightly bigger at 380 litres with the versatility of a two-tier floor and, in its higher load lip level setting, you get a long flat floor with the 60/40 split rear seats backs folded flat.

But the A3 Sportback hasn't gained weight with the bonnet, wings and other frontal elements made of aluminium so it has actually shed up to 90kg which helps cut fuel consumption and emissions.

So will the good range of eco-friendly engines with the excellent 1.2, 1.4 and 1.8-litre TSI turbo petrol engines alongside 1.6 and 2.0-litre TDIs – all offered with the appealing option of the smooth-shifting DSG automatic gearboxes.

The 105PS 1.6-litre turbo diesel is a popular choice – lively enough to get past slower traffic safely without having to really stir it into life with the standard six-speed gearbox and more than capable of eating up motorway miles quietly and comfortably with less than 2,000rpm on the clock at an indicated 70mph.

Audi's official economy figures are eye-wateringly impressive but even in the demands of real-world driving I was getting mid-50s running around and mid-60s on a long fast run.

The low-speed ride on the Sport model, on which the suspension lowers the body by 15mm, is firm but becomes more composed the faster you travel. If comfort is your thing then you can now combine the attractions of the Sport or more dynamic and even lower S line model with the standard SE suspension.

On the handling front the A3 Sportback's agility, precise steering and fine body control give a fine balance between rewarding keen drivers but still being real-world everyday usability.

The upmarket ambience of the cabin has a winning wow factor with quality trims and touches wherever you look and feel while retaining the understated simplicity.

Audi dashboards are so easy on the eye and hand with logical controls and many functions operated via the latest-generation multi-media interface (MMI) and ultra-slim touchscreen which rises elegantly from the fascia. And the jet exhaust-style air vents are as beautifully engineered as they are efficient – they can even be adjusted for a concentrated or diffused airflow.

The driving position has first-rate adjustment and good all-round visibility while the whole interior is co-ordinated and cohesive. It really is a pleasure to be in which means that even if you have down-sized from a luxury executive model you won't feel you have or miss the quality or prestige.

There used to be a time when people had bumper stickers on their runabouts proudly proclaiming their other car was some huge luxury barge or thirsty, high-maintenance sporty number. Now that there is real status in driving smaller cars perhaps the A3 Sportback needs a sticker saying 'I used to drive a... but I really don't miss it'.