Citroen has some form line when it comes to making small cars that are great fun to drive. Wizened oldies might gleefully remember the Visa GTi while a little more recently, there was the iconic AX GT and the massively popular Saxo VTR and VTS twins. Following in the footsteps of the Saxo hasn't been an easy task for the Citroen C2 but the VTS and VTR variants are starting to establish themselves as the prime pick for the nation's younger drivers who want their first quickish car without being clobbered by monster insurance premiums.

Virtually as strong as Citroen's reputation for building pocket rockets is its facility for attractive offers and discounts and very few customers will pay full retail for something like a C2 VTS. The Code special edition model tacitly acknowledges this, offering a decent slug of extra equipment for a bargain price.

The C2 Code is powered by a 125bhp 1.6-litre engine that's enough to punt it to 60mph in 8.1 seconds and on to a top speed of 126mph. This sixteen-valve unit never feels particularly rapid but a look at the torque curve shows why. It's so broad and flat that there's enough urge for overtaking right across the board with no awkward flat spots or the screaming peaks associated with old fashioned multi-valve engines. This measured, linear response makes the car feel a good deal more relaxed than its racy looks suggest but it's an easy car to maintain pace in and deceptively quick when arriving at corners.

The five speed manual box is a good deal more conventional than the paddle shift system offered on the VTR model and features close ratio gearing to extract maximum performance from the willing engine. Citroen could probably have made the engine a good deal more powerful had they wished, but in order to keep insurance costs manageable, they've pegged the power at 125bhp. Your first performance hatch was once an abject lesson in disappearing off the Queen's highway tail first during a spectacularly ill-advised cornering manoeuvre but the ESP system does a great job of reining-in youthful enthusiasm. Should you really want to test the effectiveness of Citroen's insurance policy, the ESP can be switched off but you'll still have the safety net of anti lock brakes with electronic brake assist and brakeforce distribution to help you out of a spot.

"The C2 Code takes all the attributes of the C2 VTS and presents them in an even more attractive package"

As you would expect from a car that measures just 3,666mm from stem to stern, there's not a whole lot of space to spare if a long-legged driver sits up front. The sliding rear seats help divide space between the luggage bay and the rear to a certain extent, but in no way could the C2 be forwarded as practical family transport. Two holdalls will just about fit into the boot at maximum extension although Citroen's split rear hatch helps in this regard. Whereas with a conventional hatch, stacking bags on top of each other in this tall but shallow space would be a precarious exercise in balancing the bags and then slamming the hatch before the uppermost one toppled over, the C2's hatch means you can place the bags into a boot-like aperture with no problems. I was a little sceptical at first, but having used it in practice, I have to admit to being a convert.

Despite being even shorter than a Saxo, the C2 Code is able to seat four in comfort. Lessons have been learned from the reception given to the C3 interior and the C2 adopts many of the funkier styling touches such as the ventilation system and the bar rev counter while introducing a few of its own. The latest cars feature an upgraded dashboard, in high-grade plastic with silver detailing, which brings a pleasantly up-market feel to the cabin. It's possible to carp about distortion from the curved windscreen but otherwise there are few bum notes in the Code's cabin. The sports seats grip well, the air-conditioning offers a decent blast of cold air and the stereo isn't bad. The target customers will doubtless feel that it could use a meaty sub and some amps but for those of us more interested in Sport on Five than Bobby Friction it's perfectly acceptable.

There's little doubt the C2 Code offers a lot for your money. The £10,695 asking price is nearly £3,000 less than the Saxo VTS was at launch all those years ago, and includes air-conditioning, a CD stereo and ESP stability control as well as the Code-specific leather trim, heated front sports seats and aluminium gear knob. On top of that, there's a full-length roof stripe, a chrome exhaust pipe and 16-inch alloy wheels. Code customers also get to chose between iron grey pearlescent or dynamic black paint finishes.

Rivals for the C2 Code include the Suzuki Swift Sport and the Fiat Panda 100HP, neither of which are as quick nor can they really touch the value proposition that Citroen generates.

Demand has proven strong for hot baby Citroen models thanks to a combination of affordable parts prices, a growing and close knit community of owners and the fact that there's an endless conveyor belt of 17 year olds who want nothing else. Young buyers are often a lot cannier than many give them credit for and will only look to cars that give maximum bang for the buck and that's where the C2 Code scores. Apart from the low upfront price and beefy residuals - the C2 VTS for instance retains more of its value after three years than an Audi A4 1.8T - insurance is reassuringly affordable at a mere Group 8. This means you're getting a car that will accelerate to 60mph quicker than a 2.2-litre Alfa Brera but which costs less to insure than a Hyundai Trajet.

You won't need to spend a fortune pouring unleaded down the C2 Code's neck either. With a combined fuel economy figure of 41mpg, this Citroen isn't going to earn you a fortune in reward points. The fuel tank isn't big though, so stopping at petrol stations is a case of little and often.

Although they may not have written the rulebook on fast, affordable, small cars, Citroen has at least appointed itself editor in recent years. Rather oddly, the company it has deposed is sister concern Peugeot which once cornered the market but has rather fallen from grace of late. The C2 Code takes all the attributes of the C2 VTS and presents them in an even more attractive package at an eye-catching price. It's worth bearing in mind that few retail customers will really be paying more than £10,000 for a VTS, but even then, the Code's package of extras still looks good value.

Where this car scores is in offering a beautifully-judged compromise between performance and affordability. It's a template the Saxo capitalised upon and the C2 is following suit. In short, this is one Code that's not going to be cracked.