Which small car under $40,000 should you buy?

Another small car has perished.

Skoda Australia has swung the axe on its slow-selling Scala, despite us whining and carrying on for years about why it's an overlooked gem that deserved to sell better.

The unpopular hatch now follows rivals like the Ford Focus, Holden Astra, Mitsubishi Lancer and Renault Megane out the door.

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Small car sales volumes have continued to decline in Australia as buyers flock to SUVs – which, frankly, in many cases are little more than lifted hatchbacks anyway, but we digress – though there have been numerous new entries to the segment in recent years courtesy of Chinese automakers such as BYD and MG.

I posed the question to the CarExpert editorial team: which small car would you buy for under $40,000 before on-road costs, regardless of powertrain type? That left the door wide open for a raft of petrol, hybrid and electric options, ranging from new arrivals like the MG 4 EV Urban to stalwarts like the Toyota Corolla.

Unsurprisingly, this year's CarExpert Choice Awards winner for Best Affordable Small Car featured prominently among the responses, but one of the category finalists received a lot of loving too.

Marton Pettendy, Managing Editor

Kia K4

If I had $40,000 to spend on a new small car it would have to be the Kia K4, for the same reason we named it our Best Affordable Small Car in the 2026 CarExpert Choice awards.

The K4 is one of the newest models in this segment, yet it has a base price of just $32,090 plus ORCs for both the hatch and sedan. And with three other variants of each body style also priced under $40k, only the top-shelf GT-Line breaks that barrier at $43,790 plus ORCs.

Admittedly its 1.6-litre turbo-petrol engine is much peppier than the 2.0 MPI four that powers all other grades, but every K4 comes with classy exterior and interior designs, the latest safety and multimedia tech, loads of standard equipment, a great ride and handling package, and a seven-year warranty that most rivals can't match.

If you're in the market for a traditional, affordable small car from an established brand, the Mazda 3, Hyundai i30 and Volkswagen Golf are also good choices, but of them only the i30 can match the K4's overall value for money.

MORE: Explore the Kia K4 showroom

James Wong, Marketplace Editor

Mazda 3 G20 Evolve Sedan

I know it's not one of the hybrid options, but the Corolla is too plain for me, as is the i30 Sedan. The Mazda 3 Sedan, particularly in G20 Evolve trim with the optional Vision Technology Package ($2000), squeezes in comfortably under $40,000 drive-away.

Why the Mazda? Well, even in one-up-from-base spec it has a wonderfully upmarket look and feel inside and out, rather than the fleet-spec Uber vibe that its aforementioned competitors do.

It's also fun to drive thanks to its playful dynamics and rev-happy 2.0-litre petrol engine, and opting for the sedan over the hatchback means you get a usable boot.

Other honourable mentions go to the MG 4 for being an excellent entry into electric vehicle (EV) motoring, as well as the Volkswagen Golf 110TSI Life which is likewise premium-ish for $37,990 drive-away as currently advertised – I just don't gel with the older 1.4 TSI and accompanying eight-speed slushbox in Australian-spec.

MORE: Explore the Mazda 3 showroom

William Stopford, News Editor

Hyundai i30 Sedan Premium or MG 4

If only the turbocharged 2.5-litre four-cylinder all-wheel drive Mazda 3 was sold here. If only you could get the Hyundai i30 Sedan Hybrid in top Premium trim. And, for the sake of this article, if only the Kia K4 GT-Line fell under $40,000 before on-roads.

See, the Kia K4 GT-Line is my favourite vehicle in the broader small-car segment. Apart from disappointing front headroom and styling that's a bit heavy-handed, it delights with superb ride quality, a punchy powertrain with a traditional and well-sorted automatic transmission, and a thoroughly contemporary cabin with slick technology and user-friendly controls plus a long list of standard equipment.

However, it's priced at $43,790 plus on-roads, so it doesn't qualify for this list. Looking below the $40k mark, I could go for a K4 with the naturally aspirated 2.0-litre four-cylinder engine and the – don't knock it 'til you've tried it – continuously variable transmission. Alternatively, I could go for the same powertrain in the Hyundai i30 Sedan, which can be had in comprehensively equipped Premium trim for $39,500 plus on-roads.

There's a new generation around the corner and the i30 Sedan's interior isn't as nice as the K4's (and its exterior isn't as pretty as the Mazda 3 sedan's), but there's a lot more kit than in a K4 Sport+.

