It’s based on the Jazz but priced like a Civic. Is the Honda City a car that makes no sense in Honda’s lineup, or does it have the goods to attain success in an already crowded small-car market?

I’ve got to say it. I’m more than a little bit puzzled by Honda’s all new City. Here we have a vehicle that’s based on the Jazz’s compact underpinnings and isn’t exactly burdened by mechanical sophistication, yet still manages to command a price-tag just a couple of Gorillas less than the bigger, more powerful and more capable Civic.

What’s going on here?

With the City range kicking off at $20,490 and the base model Civic VTi retailing for $22,990, it seems Honda’s new small sedan might be positioned just a little too close to the Civic for comfort. With a pair of perfectly adequate (and more powerful) Korean rivals costing less and the excellent Mitsubishi Lancer just a few green notes pricier, how can the City justify its existence?

Honda sent a 2009 City VTi-L our way and told us to find out for ourselves, and after spending a week with Honda’s newcomer, it’s safe to say that first impressions are good.

The Package

On paper, it looks like you’re getting shortchanged with the City. While much of the competition at this price point use 2.0 litre engines, the City makes do with a 1.5 litre four-banger. Engine output is as modest as its displacement suggests, with the iVTEC mill generating just 88kW and 145Nm.

The engine is straight outta the Jazz, and the City also makes use of all the other mechanical hardware from its smaller stablemate. That means you get Macpherson strut front suspension, torsion beam rear suspension, smallish disc brakes, a five-speed auto or five-speed manual gearbox and electric power steering.

Open the bonnet, and you could be forgiven for feeling underwhelmed. The engine is physically tiny, and there’s loads of empty space around the motor, behind the headlights and under the quarter panels. A mechanic’s wet dream, considering the ease of serviceability; but if this was the first part of the car you looked at, you’d be forgiven for thinking this was bare-bones motoring at its most skeletal.

Venture further aft, however, and the City starts to look a little meatier. The cabin is where Honda has devoted most of its efforts and while it may not be crammed with the most up-to-date electro-gizmology, it’s probably one of the best passenger compartments in its segment.

For such a small car, the City is pretty damn spacious on the inside too. There’s a surprising abundance of rear legroom and headroom, and the rear bench is neither too hard nor too soft, but a Goldilocks-pleasing “just right”.

The VTi-L’s cabin in particular is a nice place to be, with its Premium Black cloth trim (the VTi gets regular ol’ cloth), alloy-look trim pieces and leather-bound steering wheel offering some tactile delights for driver and passengers.

Storage nooks and crannies are also in abundance, with seven cupholders, a pair of capacious front door pockets and a rear-seat undertray (VTi-L only) giving you plenty of options for storing your junk. The glovebox is a little on the small side however, and its shape isn’t exactly conducive to carrying much more than the owner’s manual. On the flipside, the centre console box is deep and far more accommodating.

On the subject of storage, one of the City’s party tricks is its ability to swallow a whole 506 litres-worth of stuff in its unassuming boot. That’s more luggage room than a Commodore, and 130L more than the Civic. On the flipside the boot floor is pretty low and the lip is kinda high, but beneath the carpet is another pleasant surprise: a full size spare.

Air conditioning is standard, and the HVAC controls are large, easy-to-operate rotary knobs. The instruments are sizable, clearly legible and backlit at all times, which makes them a cinch to focus on. The speedo takes pride of place in the centre of the cluster, and nestled within it is a fuel economy readout that tells you just how much juice that little four-pot is drinking.

Windows are electric all around, and wing mirrors are also electrically adjustable. Cruise control is standard kit too.

But as attractively-styled and eminently functional as the City’s insides are (Honda’s interior design team did a bang-up job here), the real pièce de résistance is that audio system.

The City is bound to be a hit with older folk, but Honda is actively targeting a younger audience with this car too – and we need tunes and we need ‘em loud.

The City’s stereo controls take pride of place up high and in the middle of the centre stack, with a larger volume/selector knob flanked by the other controls. To get your music on, flip down the LCD display to load CDs (one at a time, there’s no stacker here), or hook up your iPod/MP3 player via the integrated USB jack in the centre console.

There’s also auxiliary inputs for other audio players (or mobile DVD players), and the stereo can play MP3 WMA and AAC files – perfect for your pirated legally downloaded music collection.

It’s easy to operate and being able to scroll through an iPod’s music banks with the steering wheel audio controls sure is convenient, but the absence of radio preset buttons made jumping from one corner of the frequency band to the other slightly annoying.

Sound quality is loaded heavily to the mid-range, with a nice bottom end – great for getting the ‘burbs jumping but lacking a little clarity at the top end. Still, it’s not a bad system to crank some tunes through, and I should know – I’m one of those 20-something young’uns that Honda is targeting with this car.