MERCEDES-BENZ is making no bones about which car it intended to wipe the floor with when devising the latest, fourth-generation C-class.

Yes, it did poach some key Audi interior talent some time ago in order to make Mercedes interiors look and feel like a million dollars, instead of the million Roubles result of the previous W203 model.

And no doubt the Lexus IS’ remarkable value quotient has helped Mercedes to add more value for money in its most compact sedan range.

But the real prize for the people behind the three-pointed star is stealing some of the BMW 3 Series’ coveted – and long deserved – ultimate driving machine cachet.

Previous C-classes were too mature, too comfortable, too refined to bother breaking into a sweat around a series of stirring bends – even though their sophisticated (and pioneering) multi-link rear suspension system first seen anywhere on the 1982 W201 190E range meant that the Mercedes sedan is certainly no slouch in this department.

Slow-ratio steering, a long-travel accelerator pedal and rather leisurely performance are not the ingredients that start making keen drivers salivate with anticipation, no matter how well engineered the rest of the car is.

So – and we’re cutting to the chase here – how does C cut it against 3?

To find out, we lined up our C220 CDI Classic test car – now sourced from Germany instead of South Africa – with the latest BMW 320d, to ascertain if Mercedes has succeeded in out-manoeuvring its Munich-based nemesis.

Why diesel? Because we were frankly disappointed by the new C200 Kompressor’s lack of mid-range oomph and overall refinement, while the C280’s V6 is sweet and strong up top but somewhat subdued at lower revs.

Also, we regard the 320d as the best 3 Series this side of the sublime 335i twin-turbo petrol – for the moment anyway.

So on we go.

Behind the wheel, the first thing you notice is how much heavier the BMW’s steering is compared to the slick lightness of the Mercedes’ now-quicker set-up. And that’s no bad thing, particularly if you don’t want a biceps workout around town.

But on the move, you will also marvel at how sharp and intimately connected the BMW’s steering feels, with a level of tautness and body control that emphatically draws the line in the sand between sporty and sports sedan. And only the 3 Series lives in the latter.

Anyway, after a short time, when you get used to the 320d’s weighty steering, the Benz’s feels somewhat vanilla in comparison.

Nevertheless, both have about the same accomplished level of handling and grip finesse.

The C220 CDI’s steering and handling are best described as fluent and flowing, whisking you through turns with a super smooth attitude that feels progressively sportier the harder you throw it through a corner.

It’s just that the 320d always involves the driver more. Much more.

In a nutshell, this is the largest philosophical difference between two otherwise extremely similar compact sedans. Everything else is a matter of degrees.

Yes, the C220 CDI’s engine is quieter, which fits the mood of the Mercedes.

But the 320d’s powerplant is smoother. It is also quicker off the mark (especially when slotted into Drive Sport), but the C220 CDI’s capacity advantage helps it feel faster as speeds build past 60km/h.

Perhaps it is the five-speed automatic gearbox in the Benz compared to the BMW’s sensational six-speed ZF item that gives the Bavarian brand the mechanical edge. It certainly is smoother and changes up more fluently in sequential mode than the C220 CDI’s transmission.

Fire it up first thing and there’s no escaping the diesel clatter. But soon, as the engine warms, the sounds fall away.

Even when the auto’s button is set to Sport rather than Comfort, or when the fine left-right Tiptronic-style sequential shifter is in manual mode, there is no escaping the rather tardy take-off acceleration.

But once the revs build past about 3000rpm, the turbo really kicks in and the C220 CDI lunges forward, with almost too much enthusiasm if you are not expecting this. In contrast its C200K petrol-powered sibling, now sounding strained, is beginning to taper of by this time.

The Mercedes diesel comes into its own on the open road, overtaking with towering confidence and rock-solid stability to back it up – aided by one of the best cruise control set-ups in the business.

Not only do you set-and-forget your desired speed, Mercedes’ brilliant Limiter function will cap your maximum speed – an absolute boon when “safety” cameras are about.

And, obviously as expected, fuel consumption is remarkable: we averaged about 8.1L/100km through all sorts of differing driving environments.

