PEUGEOT really needed to pull something out of the hat with the new 508.

The preceding 407 felt old way before its time, hampered by leaden dynamics, poor interior packaging, sub-budget-brand quality and a comical proboscis that looked too long even for Pinocchio.

It was acutely disappointing because the 407 looked good on paper back in 2004. The double-wishbone front suspension, common-rail diesel technology and Peugeot’s bold new design direction had us hoping for a modern-day classic.

But it was soon outclassed by the VW Passat in 2005, the 2007 Ford Mondeo looked and drove better, and almost every other rival felt roomier – especially the cheaper Skoda Superb.

The 508 – with its sober styling, return to MacPherson strut front suspension (GT model excepted) and smaller-capacity powerplants – seemed almost like an over-reaction to the 407’s weaknesses, but has something of the earlier 406’s character – if not sheer beauty – with handsome and uncluttered lines, much better proportions and eye-catching details.

We haven’t experienced a more appealing contemporary French cabin, either. Swathed in a quality ambience, there is nothing flashy or futuristic about the dashboard, but we failed to fault the harmonious layout, super-clear instruments, supportive seats, spacious surrounds or quality.

We prefer the 508’s more masterful cabin presentation to the Passat 125TDI Highline, and that’s a complete turnaround after the flaky 407.

We do not like the thick pillars (the scourge of modern car design) as far as vision is concerned and reckon Peugeot should have made the centre console’s red lighting white a la Audi A8 (after all, the instruments’ dials and info window displays are), but on first acquaintance the 508 is a real winner here.

However, winning us over with interesting design and an inviting cabin that is big on quality as well as space is only half the story.

As the larger of the three turbo-diesel options are the only models available for the time-being, we sampled the Allure 2.0 HDi in both sedan and wagon guises, as well as the GT 2.2 HDi performance flagship.

The volume-selling 120kW/340Nm 2.0-litre turbo-diesel with six-speed automatic is a revelation – quiet, smooth and certainly powerful and torquey enough to make the Allure models feel more than sufficiently fast and powerful.

Furthermore, each boasted fast, natural and responsive steering, backed up by flat, involving and secure handling balanced by generous levels of grip. Far from feeling stodgy like the 407, the newcomer marks a welcome return of the Peugeot driver’s car.

For all its refined yet punchy turn of speed, though, the Allure 2.0 HDi lacks the dynamic verve and spirit of better mid-sizers like the Mondeo. Peugeot once (405 and 406 era namely) built arguably the best-steering family cars on earth, but now they are merely very good. More feedback and finesse is what’s wanted.

Worse, the suspension is not as pliant as the praiseworthy Ford’s, or the Passat’s, or that of a Mercedes C-class. On the optional 18-inch alloys, the ride felt firm (though ultimately quiet and well-damped). Germanic feel and ability comes at a price it seems.

We tried the standard 17-inch set-up on an Allure 2.0 HDi sedan and found slightly better compliance and comfort, coupled with a tad less alacrity and poise.

And now on to the 2.2L diesel-equipped GT – the luxury top-liner with its own (if 407-derived) wishbone front suspension system.

With just as much power (150kW) but more torque (450Nm) and a whole lot less consumption and emissions than the 2.7L twin-turbo V6 diesel of its 407 SV predecessor, the 508 GT is a strong, swift and stirring performer of a very high order.

Sensationally determined yet almost eerily hushed acceleration sees this particular Peugeot speeding along in cocooning splendour, while the front end has its own special talent in the way the steering turns into corners with better precision and feel than the regular 508.

Suddenly we found ourselves finally forgetting about how brilliant the old 406s were, such was the superior combination of eagerness, ability and composure that the GT displayed. Even the firm ride didn’t matter that much.

We only had about 30 minutes on lovely but probably untypical Aussie roads to assess the GT, but would seriously debate buying the equivalently priced base A4, 3 Series or Lexus IS 250 over this version.

Clearly, then, the 508 is compelling evidence that Peugeot is back in the game.

While the regular Allure certainly lives up to its name as a quality accommodating medium/large family-car proposition of flair and finesse, it is the GT that has left us longing for more.

And that’s a massive move in the right direction for the company after the all-too long-in-the-tooth (and on the nose) 407.

Even after an all-too-brief driving session with the vital French newcomer, we are ready to don our hat to Peugeot’s engineers for pulling out something as improved and appealing as the 508 from the carcass of its underperforming predecessor.