The dilemma

Caroline and her husband have two cars. The first, a 2015 Volkswagen Passat, is used for travelling, ferrying grandchildren and general use when they are together. The second, a 1998 Mazda 323, fills the gap when they both need a car. They're keen to replace the Mazda with something newer, safer and like the idea of a smaller 'Passat' (i.e. the Polo), or are there better ways to spend their cash?

The budget

About $20,000

The shortlist

The Polo is one of the light-car segment's class acts but there are some areas where it underperforms, particularly in this price range, so it might pay to consider other options.

Some can be counted out straight off the bat. Toyota's Yaris, Honda's Jazz and other arch-mainstream contenders make sense in the budget-sensitive realm but lack the sheer talent to kick it with the Polo and a $20k budget.

Peugeot's 208 lands closer to the mark but is ultimately outgunned by our chosen Polo alternatives. The Renault Clio's lack of head-protecting rear curtain airbags is a question mark for a car that – while not the preferred kid-carrier – may be asked to handle the task now and then.

Mazda 2 Maxx, from $17,690

This Mazda is noisier than your average light hatch on the open road and its 1.5-litre engine is throaty when worked hard.

It has one of the segment's smaller boots (250-litres) and its service cost/convenience credentials are dampened by yearly/10,000km intervals.

But the 2 is willing performer, fun to drive and has one of the best economy ratings in the business (4.9L/100km).

It's slickly presented inside and out, ticks all the fundamental safety boxes and can be optioned with autonomous emergency braking for just $400.

Those who don't break through the 10,000km annual barrier will find it much more competitive on the servicing front, especially when costs are fixed for the life of the vehicle.

Read Drive's Mazda 2 reviews:

Road test: Mazda 2 Maxx sedan
Road-test comparison: Light hatches 
Drive Car of the Year 2016: Best City Car

Skoda Fabia 81TSI hatch, from $19,490 driveaway

This Skoda has some things the Mazda doesn't, most notably standard autonomous emergency braking.

Its 1.2-litre turbo engine – shared with the closely related Polo – is not just stronger and more flexible than the 2's engine at low revs but quieter and fractionally thriftier (4.8L/100km).

It has the bigger boot (305-litres), longer service intervals (yearly/15,000km) and its standard auto transmission and driveaway pricing add up to sharp value – a 2 Maxx auto costs $200 more, a Polo 81TSI auto $1700 more, before on-road costs are factored in.

But the Fabia asks for more expensive fuel than the Mazda (95-octane premium) and its fixed-price servicing coverage has a use-by date (six-years/90,000km). Its dual-clutch auto is occasionally hesitant in stop/start driving and there's no manual version (for that, you need to step back to the less powerful 66TSI).

While there's nothing wrong with its cabin presentation or driving qualities, the Mazda is more engaging on both fronts, the VW more polished.

Read Drive's Skoda Fabia reviews:

Road test: Skoda Fabia 81TSI Monte Carlo wagon

Volkswagen Polo 81TSI, from $18,690

This VW, powered by the same 1.2-litre turbo engine as the Skoda, serves up the same excellent driveability, quietness and economy (4.8L/100km).

Its mix of ride, handling and open-road refinement has a distinctly upmarket flavour for a light car, as does its cabin.

It matches its rivals here by including a reversing camera in its standard safety artillery, has a potentially tempting manual option and convenient yearly/15,000km service intervals.

Just like the Fabia, though, it asks for costlier 95-octane premium brew, is almost sober to a fault in its character and its fixed-price servicing deal expires after six-years/90,000km.

Auto models don't just have dual-clutch driveability niggles but a budget-breaking price ($21,190 plus on-roads). Add another $1900 to that for autonomous emergency braking.

Read Drive's Volkswagen Polo reviews:

Road test: Volkswagen Polo 
Road-test comparison: Light hatches

Drive recommends

In a no-budget scenario the Polo's extra veneer of polish makes it more desirable than a Fabia. In an 'about $20,000' scenario, however, the Skoda's superior value and safety combine to give it a clear win.

Does that make it better than a Mazda2? Maybe not if Caroline must have a manual gearbox or is seeking to maximise servicing peace of mind over the full life of her car.

Otherwise, the Fabia – the light hatch with the better engine, better standard safety fitout, bigger boot and lower price – seems the obvious candidate for the spot next to her Passat.