For the record, Mercedes quotes 8.4 seconds for the zero to 100km/h dash, a 210km/h V-max and 6.7L/100km.

However, this ageing four-cylinder turbo-diesel is a tad coarser than the super-quiet efforts of some other rivals of late.

It has been around since the inception of the W203 C220 CDI in 2001, although detailed improvements to the engine, turbocharger and common-rail direct-injection system see power and torque outputs rise markedly to 125kW (up 15kW) at 3800rpm and 400Nm (from 85Nm) from 2000rpm respectively in its latest incarnation.

So congratulations, Mercedes. What was once a sizeable gap between the ‘C’ and the ‘3’ is now but a door barely cracked open. Fit more progressively weighted steering and we think that maybe both cars will be on an even dynamic keel.

After all, in most other areas, the C220 CDI is already at least the BMW’s equal, and in no small part due to its pure, traditional Mercedes upbringing.

Far from throwing the baby out with the bathwater in its pursuit of dynamic nirvana, the latest C-class strikes a brilliant balance between sporty and comfort.

Of massive importance is the fact that the Benz rides better – on the C220 CDI’s standard 16-inch 205/55 R16 rubber – than the BMW shod with highly controversial (though much improved) run-flat tyres.

On the other hand, in a three-digit speed blowout, we know what we’d rather have underneath us every time.

Still, the Merc is just so relaxing to travel in, with soft and supple suspension cushioning. Only the odd road surface would occasionally allow some road rumble to enter inside, which is an otherwise commendably quiet place to be.

The rather blocky dashboard is of the earlier Mercedes T-shaped fascia school of design, rather than the latest horizontal look as espoused by the current S-class and BMW range.

It works well nonetheless, while closer scrutiny reveals more modern detailing, such as the controller at the base of the gear lever assembly that controls the audio and related communications screen sited on the upper-half of the dash.

Even in the most basic Classic guise, we like the silver-trimmed instrumentation. On more luxurious models fitted with a multi-function steering wheel, a comprehensive trip computer is fashioned within the analogue speedometer. Among its usual displays is an extremely handy digital speedo. More cars should have this feature.

Mercedes has obviously got its value-for-money with the ex-Audi interior staff, because the surfaces are nicely finished, the switches and controls are elegantly presented, easily deciphered and within handy reach of the driver.

Give the dashboard the dodgy knock-knock test (or the equally dicey glovebox open-and-shut routine) and the C-class’ new-found solidity passes muster easily.

The C-class now feels as subjectively spacious as the 3 Series, so this could easily pass for a compact family car. The driving position is exemplary, helped by a firm and very supportive seat. In fact, all outboard seating is good, but the rear-centre fifth is – as usual – for small folk only at best.

The audio sounds great, the air-conditioning and ventilation set-up is both satisfyingly capable and unintrusive, and we particularly liked the feel – if not the look – of the large steering wheel.

Brilliantly effective parking sensors can be ordered, and are recommended, since they aid the helpfully large rear-view mirrors when parking.

So the cabin looks great, works especially well, and feels more expensive than most Mercedes have in recent years.

But, gee, we really dislike the foot-operated parking brake – such an anachronism. In the past it was the re-circulating ball steering that steamed up reviewers of Mercs.

Vinyl seats look and feel like leather. People will hate the fact it’s pleather, but it took us a couple of days before we realised. That’s a sign that the old Mercedes is back. It just doesn’t call it ‘MB-Tex’ anymore – Artico is the name.

Who cares anyway? Leather is available as an option, along with a whole world of mostly eye-searingly expensive extras that – like most German cars – will catapult the most basic C-class to a stratospheric price level.

Never mind though, because the latest C-class – handsome, beautifully proportioned and fresh enough to turn heads – will not alienate its traditional buyer base one iota, but will lure legions of 3 Series buyers.

Along with its edgier dynamics, we prefer the BMW’s great diesel engine and gearbox combination, but would still be content with the C220 CDI.

Because what we forgo in sheer driving pleasure, we gain in wholeness.

Right now, the C-class is simply the most rounded compact luxury sedan money can buy.

But don’t look now, here comes the next-generation Audi A4...