Up Front

The new front-wheel-drive Lexus CT 200h, which is scheduled to hit dealer showrooms in late February, is a terrific upscale alternative to the Toyota (TM) Prius. This all-new model has two big selling points: A relatively low price—it's the least expensive model in Lexus' lineup, with a starting price of $29,995—and an average fuel economy rating of 42 miles per gallon.

It's no BMW (BMW:GR), but the CT 200h offers a nicer cabin and greater driving panache than high-mileage competitors such as the Prius and Honda (HMC) Insight. If your priority is the greatest possible fuel economy the Prius is still the best buy on the market, as far as I'm concerned. If you're willing to pay a bit more for nicer styling and better handling, the CT 200h is well worth a look.

Lexus' new entry-level hybrid has the same power plant and drive train as the Prius, an 80-horsepower electric motor and 98-hp gasoline engine that generate a combined 134 hp. The transmission is a fuel-efficient, continuously variable automatic. That's where the similarities end.

The CT 200h is completely different from any other Toyota or Lexus model. Indeed, it doesn't share a platform with any of them. It's a four-door/five-passenger hatchback, a highly practical style of vehicle that is popular in Europe but traditionally doesn't sell well in the U.S. With the price of regular gasoline now above $3, American tastes may start to change.

The CT 200h is an excellent choice for commuting and is flexible enough to handle everything from weekend chores to a car-pool with three or four kids. The sporty, well-bolstered front seats are much more comfortable than front seats in the Prius. There's only enough knee-and-foot room for two average-sized adults—not three—to sit comfortably in the rear seat, however.

Even with the rear seats up, there's 14.3 cu. ft. of luggage space, about equal to the trunk of a midsize sedan. As in the Prius, the rear seats fold down to make a large hauling space.

Starting price is $29,995, about the same as a top-of-the-line Toyota Prius V. Standard equipment includes a chunky, leather-clad steering wheel, a six-speaker audio system, 17-in. alloy wheels, a push-button starter, Bluetooth and USB connectivity, and stability and traction control. Standard safety features include eight air bags and stability and traction control.

Options include a hard-drive navigation system with traffic and stock price alerts ($2,245), premium audio with a backup camera ($1,475), LED headlights ($1,215), and remote engine startup ($375).

The CT 200h's 42-mpg fuel economy rating (40 mpg on the highway, 43 in the city) lags the Prius' 50 mpg, but equals that of the Honda Insight and beats most other hybrids. If my experience is any indication, mileage results may diminish during the year's coldest months. As I engaged in about 225 miles of mixed driving in frigid winter weather, I averaged 37 mpg. On the plus side, the car is instantly ready to go in cold weather. The windows defrost as swiftly as the heated front seats become toasty-hot.

I didn't make any effort to maximize fuel economy. The CT 200h has three driving modes: eco, normal, and sport. If you were to keep it in eco most of the time—accelerating and braking gradually—I suspect you could easily average 42 mpg or more. If you really want to economize, you can drive up to a mile on electricity alone at speeds as high as 28 mph. One cool feature: The instrument panel backlighting is blue in eco and normal modes and switches to bright red in sport mode.

Behind the Wheel

The CT 200h accelerates from 0 to 60 in 9.8 seconds, same as the Prius—slow, even by economy-car standards. However, the Lexus is more fun to drive than the Prius because its developers went to considerable lengths to give it better driving dynamics.

Among other enhancements, the CT 200h has an independent rear and MacPherson strut front suspension, as well as lateral dampers and a rigid frame to improve steering and handling in the corners. The center of gravity is much lower than in the Prius, and the seats are in the center of the vehicle, which improves balance. Putting it in sport mode quickens throttle response and steering feedback and makes the suspension settings sportier.

Going to such lengths to improve handling in such a slow vehicle might seem almost ridiculous but it works. While the Prius feels stiff and ungainly on the road—like a giant toy car—the CT 200h is kind of fun to drive. Toss this car around among curves in sport mode and it feels tight and under control. The speed-sensitive electric steering provides a surprising amount of road feel. The CT 200h would be more fun if it had paddle shifters and didn't have a boring (albeit fuel-efficient) continuously variable transmission. For a super-efficient hybrid, it isn't bad.

The CT 200h's cabin feels upscale, even though Lexus cut some corners to keep the base price low. Notably, the seats and cabin are upholstered in a faux leather called NuLuxe, which is both cheaper and more environmentally friendly than the real thing. (No volatile organic compounds are used in its production and two-thirds less C02 is generated.) Nonetheless, the black-and-tan upholstery in my test vehicle felt soft and looked both pricey and durable.

Personally, I'd stick with NuLuxe. If you want real leather, it's available as part of a $1,330 package that also includes rain-sensing intermittent wipers, driver's-seat memory, and auto-dimming outside mirrors.

Buy it or Bag It?

The CT 200h is a niche product: Lexus expects to sell only about 12,000 annually in the U.S. So it isn't for everyone. But it's a vehicle I'd definitely consider buying for myself, especially as a second car.

The main competitor is the Prius, which (as was mentioned above) tops out at about the starting price of a CT 200h. The Prius seems clunky next to the CT 200h. The main doubt I'd have about either of them is Toyota's seemingly endless product recalls. (Who would have dreamed three years ago that uncertainty about quality would be associated with Toyota products?)

The other main alternative I'd consider is the diesel-powered Audi (NSU:GR) A3 TDI wagon, which starts at $31,125 and is rated to get 30 mpg in the city and 42 on the highway. The Audi is quicker and even more fun to drive than the CT 200h, but has greater CO2 emissions.

The Audi and the Lexus are both very nice little cars. I'd be hard-pressed to choose one over the other.

Click here to see more of the 2011 Lexus CT 200h.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE