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The Chrysler Ypsilon is the smallest of the new breed of Italian-built Lancias, uniquely badged as Chryslers for the UK because Fiat would rather not confuse, upset or frighten us by re-launching Lancia here having killed it off years ago.

More specifically, the Ypsilon is an ultra-compact five-door supermini, only 3.8 metres long but quite tall so it’s surprisingly credible as a five-seater. The underbits are closely related to the Fiat 500 and Ford Ka, but it sits on the longer, 2390mm wheelbase of the new Fiat Panda. Chrysler stresses space (at least for the car’s size) and luxury, both of which the Ypsilon delivers in exchange for solid prices.

Our test car came in tcame in top-of-the-range Limited trim and was further enhanced by two-tone paint, 16-inch alloys, ESP, a sunroof, cruise control and rain-sensing wipers, but go for the spartan 1.2-litre, 68bhp S and you get a useful cabin package, albeit with no air-con or alloys. The mid-spec SE has both.

And overall it’s a useful, likeable little car. Once you get used to riding fairly high, and to the (attractive) central instrument cluster, it’s a relatively soft-riding little machine with lighter steering than most and a light-to-use if slightly rubbery five-speed gearchange. It’s a quite different experience from what has become the Ford-VW norm among small cars; the body isn’t so well controlled but the car copes better and more quietly than most of its peers with suburban potholes. Noise levels are also fairly low at top-end motorway cruising speeds, which makes the Ypsilon much more than a mere city car.

The engine in our test car was the familiar GM-sourced 1.3-litre turbodiesel currently offered in Panda, 500, Corsa and Meriva, among others. In all of these applications – Ypsilon included – it is a little light on bottom-end torque but has a surprising turn of pace to the top end provided you remember to push the long-travel accelerator far enough. A 114mph top speed with an 11.0sec 0-62mph sprint is okay for a car of this duty and character, especially when you match it with 74.3mpg combined and a CO2 output of just 99g/km.

Other engines available under the Ypsilon’s bonnet are the 1.2-litre, 69bhp petrol, which offers less performance (0-62mph in 14.5sec, 101mph) for worse economy and emissions (57.6mpg, 115g/km), and the entertaining 875cc TwinAir unit, which manages to generate 85bhp and propel the Ypsilon to 62mph in 11.9sec and on to 109mph. The TwinAir powered Ypsilons are also currently the only ones available with an automatic gearbox.

The TwinAir engine has retained all its idiosyncrasies from other installations. It's a thrummy powerplant with a distinctive noise and a character that encourages you to extract every last drop of performance. And, for the most part, the gearbox is willing to indulge in this type of driving with you. But whilst this seems perfectly appropriate in a something like a Fiat 500, the more luxurious billing of the Ypilson implies power should be more effortlessly available. The TwinAir is undoubtedly a fantastic engine, but it is not suited to the Ypilson.

Inside, the cabin is impressively comfortable, and has great-looking leather bucket seats. The only jarring note are some slightly flimsy-looking hard plastics. Exterior styling, like that of Ypsilon’s big brother, the Delta hatchback, is pleasantly distinctive. And very Italian. Little Lancias apparently sell well to stylish Italian women; Chrysler UK seems safe in hoping for annual sales between 4000 and 4500 units. In particular, the designers have been successful at giving the car a coupé-like look, neatly disguising its generously proportioned second door. The car is quite roomy in front, but the rear compartment is better at housing smaller adults (and two of them rather than three) than six-footers.

If you’re the sort who buys brands, this car may not do it for you, although the UK company is battling hard to give the Chrysler brand some new impact. However, if you’re seeking a compact, economical five-door with cute looks and lots of equipment, the Ypsilon looks like a decent choice.

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