MAYBE I MISUNDERSTOOD the guy. He said he was delivering anentry-level car, a "price leader," a 1987 Toyota Tercel.

He delivered a Tercel, all right. But if this plushed-up littlenumber is a "price leader," Toyota is trying to lead budget-mindedconsumers over a cliff.

I mean, whoa! When did $9,088 move to the head of the "economy car"parade? And that's $9,088 without taxes, tags, finance charges, "dealeroptions" or other markups.

By the time this Tercel rolls off the lot, it could be carrying aprice of $10,500. That's economy? That's a bargain?

Some might argue that Toyota's terrific reputation for qualityjustifies its prices. Certainly the test car, a Tercel DX, was a qualitypiece. But not substantially better than, say, a Mazda 323, SubaruJusty, Ford Festiva or Pontiac LeMans, all subcompacts that can be had,reasonably dressed, for under $9,000.

Ah, and the Tercel DX surely can't claim to be better than the neatlittle Volkswagen Fox, a first-class econobox that can be driven homefor $8,500 or less.

The strengthening yen has boosted prices of Japanese cars sold in theUnited States an average $2,300 since September 1985. And manyJapanese-car dealers have responded to those hikes by knocking off the$1,000 to $2,000 "additional dealer markups" they were so fond ofcharging 16 months ago.

But more will have to be done to keep pulling the tight-purse setinto new-car showrooms. Putting $9,088 stickers on itty-bitty modelslike the Tercel, however good their quality, gives economy cars a badname.

Praise: The Tercel's an excellent subcompact. Fit and finish areimpeccable. The four-passenger cabin layout is comfortable andwell-designed. The clutch clutches with authority. The five-speed manualgearshift shifts with precision. I can't knock the quality of thisfront-wheel-drive subcompact, just as I can't knock the quality of someof its equally good but lower-priced competitors.

Head-turning quotient: The Tercel entered the U.S. market in 1979 asan ugly duckling. If it were to leave today, it would go out the sameway, despite numerous aerodynamic facelifts.

Ride, acceleration, handling: All-around excellence. This little cartakes bumps without bouncing all over the place. It takes curvesreasonably well, too, although I find the Fox's handling moreimpressive.

The Tercel is powered by a 1.5-liter, 4-cylinder, 12-valve,single-overhead-cam engine capable of 76 horsepower at 6,000 rpm. It'scompetent on the highway, and can do long trips without wearing out thedriver.

Sound system: Toyota electronic AM/FM radio and cassette with fourspeakers. Excellent tone quality and signal retention.

Mileage: About 39 to the gallon (11.9- gallon tank, 460-mile range),mostly highway, mostly driver only. Here the Tercel outshines the Fox,which has a 1.8-liter engine that gets about 28 mpg.

Price: $9,088 as tested, including $1,405 in options and a $325destination charge. Note: Sometimes, th ose "options" (cloth seats,multiplex stereo) are the only way you can buy this car. Base price onthe three-door DX test model is $7,358. The dealer invoice price is$6,328.