THERE'S an air of familiarity about the Jaguar XE saloon, even though it is virtually 100 per cent new.

Taking the larger XF saloon as a start point, the company has created a more compact version featuring aluminium and steel architecture, new engines and new suspension.

Although the exterior design is fresh, too, there's an obvious resemblance to the XF, which will be welcome news to those who might be tempted to downsize or switch from one of the premium brand German rivals.

Sporty and smart in appearance, the XE gets top marks for its looks... and the good news just keeps on coming as you explore the cabin and put the engine through its paces.

Inside, there’s a new generation infotainment system as well as more personalisation options.

And for the enthusiastic driver, there's the option of changing the way the car handles. Apart from paddle-shifters behind the steering wheel to override the automatic gearbox, there's a Sport mode that keeps transmission in lower gears for better mid-range performance plus a choice of Dynamic, Normal or Eco modes.

It might be a compact saloon but for those sitting up front the space is generous and the view is excellent thanks to the low dashboard. If you opt for the electrically adjusted seats (£765) you will soon find a perfect driving position. The high waistband and wraparound dashboard gives an immediate sense of one-ness with the car.

In the rear seats, space is tighter. Although three adults can be accommodated, none would want to straddle the middle section, and knee room is at a premium. The boot is well-shaped and offers up to 455 litres of space.

That new infotainment system is super-slick, presenting clear and attractive graphics for audio and navigation, while the pulsating start button and pop-up drive selector continue to provide a lovely touch. However, the aircraft-style ventilators have gone to make way for the touchscreen, and the theatre that became a hallmark of the XF is sadly lacking.

The new 2.0-litre diesel engine matched with automatic transmission in 163PS looks likely to be the best seller, certainly among business users.

At start-up it is disappointingly noisy, and the engine is quite vocal when pressing on, but at cruising speed it becomes impressively refined with an instant power surge on tap. Change the car's settings, select the Sport mode and your cruiser suddenly becomes a more potent force.

If there is one aspect above all others about the XE that leaves a lasting impression it is the rear-wheel drive chassis that provides the sort of ride quality that irons the harshest of road surfaces and keeps the XE feeling balanced and composed.

The trim levels start with SE, XE Prestige, XE R-Sport, XE Portfolio, XE S. There are two 2.0-litre diesel engines to choose from, with a power choice of 163PS and 180 PS, and both are available with manual or automatic transmission. The higher-powered version is also available with all-wheel drive. Three petrol offerings - 200PS and 240PS 2.0-litre and 340PS 3.0-litre - complete the line-up.

Even the base SE model, tested here, comes with satellite navigation and DAB radio, 17-inch alloy wheels, cruise control and a leather steering wheel.

There’s a great deal to love about the XE and although it wears a premium badge it’s the kind of car that will appeal to a broad range of buyers.

Of the 35 candidates for the 2016 European Car of the Year award, the Jaguar XE is one of seven to be short listed. The winner will be announced at the end of February, and with key criteria being technical innovation and value for money I would not bet against the XE.

Developed using lightweight aluminium architecture, the XE is the most fuel-efficient Jaguar and offers the lowest total cost of ownership of any Jaguar, boasting class-leading residual values and CO2 emissions from just 99g/km.

I doubted whether I would achieve the company's claimed average miles-per-gallon figure of 68.9mpg for the 2.0 163PS version, but at times I came mighty close at 66mpg, and regularly achieved a figure close to 60mpg without ever attempting to eke out more miles.

The suite of active safety technologies and advanced driver assistance systems includes dynamic stability control, traction control, emergency brake assist, lane departure warning, blind spot monitoring, closing vehicle sensing, reverse traffic detection, traffic sign recognition and adaptive cruise control.

The inherent strength and stiffness of the body structure, together with those cutting-edge driver assistance systems and impressive ride, handling and refinement make for a compulsive package.