(FORTUNE Small Business) – Few cars evoke rose-tinted memories like the Ford Mustang, which first appeared in 1964. What's forgotten is that the original Mustang was based on the humble Falcon, and the misbegotten Mustang II was a Pinto in wolf's clothing. Now that the 2005 Mustang has just hit the market, it is time to put nostalgia aside. This fifth-generation edition is the best Mustang yet.

The 2005 comes in two flavors: mild (with a 202-hp V-6 engine, starting at $19,410) and the extra-spicy GT (300-hp overhead cam V-8, $24,995). Both have classic proportions, with a shark-nose front end, long hood, fast-sloping roofline, and short rear deck. Climb into the driver's seat, and you immediately feel at home. Gone is the sitting-in-a-bathtub sensation you got in the previous design, with the windowsills up around your nostrils. All the important driver contact points—steering wheel, gearshift lever, pedals, and seat cushion—are properly aligned. That means no palsied left leg while driving a manual shift in traffic.

On a drive into the Hudson River Valley, my GT test car (Torch Red exterior, charcoal interior with red leather trim, sticker price $28,865) was as smooth as it looked. Thanks to improved stiffness and torsional rigidity, it soaked up cracks and potholes without a shimmy or shake. The V-8 engine was pleasantly growly and produced plenty of zip. Ford claims zero-to-60 times of less than six seconds. Retro-minded designers went overboard on the instrument panel, however, and the 1960s-style gauges are hard to read.

Rear-drive sporty cars such as the Mustang have long been considered anachronisms. The Pontiac Firebird and Chevrolet Camaro were obsolete when they went out of production in 2002, and today's young hotrodders prefer front-drive pocket rockets such as the Subaru WRX and Mitsubishi Evo. But rear drive is catching on again, because it offers better handling in roadsters such as the Chevy Corvette. With a lot less horsepower, the Mustang doesn't pretend to run in that league, but it can certainly appeal to motorists of a certain age who want to relive their youth. Their kids might even like it too.