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Indulge in Audi luxury
The Audi A1 is one of the marques challenging Mini. Supplied picture

The small luxury car market segment is not exactly new; Mini has been offering vehicles for more than a decade.

Because only a small number of buyers had shown any interest in these up-market but relatively expensive little hatches, most premium car makers had been happy to leave Mini unchallenged.

But things have changed in recent times, with a worldwide trend of moving into smaller cars as we are forced to contend with increasing fuel prices and more competition for space on the roads and in carparks.

Even markets like the US, where big has always been best, small (or at least smaller) vehicles are now dominating sales charts.

More than 6.5 million compact luxury cars were sold globally last year and it is estimated the compact luxury market will grow by 4 million sales globally to beyond 10 million by the end of 2020.

Here in Australia most drivers appear to prefer an SUV or a small hatch - last year sales of small cars priced at more than $40,000 increased by 38 per cent.

With people prepared to spend more money on smaller cars, mainstream manufacturers are loading their cars with more equipment than ever before and premium brands are entering the small car segment for the first time.

Buyers looking to downsize without sacrificing features, safety or driving enjoyment now have a plethora of options.

We are seeing well-specified hatches being offered from the likes of Lexus, Volvo, Citroen, Alfa and Volkswagen, whose Golf VII is going to raise the bar even further when it arrives here next year.

And we are seeing brands like Audi, BMW and Mercedes-Benz offering sub-$40,000 models.

At the launch of the new Mercedes-Benz A-Class at the Australian International Motor Show in Sydney in September, the German marque predicted that 50 per cent of its buyers would be new to the brand.

Executives at BMW and Audi quote similar statistics when talking about their 1 Series and A1 respectively.

So what do you get when you buy an entry-level premium brand car?

First, and foremost, you get the badge. While it may not sound like much, just ask yourself which is going to get the greater reaction from neighbours when you take your new car home for the first time - a highly-spec'd Japanese or Korean hatch or a new little Beemer, Merc or Audi?

On a more tangible note, you are also buying the same expertise and technology that goes into developing and building far more expensive cars than the entry- level hatch you have just bought.

Mercedes has equipped its third-generation A-Class with a comprehensive suite of standard safety equipment, including a radar-based collision warning system, nine airbags, electronic driver fatigue detection and Pre-Safe, which readies the car for maximum occupant protection if it detects an inevitable collision.

These are features previously only found in bigger, more expensive models.

The little Merc also has features like voice-activated connectivity to operate the audio and phone systems, which will become more important as laws regarding the use of mobile phones in cars continue to tighten.

With all three German brands you also get an interior that is well built and well finished, with plenty of soft-touch plastics and enough room to comfortably accommodate four adults.

And all three are powered by high-tech, fuel-efficient turbocharged engines matched to seven or eight-speed automatic transmissions and a range of safety equipment.

While the driving experience may be different to a larger car, these small hatches are fun to drive and very comfortable, either in the city or long country or highway runs.

But there are catches. Servicing will generally be more expensive than more mainstream manufacturers, especially those that offer set-price work. So will tyres, especially on the BMW that uses run-flat tyres.

And you can nearly double the price of your purchase if you starting ticking too many boxes on the options list, of which there are plenty.

But for drivers who have always wanted to sample the premium experience, it has never been more affordable.

These small hatches are fun to drive and very comfortable, in the city or country.