It is true to say small cars are now big business. The Oxford-built Mini has proved that and all manufacturers with city type cars aspire to achieve the same cult status. In Fiat's case the original 500 model, launched more than 50 years ago, was a cult' car and did battle with the Mini.

The original Fiat 500 was small and cute, with a small capacity rear mounted 500cc engine, and stayed in production until 1975, with 3.8 million being sold worldwide. In the UK the Fiat 500 averaged 2,000 annual sales in its lifetime and became a collectable cult' car after its demise.

Today customers are more affluent and they have the desire for cult status cars. But demand for such small vehicles, which can be equipped to a bespoke level with loads of manufacturer designed extra cost options, is also being driven by congested roads, inadequate parking, taxation and high fuel prices. It pays most car owners to think small' these days.

So step, or drive, forward the all-new front engined Fiat 500 three-door city car. It is cute, smart, compact, safe, practical and affordable - in fact it is the latest must-have motoring status symbol.

Although designed by Fiat in Italy, the much-awarded Fiat 500 is actually built in Poland. The car has already been awarded a maximum Euro NCAP five-star safety rating, models have seven airbags as standard across the range and it has a choice of three engines, two petrol, one diesel, which meet the proposed Euro 5 emissions standards, more than two years before they are implemented.

With three, four-cylinder engine options, 1.2 and 1.4-litre petrol and 1.3-litre turbodiesel, and three specification levels, Pop, Lounge and Sport, there is a current total of nine derivatives at prices ranging from £7,900 to £10,700. Arbath sporty 1.4 turbocharged petrol 135 and 150bhp models will be added at the end of this year.

In addition to the current nine core models, Fiat's bespoke accessory Personalisation Programme provides 100 accessories. There are also 12 bodywork colours, a choice of eight sticker/stripe kits, ten different badges and 14 upholstery solutions generating a staggering 549,936 possible combinations of colour, trim and options.

Anti-lock braking, remote control central locking, electric front windows and door mirrors, MP3 compatible CD player/radio with six speakers, folding rear seat, trip computer, follow-me-home headlights and electric power steering are fitted as standard.

Lounge models gain a leather-bound steering wheel, air conditioning, leather trim, 15-inch alloy wheels, body-coloured mirrors, exterior chrome trim, a fixed glass sunroof and a 50:50 split folding rear seat.

Sport versions differ over Lounge variants by having dark tinted rear windows, sports interior trim, 15-inch sports design alloy wheels, a rear spoiler and foglights.

The current view is that Sport specification initially will be the most popular because that is what advance orders reveal.

Certainly the younger generation will like what they see, but the Fiat 500 will appeal to all ages.

Women, I think, will opt for the Lounge models if for no other reason than the comfort of ride is better because the suspension is more compliant.

Sport variants do suffer from a harsh ride. The Pop models are ideally suited for buyers on a budget, such as first-time owners and, the car mum and dad buy for their offspring.

Advance orders show the 1.4-litre, 100bhp petrol engine to be the most popular choice but my view is that the 1.2-litre 69bhp is the most practical in its role as a city car.

The 1.4 engine has an official fuel consumption figure of 44.8mpg (36.9mpg on test) and CO2 emissions of 149g/km which puts it in vehicle excise duty band C, costing £115 a year. Top speed is 113mph and 0-62mph is covered in 10.5 seconds.

This unit is pretty responsive for acceleration, very flexible for town driving and it is fine for relaxed motorway driving. Electronic stability control is standard on 1.4-litre models but a £200 option for 1.2 petrol and 1.3 diesel versions. As a city, commuter or runabout car, the 1.2-litre petrol engine makes more sense. With only 69bhp it is a bit sluggish but if worked hard the car will achieve 99mph, covers 0-62mph in 12.9 seconds and returns 55.4mpg, (41.4mpg on test this week).

The CO2 emissions are much lower at 119g/km giving it a VED Band B rating and that means just £35 a year in road tax. It might also end up being London Congestion Charge free if the sub 120g/km limit is implemented.

For diesel lovers there is Fiat's highly-acclaimed 1.3-litre MultiJet turbocharged unit with 75bhp and a combined fuel economy of 67.3mpg.

This unit produces just 111/g/km of CO2 emissions, which also gives a £35 per year road tax bill.

Top speed is 103mph, 0-62mph takes 12.5 seconds. With the 1.3-litre diesel power models costing the same as the 1.4-litre petrol versions, higher mileage drivers might just choose this engine option.

An automatic transmission option will be available for both petrol engines.

The retro and rounded curvy looks of the new Fiat 500 are certainly the main reasons customers will be attracted to this car as opposed to a Mini or even a Renault Twingo.

The looks alone are unique and distinctive; it can be no other car. Add the bespoke styling accessories and the car lots of people want, becomes your car'.

The compact three-door body with its very short bonnet and minimal front and rear overhangs is just 3,546mm long, 1,627mm wide and 1,488mm high.

The top hinged tailgate gives access to a small boot, which is larger than a Mini hatchback, with 185-litres of space, increasing to 550-litres with the rear seat folded back.

In the front there is plenty of room for two adults, in the rear leg space is minimal. Headroom in the front is not generous; again in the rear it is limited.

It takes a while to get the driver's seat and steering adjusted for driving harmony. The worst feature is the high driving position and the limited seat height adjustment.

The interior design continues the retro theme with a chic dashboard, easy to see and use controls, a close to hand gearlever and a cowled large round speedometer/rev-counter combination right in front of the driver.

The Fiat 500 is small to park yet remains agile and nimble in traffic but the suspension, more or less the same as the Fiat Panda, gives a controlled and secure drive on open roads.

Yes the ride comfort is harsh for Sport models, but younger drivers in particular will not mind that.

All models have a fidgety ride over poorer surfaces as well, but no worse than other small cars.

The front wheel drive system offers pretty good grip and the steering with its excellent large steering wheel makes for pleasurable driving, just what real owners want.

Overall the Fiat 500 is a welcome and very worthy addition to the new car market.

All Fiat UK and their dealers now need to do is to give its customers a pleasurable buying experience and to back it up by good aftersales service. The Fiat 500 deserves it - and so do Fiat's customers.