In 2004 the new Fiat Panda was deservedly crowned European Car of the Year. But while Fiat may have a history of making great small cars, over the years it has suffered a reputation for mechanical and electrical gremlins.

Three years is a good test period in which to judge whether the Fiat Panda deserved its 2004 title or whether it has failed to fulfil its early promise.

In terms of styling the Panda’s slightly boxy and upright appearance has aged well while its short overhangs and high roofline maximise interior space without occupying much road space.

Front-seat passengers are well catered for with good leg and shoulder room while rear passengers should be able to cope with shorter journeys. Boot space may not be huge but it is wide and easily accessible. Many models come with a split-fold rear seat to give extra space when passengers are left at home.

The Panda has limited engine choice but they all complement the car well. The entry model comes with a 1.1 litre engine producing 54bhp while the larger 1.2 litre produces 60bhp. Both perform with enthusiasm and will return about 50mpg in mixed motoring.

In 2005 the petrol engines were joined by the 1.3 litre Multijet diesel. Not only did it become the most powerful engine in the range with 70bhp on tap, but at 65.7mpg it was also the most economical. These diesel models are still scarce second-hand, but keep your eyes peeled as they should start to appear in reasonable numbers in 2007, making an excellent used buy.

Last month even this version was eclipsed by a 100bhp 1.4 litre model with six-speed gearbox. With stiffer suspension, larger wheels and a new front air dam the newest addition to the line promises to be the sparkiest and prettiest Panda yet. The only downside is that it will be some time before any of these 100bhp cars make it onto the second-hand market.

On the road the Panda delivers everything you could hope for in a supermini: sharp handling, nimble steering and plenty of grin factor.

The suspension copes well with the ruts and rumbles of poor surfaces while still having a firm edge that stops the car being wallowy. The steering is light but precise, and touch the button marked “city” and it will be made even lighter for parking manoeuvres.

At launch the Panda equipment list looked a little spartan but in July 2004 all models gained a passenger airbag, ABS with EBD (electronic brakeforce distribution) and Isofix child seat anchors.

It was also the first car in its price class to include on its options list traction control, electronic stability control, a “hill holder” system, parking distance sensors and six airbags, so it can pay to hunt around for a model where these options where taken up.

While the 1.1 litre Active model may be the cheapest way of owning a Panda it is worth spending around £300 more for an equivalent age 1.2 Dynamic.

In addition to a little more power you benefit from the inclusion of central locking, a boon on any five-door car.

But pick of the crop is the 1.2 Eleganza. With climate control, alloy wheels and electric mirrors, this top model offers some useful features, together with some nice visual touches such as the colour-coded bumpers. Expect to pay about a £500 premium for these models second-hand.

Now approaching its third birthday the Fiat Panda can still hold its head high in the company of the Golf and Mazda3, which both fought hard for the European Car of the Year title in 2004. And it can still give many newer rivals a run fortheir money.()

Gearbox
Dash-mounted gearlever falls naturally to hand and the manual gearbox is light and precise

Interior
Cloth upholstery is hardwearing but can mark easily. Optional red and yellow trim colours are a personal choice

Air-conditioning
Standard on Eleganza models and a popular option on the 1.2 Dynamic Safety Post-July 2004 all models gained passenger airbag, antilock braking and Isofix child seat preparation

Rear seat
Split-fold rear seat reduces back bench to just two seats; sliding rear seat available but a rare option

Exterior
Panda looks funky in optional yellow or light blue paintwork. Roof bars complete the effect Servicing and warranty Three-year/60,000-mile warranty on new cars with servicing due every 12,000 miles or 12 months, whichever is sooner

Sat nav
A £1,000 factory option on new cars and rarely found on second-hand examples. Pay a premium of no more than £200 if fitted

Spare wheel
All models get a full-size spare wheel

VITAL STATISTICS

Model Fiat Panda 1.2 Eleganza
Engine 1242cc, four cylinders
Power 60bhp
Transmission Five-speed manual
Fuel 50.4mpg (combined cycle)
Acceleration 0-60mph: 13.5sec
Top speed 96mph

THE ONE TO BUY

Fiat Panda Eleganza 1.2 2004 04 with 20,000 miles. Pay £4,600 at a dealer or £4,000 privately

VALUES

5,000
2004 04
Trade £3,925
Retail £4,925

2005 05
Trade £4,300
Retail £5,350

2006 06
Trade £4,750
Retail £5,875

10,000
2004 04
Trade £3,825
Retail £4,825

2005 05
Trade £4,175
Retail £5,225

2006 06
Trade £4,600
Retail £5,725

20,000
2004 04
Trade £3,575
Retail £4,600

2005 05
Trade £3,925
Retail £4,975

2006 06
Trade £4,325
Retail £5,450

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2004 04 Daihatsu Terios 1.3 Tracker