SEAT has raised its game with the third-generation Leon which is an all-rounder up there withe the best, says Matt Kimberley, PA motoring writer.

The Leon is a big car for SEAT, figuratively speaking at least. It's the company's second-biggest seller in the UK, after the Ibiza supermini, but on the physical side this third-generation car is actually a little shorter than the model it replaces.

Apart from a few of the engines, which follow a different development and replacement timescale to the rest of the car, this Leon is all-new from the ground up, with some fairly major changes versus the old one.

First things first, it's a fine looking thing. In top-spec FR trim, which uses deeper, more aggressive bumpers and slightly lower suspension, it looks the business. I'm not sure there's a better looking C-segment hatchback out there at the moment. You could argue that the more conservatively-bumpered S and SE models undersell the design a little and you'd be right, but the stylish undercurrent is there.

It's 52mm shorter, as an FR is 11mm lower, 48mm wider and has a wheelbase stretched by 58mm. Pushing the wheels so far out towards the corners has benefits for stability, rear passenger legroom and longevity for chassis components, so for the five-door Leon it's the best thing to do. The three-door SC model, using the flexibility in the new chassis design, has a wheelbase 35mm shorter for increased outright agility to compound its more sporting looks.

Under the skin it uses a modular chassis that offers SEAT and the other Volkswagen Group companies that use it huge flexibility of construction. It's also lighter, and as part of a package of weight-saving measures it helps all versions of the new Leon drop around 90kg against their like-for-like predecessors.

But that's only part of the story. The materials quality upgrade is remarkable, and there's also a great deal more cohesion in the cabin than ever before. Stepping out of the Mk II and into the new one feels like a quantum leap. There are 'tight' cars and 'solid' cars – while tight cars always go loose, the Leon feels solid, like it will stand the test of time better than its forebears.

The range of engines at launch covers the heartland of the typical five-door family hatchback market. But what engines – the 1.2, 1.4 and 1.8-litre TSI turbo petrol family is magnificent, and while the 1.6-litre TDI diesel is a little flat the latest 2.0-litre unit is a modern marvel of mechanical engineering – amazingly quiet in operation but as strong as an ox and happy to rev. The only place it gets caught out is below 1,250rpm, where all torque disappears.

That's the engine you'll find under the bonnet of this car, and for the moment it's the flagship power unit before a 181bhp version arrives late in 2013. Its figures are just mad – 148bhp with 236ft.lb of torque on tap for relentless pulling power especially through the third and fourth of the six ratios, and yet its official CO2 output is only 106g/km. Combined with the performance and potential miles per gallon in the 60s, this has to be one of the finest real-world engines on sale today.

Its price is an off putting aspect though. This car, with its options, is nearly £23,500, and diesels like this are not suited to frequent urban and suburban running because of their particulate filter, which can get clogged without regular faster driving. But fortunately if this car's 2.0-litre TDI is one of the finest diesels around then the 1.2-litre TSI is surely one of the best petrols. Incredibly gutsy for its size, lightweight and easily capable of more than 50mpg, this cheapest engine in the Leon range might just be the pick of the lot. It's a shame you can't get it in sharp-suited FR spec.

With optional 18in wheels the test car creates a little more road noise than it could on rougher country road and makes more of potholes than smaller wheels do on the Leon, but for the most part the ride stays very composed.

Whichever version of the Leon you would ultimately buy, from the no-frills but high-quality S to the fruity and stylish FR, the new package is light years ahead of the Mk II. It's user-friendly, better for passengers and engaging to drive, so as an all-rounder it's up there with the best.