For the past few years, car shoppers looking for an inexpensive new car at a Toyota dealership would have been gently guided to the Echo. Had we been there, we would have whispered in those shoppers' ears, "Friends don't let friends drive Echos." Thankfully, it's been cut from the 2006 team roster and its replacement, the all-new 2007 Toyota Yaris, is a better vehicle in just about every regard.

Though the Toyota Yaris will be new to Americans, the 2007 model will actually be the start of the car's second generation. A first-generation Yaris was available in other markets, and it was Toyota's best-selling car in Europe. The 2007 Yaris is available as a two-door hatchback (named Liftback) and a four-door sedan. It is situated below the Corolla in Toyota's model lineup hierarchy and as such, is meant to appeal to the young and/or money-conscious consumer.

Toyota has put in extra effort to differentiate the two Yaris versions. The sedan is almost 20 inches longer than the hatchback and has a longer wheelbase. There's also more room for rear passengers in the sedan, though the hatchback can compensate nicely thanks to its optional rear seat that can be adjusted fore and aft. Toyota has even gone to the trouble of designing two distinct instrument panels. The Yaris sedan and hatchback share the same 1.5-liter, four-cylinder engine, and it's the same one that's featured in the Scion xA and xB. Pricing starts out pretty darn cheap: The Liftback's MSRP is right around $11,000 and the sedan with the top-shelf S trim is about $14,000.

Toyota has put together a decent subcompact here. It has all the right features available, it's not a dog to drive and it's attractive enough that you won't mind using it to go out clubbing with your friends. And it's a Toyota, which means the car should fall in line with the company's above-average reputation for reliability. Our parting advice, though, is to keep an open mind. A lot of automakers have stepped up the quality of their subcompacts, and there are many worthy choices available, including the updated Chevrolet Aveo, the redesigned-for-2006 Hyundai Accent and Kia Rio and the new-for-2007 Honda Fit and Nissan Versa.

The 2007 Toyota Yaris subcompact is available as a two-door hatchback (Liftback) or four-door sedan. Standard features include 14-inch wheels, air-conditioning and a tilt steering wheel, but not much else. An "S" trim level upgrade for the sedan comes with a rear window defroster, 15-inch wheels, a ground-effects kit, 60/40-split folding rear seat and a CD/MP3 player with an auxiliary input jack. Most of these features are available on the regular hatchback and sedan as options. Other upgrades for the Yaris include alloy wheels, a rear spoiler, foglamps, keyless entry and power windows and locks.

All Toyota Yaris models are front-wheel drive and powered by a 1.5-liter, four-cylinder engine that produces 106 horsepower and 103 lb-ft of torque. Two transmissions are available: a five-speed manual and an optional four-speed automatic. Fuel economy figures with the manual gearbox are 34 mpg city and 40 mpg highway for both body styles. When equipped with the automatic, the Yaris rates 34 city/39 highway.

On the options list for the 2007 Toyota Yaris you'll find antilock brakes, front seat-mounted side airbags and head-protecting side curtain airbags for all outboard positions. In NHTSA tests, the Yaris sedan earned four stars (out of a possible five) for its protection of occupants in frontal impacts. Without the optional side airbag package, it has a three-star rating for side-impact protection.

With the suspension stiffened by 47 percent over the Echo, the Toyota Yaris feels buttoned-down and, dare we say, fun on curvy roads. The suspension design is nothing earth-shattering -- tried-and-true MacPherson struts up front and a torsion beam out back. But with redesigned bushings, a single upper mounting point for the front struts (rather than three as in the Echo), firmer calibrations and a lower center of gravity, the Yaris doesn't even feel related to its wallowing forebear. The 106-hp engine is surprisingly peppy, with a smooth delivery even when revved to high rpm. Off-the-line acceleration can be sluggish with the automatic transmission, but all models have enough midrange pull for easy merging and passing at highway speeds.

Inside, the Yaris Liftback's dashboard differs notably from that of the sedan. Three gloveboxes (yes, three) and a narrow center stack make the instrument panel unique to the Liftback. The slightly less outlandish center stack layout found in the sedan is in keeping with that car's more conservative exterior styling. One of the LE Liftback's most unusual interior features is the optional sliding and reclining rear seats.