Improvements include more rear-seat room, a quieter cabin, and better fit and finish than the previous model. While its handling is still fairly agile, the Impreza isn't as sporty to drive as its predecessor. Standard all-wheel drive helps in slippery conditions, but saps fuel economy; fuel economy of 24 mpg overall with the automatic ranks among the least efficient small cars. Crash-test results are impressive; electronic stability control was a readily available option that became standard in 2009. The Impreza Outback Sport is basically a better-appointed Impreza hatchback with a two-tone paint job; stability control was standard. The turbocharged WRX accelerates strongly, but the 2008 version proved to be surprisingly bland to drive. A quick 2009 update had 40 more horsepower and a retuned suspension, making it much more fun. The 24 mpg we measured with a manual transmission was pretty good for this level of acceleration. With over 300 horsepower, the STi version is a hard-core sports car; most buyers will find the WRX to be a more livable everyday.

Standard anti-lock brakes and all-wheel-drive provide confidence in slippery conditions. Road noise can grow wearisome on longer trips. The 2.5-liter four-cylinder supplies decent acceleration, but 22 mpg overall is mediocre. Interior trim is relatively spartan, rear seat room is cramped, and trunk space is modest. Sedans lack a folding seatback, which is a common feature in this class. The Outback Sport is basically a two-tone Impreza hatchback with a higher ride height and more standard equipment; it doesn't handle or ride as well as regular Imprezas. Both the rally-racing inspired WRX, with its 227-hp turbocharged engine, and the even more potent WRX STi version are a blast to drive. Suspension revisions in 2006 and newer WRXs made handling at the limit trickier; no stability control was available.

The 2.2-liter is livelier than the base 1.8-liter. The Impreza delivers nimble handling and a relatively comfortable ride. The rear seat is cramped and cargo space is tight. In 1996, AWD became standard on all Impreza models and an "Outback Sport" SUV-inspired wagon debuted. An RS sedan followed for 2000.