17 Sep 2014 15:55 Last updated: 4 Apr 2016 14:04

The Mercedes C-Class is a massive step forward when compared with its predecessor. Its beautifully built cabin features plenty of flair with quality materials, it has impressive levels of safety kit and lots of goodies as standard.

However, its appeal as a company car – in C220 Bluetec Sport auto guise, for example – has been limited by comparably high benefit-in-kind tax costs, despite the C-Class being very competitive to lease.

Enter the C300 Bluetec. With the 201bhp 2.1-litre twin-turbodiesel and a 27bhp electric motor under the bonnet, the C300 Hybrid cuts CO2 emissions to as low as 94g/km and has a starting price of £34,630. Even in top level AMG Line trim (and on 18-inch alloys), CO2 output remains below 100g/km.

So, with the Hybrid’s green credentials established, does the C-Class now have what it needs to beat rivals from BMW and Lexus?

What’s the Mercedes C300 Bluetec Hybrid like to drive?

As you’d expect, all is serene when moving off from a standstill. A display on the dashboard shows you how much energy is being sucked from the batteries, and how much farther you’ll be able to press the accelerator before the diesel engine kicks in.

In reality, you’ll be able to drive on pure electric power only when you’re trickling along in heavy traffic, and then only when you’re feathering the pedal. Normal manoeuvres away from traffic lights have the diesel engine firing after as little as a couple of seconds – and this is where the C300’s main problem appears.

The outgoing C-Class’s diesel engines were noisy and coarse, and while this version is better it still sounds decidedly gruff, particularly when it starts while you’re at a standstill, for example when it deems you’re using too much electricity for the batteries to cope on their own.

The engine’s startup is less noticeable if you’re already on the move, but you soon become aware of its noise, which is all too apparent. Any vibrations are restricted to the engine bay, though.

The Hybrid’s main advantage over conventionally powered rivals is that it shuts down the diesel engine and decouples it from the drivetrain whenever you lift off the accelerator pedal if you're in Eco or Comfort modes. With no engine inertia to hamper progress, you can coast for surprisingly long distances before either accelerating again under diesel power or applying the brakes, which also recharge the batteries.

However, as a result of the energy-recuperation system, the brake pedal response is inconsistent, which takes a little while to get used to before you can bring the car to a halt smoothly.

The C300 diesel-electric engine is mated to a seven-speed automatic gearbox. It’s not the smoothest auto out there – the change from first gear to second and vice versa sometimes proving lumpy – but is fine in most situations.

Our test car was in Sport trim, which comes with 17-inch alloys (and CO2 emissions of 95g/km) and conventional steel-sprung ‘comfort’ suspension. The ride quality is a little fussy in town, with most ruts making their way into the cabin, but body control is largely good with minimal roll or pitch. The ride improves at speed, although there’s some wind noise from the door mirrors. The steering is direct, but the weighting isn’t consistent enough in corners.

What’s the 2014 Mercedes C300 Bluetec Hybrid like inside?

Very impressive. Every surface looks and feels a grade above what you’ll find in a BMW 3 Series, while most of the buttons and switches feel solid and well damped.

Entry-level SE cars come with 16-inch alloys, manmade leather seats, climate and cruise controls, a reversing camera, rain-sensing wipers and a DAB radio.

Sport trim (pictured) gets you 17-inch alloys, flashier interior trim, heated front seats, LED headlights, lower suspension, front and rear parking sensors, sports seats and split-folding rear seats. The sat-nav system on this version is not very well integrated into the rest of the infotainment system, and nor is it as intuitive as similar systems in Mercedes' rivals from Audi and BMW.

The top-the-range AMG Line comes with 18-inch alloys, an AMG bodykit, a leather-wrapped dashboard, sports suspension and gearshift paddles.

All models come with a 7.0-inch colour screen that’s controlled using a rotary dial and touchpad positioned between the front seats. You can scroll through the on-screen menus using just the touchpad, swiping left and right to cycle through functions, and pinching to zoom in on maps.

Most of the time, though, you’re better off sticking with the rotary dial, which is quicker and easier to use on the move. It’s just a pity that whichever method you use, the on-screen menus aren’t as intuitive as the ones in BMW’s iDrive system.

Even seriously long-legged drivers will have no problem getting comfortable thanks to an enormous amount of front legroom, and there’s plenty of front headroom, too, even in cars equipped with the optional panoramic roof.

The glass roof does impinge on rear headroom, although six footers will still fit and things aren’t that much worse than in the back of a BMW 3 Series. You just have to be careful not to bash your head when getting in, because the swooping roofline makes this easy to do.

Officially, boot space is on a par with a BMW 3 Series' (at 480 litres), and the load bay is easily wide enough for a set of golf clubs. Split-folding rear seats are standard and lie flush with the boot floor when dropped.

Should I buy one?

With a starting price of £34,360 for SE trim, the Hybrid costs £2500 more than the C250 SE, but outpaces it to 62mph, emits less CO2 and is more economical. However, private buyers will still be better off with the conventionally powered diesel in the long run.

It’s company car drivers that the C300 is aimed at, and it’s here that it really shines. In Sport trim, higher rate tax payers have to find only £147 a month to run one, compared with £171 for the Lexus IS300h F-Sport and £230 for the BMW 325d Luxury auto. Even the BMW 320ed - our favourite of the 3 Series range - is more expensive at £179 per month, despite being noticeably slower than the Merc hybrid.

It’s a shame that the diesel engine’s refinement mars what is, overall, an impressive package, and there are rivals that handle and ride better, too. Even so, if you can live with that knowledge and like what the C300 offers, we think you’ll be pretty chuffed with your choice of company car.

What Car? says...

Rivals

BMW 3 Series

Lexus IS

Mercedes-Benz C300 Hybrid

Engine size 2.1-litre diesel/ electric motor

Price from £34,630

Power 201bhp+27bhp

Torque 369lb ft

0-62mph 6.4 seconds

Top speed 152mph

Fuel economy 78.5mpg

CO2 94-99g/km