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I agree that fixing up the Jetta would be advisable...particularly if you can do it for under 1k, since that's about as low as most cars would be. However, if you are dead set on a new ride, Civics, Corollas, Metros, or Tercels from the 90s are good options, as is the original Insight, of course.
I recently scored a '95 Tercel for under 2k and have hit about 45 mpg on my first tank with a mixture of city and highway and no car mods besides airing my tires. In my case, it's a definite upgrade from the Taurus I used to have that would give me 23 mpg at best in a mixture of city / highway.
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