I'm not quite ready for an EV personally, but there's a growing contingent of affordable EVs. My favourite at this price point is still the original MG 4, now priced from $39,990 drive-away.

MG has addressed perhaps our chief complaint with the MG 4 with a recent update, giving it a vastly improved interior. You can get the new front-wheel drive MG 4 EV Urban for less, but I prefer the poised dynamics of the rear-wheel drive MG 4.

MORE: Explore the Hyundai i30 showroom
MORE: Explore the MG 4 showroom

Ben Zachariah, Road Test Editor

Mazda 3 G25 Evolve SP sedan

For buyers looking at small cars for less than $40,000, it's hard to go wrong, with the segment still alive with competition.

While the Kia K4 impressed me recently, my shortlist would consist of the Toyota Corolla, Volkswagen Golf, Hyundai i30 Sedan, and the Mazda 3.

This is the type of answer that will change depending on the day, my mood, and what colour socks I'm wearing, but on this particular day, I'd end up with a Mazda 3 G25 Evolve SP sedan in Jet Black Mica. The healthy 139kW and 252Nm from the 2.5-litre engine, coupled with its sporting handling, would win me over compared to the Hyundai or Toyota – and the higher-spec Evolve SP grade is a bit nicer than the entry-level Golf.

I also like the fact that Mazda still offers the 3 in a sedan, which makes it just a bit different on the road. Mazda's use of chrome also looks classy against the black paint. If only it still came with a manual!

Damion Smy, Deputy News Editor

Mazda 3 Evolve SP hatch

I’d buy a Mazda 3 Evolve SP hatch. The striking design is still fresh and different, even after seven years on sale, with an elegant and smart cabin, and that 2.5-litre is punchy and characterful. With sharp chassis dynamics and reliability, the 3 blends style and pragmatism like nothing else in this price bracket.

MORE: Explore the Mazda 3 showroom

Josh Nevett, Deputy Marketplace Editor

Kia K4 Sport+ Hatch

Most cars in this category do one or two things well, but the K4 is a true all-rounder.

It drives and rides exceptionally well, doesn't use much fuel, looks great as a hatch, comes with all the bells and whistles people want in 2026, and is backed by a long seven-year warranty with capped-price servicing for the same period.

Still not convinced? At $39,090 plus ORCs for the up-spec Sport+, the price is right, too.

MORE: Explore the Kia K4 showroom

Sean Lander, Head of Video

Mazda 3

We just had one of these through the Melbourne office (video coming to YouTube soon) and I found myself caught off guard by the Mazda 3. It's pretty old now, the tech isn't flashy – there's still no true touchscreen – and it has zero electrification.

I think that's why I enjoyed it so much. It was the first car I'd driven in months that was just... a car, not a science experiment with a name nobody in the office can agree on.

It's not without its drawbacks. The engine feels underpowered and the gearing makes it feel sluggish compared to many newer models. The interior is darker than a coal mine and it's probably a bit too expensive in the current climate. But it's a really good-looking car, it doesn't annoy you when you drive it, and there's almost enough room in the back seat to fit Paul Maric.

It's also a Mazda. Sure, legacy brands haven't been kicking the goals they once did, but Mazda still has a huge dealer network, a good warranty, and the simplistic nature of their cars means they are pretty reliable. I just wish it had a touchscreen – that wheel is beyond frustrating.

MORE: Explore the Mazda 3 showroom

Max Davies, Marketplace Journalist

Mazda 3 G25 GT Hatch

I am actually quite disappointed that the Scala is no more, though I can't say it's a surprise. One fewer small car simply means less choice, even if there weren't many people choosing the Skoda.

But a great choice remains the Mazda 3, which has an interior that's aging beautifully as more new cars shift to screen-heavy setups. It's visually classy and much more premium than the car's price would suggest, not to mention packaged well enough to feel sporty from behind the wheel while still being relatively practical.

In terms of which Mazda 3 to buy, it's difficult for me to look past anything with the 2.5-litre 'G25' four-cylinder engine. The G20 is fine, but it's fairly wheezy and lacks the punch I'd want in a daily driver. The G25 fills that gap nicely without going over the top.

The only G25 variant that slides under our $40,000 mark is the Evolve SP, but I'd be looking for the GT at $40,410 before on-roads if you can afford it.

MORE: Explore the Mazda 3 showroom