CITROEN C3 1.6 16V HDi Exclusive. Price: £15,290.

IT'S not just Jamie Carragher who's good at making comebacks. Ten years ago Citroen looked as though it was down and out. Its range of drab cars were an insult to the marque's reputation for flare and innovation.

A long lingering death by disinterest looked to be in prospect - a sad end for a great company.

Things reached a nadir with the Xsara - a hopelessly reskinned version of an equally anonymous Peugeot.

Then something incredible happened. Citroen suddenly woke up and rediscovered the mojo that led to classic designs like the 2CV and the revolutionary DS-19.

Which brings me neatly on to the new C3.

Unveiled in June 2009, it's an evolution of the first C3, a quirky small hatchback that sold more than two million examples across Europe.

Sadly, the old C3 was blighted at the moment of conception when build quality issues on pre-production examples let it down badly at launch. British hacks delighted in writing about gloveboxes that fell out and instrument binnacles popping off, with the result that the C3 developed an unjustified reputation for being a bit flimsy.

Manufacturers always claim build quality improvements with every new model they launch. Sometimes that's just PR hot air but, in the new C3's case, the difference between this car's interior and its predecessor's is night and day.

The cabin is largely the same as the one in the DS3, Citroen's tilt at the premium small car segment. It's all shifting organic shapes, soft-feel plastics and slivers of graphite plastic. A classy-looking analogue clock pack replaces a cheap LCD, the passenger side has been scooped out for extra knee room and the steering wheel is a chunky leather-bound affair that's a pleasure to hold. In other words, it feels a bit special - a genuine cut above the usual Ford Fiesta's cabin.

There are still a couple of throwbacks: the CD player is still too fiddly and the plastic stalks are the same as used in the old C3.

There's good cabin room, too, with space (just) for three adults on the back seat where Citroen has found an extra 30mm of legroom compared to its predecessor.

And thanks to the stunning panoramic windscreen, which runs up and over into the roof, the cabin is flooded with natural daylight. The roof lining slides backwards and forwards (it's the same system that's used in some Vauxhall Astras) so you can still have a conventional "roof" complete with sun visors when you need them.

Viewed from the front, the C3 does look a bit as though it's got a receding hairline but the difference the panoramic screen makes to the interior is worth it. When you're in town you look up and see the sky - it feels like you're walking rather than travelling in a metal box - and the sun spills into the interior as though it were a convertible. Best of all, the panoramic windscreen is standard kit on all but the cheapest C3s.

The C3 may be stylish and innovative but Citroen hasn't forgotten that it's supposed to be a small family car.

The boot is one of the largest in this class. At 300-litres it is bigger than a Clio or a Corsa and on a par with the Skoda Fabia, but with the benefit of a lower loading lip. The rear seats split 60/40 with one lever (activated from the boot or the cabin) but they don't fold completely flat. The front door pockets are rather short, though, and won't accommodate a decent map book.

On the move it's immediately plain this is a real Citroen. The ride is pillow soft, gliding over dips and bumps that would trouble other small cars, at the expense of a lot of body sag around corners. I could live with this, though, because the relaxing ride is so soothing I don't think I'd ever overstep the C3's limits.

It feels fine on the motorway - planted and secure even in strong side winds - while a range of impressively clean and economical engines make it cheap to run. Pick of the range is undoubtedly the ultra-frugal 1.6 HDi in 90 bhp guise. On a run I achieved nearly 70 mpg and around town consumption rarely dipped below 60 mpg for an average of more than 66 mpg - outstanding.

Refinement is rather good, too. Citroen tripled the amount of noise insulation on the new C3 compared to its raucous predecessor and the result is a far quieter cabin at all speeds.

Prices range from a shade under £10,000 for a 1.1-litre that only the terminally hard-up will ever buy, to a fairly stiff £16,185 for the full fat 110 bhp HDi Exclusive.

Equipment levels are generous: only the entry level VT doesn't have the fancy windscreen, VTR+ models get cruise, a speed limiter, chrome window trim, front fogs and alloys while the Exclusive spec extends to climate control, a gloss piano black dashboard and electric windows all round.

It looks good, too. The shape is reminiscent of the old C3 but there's more than a hint of the sexy C4 Picasso people carrier about it and it's a real antidote to the drab econo-boxes often found at the cheaper end of this market.

Another resounding Citroen success then, a car with new found class and head turning looks that's relaxing to drive and very cheap to run. I loved it. Given the extra quality and kit improvements it'll be interesting to see if Citroen dealers will be as keen to do cut price deals on a new C3, as they were with the old model.

No wonder the top man at Citroen has just been head hunted by sister company Peugeot...

Spec: Engine: 1,560cc turbodiesel Max power: 90 bhp @ 4,000 rpm Max torque: 158 lb/ft @ 1,750 rpm Combined mpg: 65.7 mpg CO2 (g/km): 110 Road tax: £35 Equipment: Four electric windows, power steering, panoramic windscreen, power steering, RDS/CD player with steering remote, Bluetooth, part Alcantara upholstery, leather stitched steering wheel, automatic lights and wipers, cruise control, climate control, aux input for iPods etc