WHERE better to test the virtues of a new Subaru WRX than Tasmania, the windswept home of arguably Australia’s finest targa roads?We’ve winged across Bass Straight with the Rex’s maker to have a crack at its fourth iteration of the original classic, which astonishingly burned its way into the automotive landscape more than 20 years ago.

But while that fiery original introduced Subaru to the sports-minded mainstream and gave buyers of the day a red-hot turbo alternative to Commodore and Falcon V8s, this new one must face up to a raft of exciting four-pot rivals from Japan, Germany and even Korea (although the Aussie Commodore SS from $41,990 remains a legitimate rival, it must be said).

And so, in order to confront rivals such as the Volkswagen Golf GTI (from $41,490), Ford Focus ST ($38,290), Mitsubishi Lancer Ralliart ($39,990) and Skoda Octavia RS ($36,490), Subaru has cut the starting price by $1000 over where the original sat in 1994 – to $38,990.

But while some things change, others stay the same. Beneath the new body – all creases, angles and flares, albeit toned down from before – sits a beating heart with signature Boxer configuration, a horizontally opposed layout it shares in this age only with Porsche.

This new 2.0-litre flat-four loses half-a-litre in capacity over its forebear, but is more powerful and torque-loaded than ever. We’re talking a robust 197kW of power at 5600rpm and 350Nm of torque between 2400 and 5200rpm.

This new Euro 5-emissions compliant engine, shared in essence with the Forester XT sports SUV but more potent, features direct fuel injection, a DOHC variable valve mechanism, bore and stroke of 86mm x 86mm and a high (ish) compression ratio of 10.6:1.

It lacks a little of the old car’s exhaust burble, but remains pleasingly anti-social in the way it pops and barks from its quad-pipes.

Likewise, despite the smaller size, it is a strong and willing unit with plenty of low-down grunt, not a jot of turbo lag and a willingness to rev both hard and fast. Only above the 5500rpm mark does it start to run out of puff, which is where that new sixth manual ratio comes in handy.

Power is fed to all four corners via a viscous LSD on the six-speed manual and a trick Variable Torque Distribution system on the continuously variable transmission – yes, a humble CVT in a Rex, albeit one with up to eight artificially-stepped illusory ‘ratios’ controlled via paddle-shifters.

The manual needs a firm hand but is a ripper, with a short and precise throw – the first two gears are especially short. Third gear sits nicely in the engine's sweet spot, and there is enough grunt to pull away from sharp corners without reaching for the shifter.

The CVT is good – for a CVT, that is. Fundamentally, a ratio-less transmission is not the most sporting, and Subaru cannot completely erase the dreaded and familiar drone that emanates from a car without the familiar peaks and troughs of an engine cycling through its rev band.

The paddle-shifters that control eight artificial ratios in S# (Sport Sharp) mode are immediate – though physically they are made of cheapo plastic – and bound to be effective enough for most occasions. Fact is, pure WRX fans won’t go near it, but it will open the showroom door to a whole new sort of buyer, and for that reason alone it is a worthy addition.

Don’t like the idea of a CVT Rex? Easy, get the manual! That being said, a dual-clutch auto like those possessed by many of its rivals would likely be a more palatable alternative than the CVT.

Through the bends, the new Rex retains peerless mid-corner grip courtesy of its AWD layout with near 50:50 weight distribution. Driven properly, it’s even possible to convince the rear to let go for a moment for some corner-exiting theatrics.

Likewise, the balance is exceptional, and the turn-in from the (perhaps slightly too light) electric steering system is sharp, courtesy of a faster ratio of 14.5:1. Feel and feedback is excellent, and the ride quality is compromised enough so as not to be thrown-off by any unexpected corrugations.

Indeed, the only real dynamic issue is the brakes, which in at least one of our test cars lost feel after 15 minutes of eager – but far from kamikaze – driving. The front discs and rotors may be larger, but there was still a ready amount of fade. Oddly, one of our other test cars showed absolutely no such weakness. Strange.

The Dunlop SP Sport tyres added some welcome stickiness for those sticky situations, offering a ton of grip, though either they or a lack of basic insulations meant plenty of road roar emanated through the cabin, hurting ambience.

The cabin is a step-up on the old car, with more soft-touch plastics and some racy carbon-fibre highlights that remind the driver of the boy – or girl – racer within. The chunky new steering wheel is a delight, and the seats offer plenty of bolstering – albeit not to the extend of the Focus ST’s Recaros.

The fascia of the base car is a little dull, the head-unit looks a bit cheap and out of date, and the lack of satellite-navigation grates. Spend the extra $5000 for leather seats, nav, a sunroof and a better 10-speaker sound system with a sub and you won’t regret it.

But look, Euro-chic cabins have never been a Rex forte – if that’s a priority then buy the more refined, but less fun, Golf GTI. Rather, this new Subie retains the rough-and-ready charm of its ancestors, and in most ways moves the game – and in some cases the segment – forward.

For a hot sedan under $40k, it takes the cake, by the sheer force of its 'personality'.