Fiat's petite Panda city car takes the rough with the smooth in its 4x4 guise, says motoring editor Andy Russell.

The term 4x4 conjures up images of massive, macho off-roaders with heavy-duty go-anywhere ability, a thirst for fuel and running costs as steep as the terrain they can climb.

Nothing could be further from the truth when you see the Fiat Panda 4x4 – now in its third generation and celebrating its 30th birthday this year.

Based on the compact five-door hatchback the petite Panda, with its automatic four-wheel drive system and raised ground clearance, is a city car with genuine 4x4 credibility.

It's not going to take you up the side of mountains – not that there are any in East Anglia – but it is capable of getting you off the beaten track and dealing with all the mud, muck and mire on rural roads at certain times of the year and getting a grip when a little snow seems to bring our world to a standstill.

Distinguished by its revised bumpers with skidplates, higher ride height for terrain even rougher than some of today's roads and chunkier, grippier tyres the Panda 4x4 retains the city car's cute character... one that is fun to look at and equally fun to drive.

Its eco credentials are boosted by the engine options – the 85bhp 0.9-litre TwinAir two-cylinder turbo petrol and the 75bhp 1.3-litre MultiJet 2 four-cylinder turbo diesel.

If you drive in urban traffic a lot then the petrol is a good choice but for regular long journeys and motorway work or venturing off-road the diesel is more sensible but adds £1,000 to the price.

You'll get some of the outlay back at the pumps – I never got less than 55mpg, 68.9mpg on a gentle run and around 60mpg overall.

With 30pc more low-down pulling power than the original 1.3-litre diesel engine, and peaking from 1,500rpm, the little Panda does not need to be worked hard, just as well as the engine gets intrusively vocal above 3,000rpm, adding to the tyre noise. Fortunately at around 2,500rpm it cruises comfortably at an indicated 70mph.

With 5cm more ground clearance than the standard Panda the ride can be bouncy on poor roads, but not uncomfortably so, and the Panda holds the road well despite some body roll into corners. With great all-round visibility and compact dimensions it's in its element in the cut and thrust of urban driving.

The Panda is not big on the outside but there's just about enough legroom in the back to carry a couple of adults along with a useful 225-litre boot.

The rear bench comes in standard two-seater guise with a folding one-piece back rest which folds flat but steps up from the boot floor and the painted back could get scratched unless large items are loaded carefully. Or you can choose two rear seats with split-fold 50/50 backs that slide lengthwise through 16cm – boosting boot capacity to 260 litres and making it one of the most spacious in its segment – or a three-seat bench with a one-piece folding backrest or 60/40 split backs.

The fascia is simplicity itself but the driving position is a bit of a compromise – I found the seat a little too high and there is no way to lower it while the steering wheel moves only up and own. There's decent storage but lots of hard plastics – look closely and the textured finish is actually the word 'Panda' thousands of times.

If you like the Panda 4x4's looks but want only front-wheel drive there is a new Trekking version with traction control.

Both come with air-conditioning, Blue&Me multimedia system, stability control, a CD/MP3 radio, 15in alloy wheels with mud and snow tyres, electric heated door mirrors, remote central locking and rear head restraints. Options include large car features such as a sliding rear seat, Blue&Me TomTom2 Live and city brake control which applies the brakes below 19mph if it recognises obstacles in the path of the car, either completely avoiding a collision or minimising any impact.

When the going gets tough the Panda 4x4 gets going. if you're looking for a small, economical car but need the added attraction and safety of four-wheel drive the Panda fits the bill... without the bill being too costly.