The baby BMW was conceived to steal sales from fancy versions of mainstream hatchbacks like the Volkswagen Golf and Peugeot 306.
A parts-bin special, the Compact's body structure is based on the E36 3 Series sedan, which was replaced by the E46 in April 1999
the suspension is from the 1980s 3 Series while some interior parts and engines are shared with the Z3 roadster.
The 316i Compact arrived in Australia in March, 1995. Those who expected the engineering depth and quality of the class-leading 3 Series sedan were greeted with a jumped-up three-door hatchback instead.
Worse still, BMW priced the 1.6-litre 316i $10,000 more than either the Golf or 306 but offered less power, space, doors, equipment and style.
No surprise then that sales have been slow. Less than 3000 Compacts were sold by the time the E46 model came along in early 1999.
In mid-1996 BMW released the 318ti with the Z3's 103kW, 1.9- litre, four-cylinder engine. The 75kW, 1.6-litre 316i remained until the 77kW and more torquey 1.9-litre E46 arrived in 1999, although the misleading 316i badge remains.
BMW initially introduced two 318ti models - the base 318ti Compact and the range-topping Sport - then added the luxurious Contour in 1998.
The Sport is the most visually exciting with an integrated M- style body kit, more supportive seats and 17-inch alloy wheels.
The 103kW, 1.9-litre engine, with 180Nm of torque on tap at 4300rpm, does not offer electrifying performance. It needs to be revved beyond 3500rpm before it earns its famous badge but then noise and harshness sets in. Fuel economy suffers too.
The 318ti could not keep up with its cheaper and more powerful 128kW Golf VR6 and 116kW Peugeot 306 S16 rivals. A hefty 70kg disadvantage also weighs against the BMW.
The stiffer suspension settings make for a jittery and firm ride, unsettling the car over bumps in mid-corner. The Sport's lower profile tyres make matters worse.
Other BMWs (bar the Z3) do not suffer such ride indignities because they use the sophisticated, and expensive, multi-link rear suspension.
Nevertheless, the BMW is a lively and entertaining handler, thanks to the Compact's rear-wheel drive layout.
On smooth roads the 318ti turns into corners crisply, staying firmly tied down. You steer as much with the throttle as you do with the slightly anaesthetised steering.
From the driver's point of view, the dashboard is a mixed bag.
Brilliantly legible and typically BMW instrumentation pleases while the centre console looks down-market and incomplete.
The ergonomics are good although the pull on/off light switch and heavy-handed heater controls appear a little down-market.
The seating is exemplary for front passengers. Rear-wheel drive conspires to limit room in the rear, making for tight quarters.
The hatch is handy and the seats fold but it is not especially spacious.
The 318ti does not really appeal to boy-racer types so used examples will not have had the hard, often thrashed life of many hot-hatch rivals. A thorough panel check for big-accident damage is recommended.
Check for a complete service history since BMW parts and service are not cheap, Compacts included.
Power, entertaining handling and a well specified interior make the 318ti a smart second-hand buy while thorough BMW engineering and the kudos the badge brings should keep owners satisfied for years.