For several years, our Top Pick small car has been the Hyundai Elantra. Its latest generation combines impressive fuel economy with a practical interior and a pleasant driving experience—all at a value price. But the redesigned 2012 Subaru Impreza presented a true challenge for this honored distinction. (Read about the 2012 Top Picks.)

On paper, the Impreza has its work cut out for it. Following tradition, the revamped Impreza comes with standard all-wheel-drive, which cuts into acceleration and fuel economy. Unlike typical redesigns that add curb weight and horsepower, this new Impreza weighs less and has a smaller, less powerful engine. But as a package, it works well.

At 27 mpg, the Impreza can’t match the 29 mpg overall of the Elantra, but it does have impressive fuel economy for all-wheel-drive. Acceleration times remain decent and are on par with the previous Impreza. What’s more, this Impreza has a ride that rivals some luxury sedans, with generous compliance and isolation. The interior is very roomy, with a spacious back seat, and controls are about as simple as they get. Finally, visibility is refreshingly good for a modern sedan; here the Impreza’s upright styling gives an advantage over the more swoopy Elantra’s smaller greenhouse.

But the Impreza isn’t perfect. Road noise can get annoying—a complaint we also have with the Elantra. The Subaru’s continuously variable transmission promotes engine noise and has excessive, unwanted engine braking when descending hills.

Maybe the biggest Impreza shortcoming is the price. At $21,345, our Impreza Premium was nearly $3,000 more than the tested Elantra GLS. The Subaru’s all-wheel-drive and optional heated seats (in our test car) don’t come free.

The Elantra is a better value, but the Impreza is the better car, with its overall score squeaking past the Elantra in our Ratings. Since previous Imprezas and recent Subaru redesigns have been reliable, we expect the same for this Impreza. That makes the Impreza our 2012 Top Pick for small cars.

We’ll have a full road test of the Impreza, along with the super-fuel-efficient Mazda 3i SkyActiv, in the May magazine. Test results for the Impreza and Mazda are available online now, and Impreza highlights can be seen in the video below.