used Peugeot 206s have their fair share of problems, but the upside is that a new Peugeot 206 Diesel was/is about EUR 12K to 15K - which means that used specimen of a certain age (3 years or thereabouts), that would normally retail for about 6K to 7K with acceptable mileage and in good condition now fall squarely into a price range where, if you qualify for the "scrappage scheme" bonus, you can get a new car (made in Korea or Romania, but that is another story). Result: the used cars cannot be shifted, and are offered at (sometimes spectacular) discounts.

Re models, by all means get the diesel. These engines last forever, one of my current ones is on 220,000 km, and a friend is on 380,000 km on his 1991 205. I'd start at a Peugeot dealership, too - and if they offer extra warranty above and beyond the 6 months statutory, take it, because while the engines will last forever or thereabouts, most other parts won't (extra care should be placed on the turbo hoses - if these leak or break or slip, airflow from the turbocharger to the engine will stop and the car will stall). And have the car thoroughly checked by a qualified person other than the vendor before you sign on the dotted line. And join ADAC on a "plus" membership. And keep your mobile charged (so you can call roadside assistance). Because, whatever you do, the car - while a treat to drive - will break down eventually. Trust me, I've driven not one but several Peugeots...