Peugeot has fired up the hot-hatch market with its new 208 GTi that's great to drive and live with, says Matt Joy.

Can Peugeot's 208 GTi survive an entire road test without unfair comparisons to its much-lauded stablemate? It should do – the 205 GTi was certainly one of, if not the, finest hot hatch of the 1980s and even into the 1990s, but things were very different then.

As wonderful as the 205 was, it did without any kind of electronic safety intervention beyond (optional ABS) and like most cars of the period it would happily spin in its own length with little provocation. And it was noisy and flimsy – again like most cars of the period.

The 208 GTi should only be compared to its contemporaries, although that means just as stern a test. But the starting point is a good one – the 208 is a smart, modern design with just enough nods to the past to remind you of its forebears. And even the most humble version drives with a pleasing sharpness, and there's no doubt it can cope with more power.

So this 21st century Peugeot hot hatch announces its GTi status more subtly. There are small GTi badges, pretty alloy wheels and a discreet bodykit, nothing too lairy that will attract unwanted attention. The same goes for the cabin, which adds plenty of leather, attractive sports seats and some nice detailing that gives it a lift over the standard car.

Underneath the stubby bonnet the 208 GTi chooses the favoured route for increased performance – a small -capacity turbo engine. Already seen in the RCZ Coupe, the GTi's 1.6-litre four-cylinder unit dishes out a hearty 197bhp – making it one of the most powerful in the class. A six-speed gearbox takes drive to the front wheels, while the beefed-up suspension has stiffer springs, lower ride height and the electronic stability control can be switched off.

You don't get the sense of being in any kind of street-racer – this is civilised performance, sporty but not raw. The seats are supportive and the big glass area gives a good view out. The unusual instrument position, viewed over rather than through the small steering wheel, will suit some more than others but it is easy to get comfortable.

Fire up the 1.6-litre turbo and there is a muted rumble from the exhaust. Turbocharging can mute all the character out of an engine but the GTi's unit offers a pleasing mix of aural feedback. As much as this is at the sporting end of the 208 scale, it's still a usable, practical car.

With so much torque from low down and spread right across the rev range, the 208's engine feels more like a large non-turbo engine. It pulls strongly out of low-speed bends and displays admirable traction even when the surface is less than perfect. It will rev happily when you want to concentrate on braking and steering but you can be lazy too and use the torque.

On the kind of roads you'll want to take a GTi on, there's plenty of fun to be had. With the engine pulling strongly when you need it you can lean hard on through the bends. It grips strongly and keeps you well informed about what's going on, while the stability control system is there to back you up but won't interfere. It's good clean fun that will please most people most of the time – anything much racier would cause a headache on the motorway.

The 208 GTi is a car of its age – it delivers thrills when you want them but won't drive you mad with its hyperactivity when you just need to get home. It's also well-equipped for the money and won't cost a king's ransom to own. This is what a modern GTi is all about.