My judgement is based on following grounds:

As always for me, a key judging criterion is that a Car of the Year must not only be extremely good at what it sets out to do, but must also advance the art of the type of car it is. It must be genuinely special. So:
Skoda Yeti:
It's an SUV but not one you would be embarrassed to own. The Yeti is compact, non-aggressive and it looks like it will be fun to drive and live with. The promise is kept with an interior of remarkable quality and usefulness, a range of lively and frugal engines, and – vitally – extraordinarily good ride and handling. Few cars inspire such confidence at speed in poor conditions and on bumpy roads. For a compact SUV to do so is an incredible achievement.
Toyota iQ:
Almost as high a score here, because the iQ is the most revolutionary small car we've seen for years with its gearbox ahead of the engine, its near-flat fuel tank and its amazing manoeuvrability. I almost want to buy one and hide it away for the future. But the gearing is too long for its little engines (victims of the flawed official CO2 tests), and it's inconveniently, needlessly wide.
Mercedes-Benz E-class:
The proper Mercedes saloon and estate are reincarnated better than ever, confident in their identity, seemingly rock-solid in their quality. The mid-range diesels are best; drive an E350 CDI and you could hardly want for more in a big saloon. There's potential for technology overload here, but you can always say no.
Citroën C3 Picasso:
A miracle of modern packaging, reconciling conflicting demands of space and safety in a compact, boxy body. This is a highly useful car which proves unexpectedly pleasing to drive. Good value, too.
Volkswagen Polo:
It's a baby Golf. It does everything you expect from that idea, and no more. For many, that will be enough. For COTY, it is not.
Peugeot 3008:
This is a good car, no question, and its two most powerful engines are class leaders. But it's cumbersome to manoeuvre, doesn't have a four-wheel drive option and appeals too much to buyers' insecurities.
 Vauxhall Astra:
Again, this is a good car, and it's vastly better than its predecessor. But it's too big to be a lower-medium hatchback, it feels underpowered despite healthy outputs, and it's far too expensive. Given that other cars in its class are better, it can’t be COTY.