It may not be 'premium', but this new GT matches anything from Audi, BMW or Mercedes

We have become obsessed with brands. Think back, if you can, three decades. "Foreign" cars were still relatively rare in the UK.

Audi was just another mainstream car-maker on a par with Opel. Mercedes-Benzes were stark and expensive – it was the engineering you were paying for, not the glitz – and a Peugeot, that most solid, most durable and conservative of French cars, was an acceptable alternative which was also more comfortable.

Today, there's this notion of "premium" branding. Certain parts of society are simply unable to contemplate driving anything which isn't German, a Jaguar, a Land Rover or a Volvo. Such is the power of a name and reputation, hard won and easily lost. Such too is the power of marketing, to keep the winners winning.

Illustrated before you is a Peugeot 508. Some of our premiumophiles will stop reading now. But if they look into the 508, they will see a cabin as discreet, as tasteful, as suffused in quality, precision and tactile satisfaction as any Audi, BMW or Mercedes. And none of these has instruments as pure, discreet and redolent of engineering precision as the 508's. And from the outside? It is hard to make a roomy saloon with front-wheel drive and full safety regulation compliance look truly elegant. Within these constraints, the 508 is quite a good looker, assertive but understated, modern but not ephemeral. It comes across as expensive and precisely engineered.

The 508 (from £18,150 to £29,975) replaces both the 407 and the 607. Its mechanical make-up is vigorously eco-modern, with no petrol engine larger than 1.6 litres and three frugal diesels. The smallest, a 112bhp 1.6, can be had in e-HDi form in which the rated CO2 production is just 109g/km.

This one has an "automated manual" gearbox, old technology compared with the double-clutch systems of its rivals, slower and surge-prone in its shifts. This is the most frugal 508, but in 2012 a hybrid 508 will arrive with rear wheels powered by an electric motor and a sub-100g CO2 rating.

The most driver-indulging 508, however, is the GT with a 204bhp, 2.2-litre turbodiesel. It's a quick, muscular and very smooth engine, linked to a six-speed automatic transmission. Best, though, is the way this 508 reprises both the easy suppleness of past Peugeot saloons and their precision and balance when aimed at a series of interesting bends. The 508 shows that the company is rediscovering what once made its cars so pleasing to drive. This GT's poise and accuracy are helped by its double-wishbone front suspension. Other 508s use cheaper, simpler MacPherson struts. Why two systems? To save money, essentially, but Peugeot also justifies the move by claiming that the struts offer a more absorbent ride. Not true, unfortunately; the 2.0-litre, 140bhp turbodiesel model, likely to be the biggest seller, is quite harsh and fidgety over bumps and its engine is noisier. I do, however, like the turbocharged version of the petrol 1.6 with its 156bhp; light in the nose and properly supple in its suspension.

These new 508s are desirable cars which make a nonsense of the "premium" obsession. More than that, the GT in particular is as good as the much-praised Ford Mondeo in its driving dynamics and it stands comparison with a BMW or a Mercedes. Don't believe me? Then try one.

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