SEATTLE — When the sub-compact Nissan Versa was introduced in the U.S. five years ago we were impressed with its cavernous interior. The next-generation has arrived and we are delighted to report the large passenger area is still there, but in a sedan that features more up-to-date styling, considerably improved refinement, and better gas mileage.

And the base Versa sedan can be purchased for an amazing starting price of $11,750 including destination. But only the sedan is all new. The hatchback continues with its current design, and will probably get a complete makeover for the 2013 model year.

The Versa sedan is a perfect match for those on a tight budget because the base car is anything but a stripper. It is lavishly equipped by yesterday's standards and well equipped compared to the current competition.

Standard equipment includes air conditioning, a radio/CD player, six-way adjustable driver's seat, and a full range of safety including traction and stability control, four-wheel ABS, tire pressure monitoring and front and rear head airbags.

Add the continuously variable transmission (CVT) and the bottom line is still within reach of frugal minded buyers at $13,520.

Load up the Versa with everything Nissan makes available including navigation system, satellite radio, upgraded audio system with Bluetooth, and a full range of power equipment and the price is just $17,020. Versa still remains affordable for those who want more of the extras without breaking-the-bank.

The outgoing Versa has that tall, narrow look of some small Japanese sedans of the early part of the decade — think Toyota Echo — but the new version is lower, more planted, with smoothed out lines, a nice flowing roofline, and body molding accents over the fenders. It's not flashy – we'll call it stylishly conservative.

All Versa models come with a new 1.6-liter 4-cylinder making 106 horsepower replacing the 1.8 liter with 122 horses. But don't fret. We found the new Versa, which weighs about 150 pounds less to be every bit as enthusiastic as the old model. It handled all our Seattle chores, including climbing some steep city grades, with aplomb.

We were surprised that Nissan did not hit the new 40 mpg highway gold standard for small and mid-sized cars coming in at 38 mpg highway and 30 mpg in the city. But Nissan officials pointed out that its 33 mpg combined EPA rating is as good as any of the 40 mpg cars, and that's what counts most in everyday driving.

We checked and sure enough, it's true. For instance, the all-new Hyundai Accent just reaching showrooms is rated at 40 mpg highway, but just 33 combined. That’s impressive.

— Jim Meachen