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I'd say the Prius is more reliable based on the Jetta being an automatic and general reliability of Toyota vs. VW. But I'm not a VW guru by any means.
TDI Jetta and Prius will get similar MPG on the highway but the Prius will win around town. I've become a bit of a manual enthusiast myself after buying an Insight but I say a $500 car isn't worth a manual swap until the auto trans gives out, and before that you'd have to decide if the car was worth keeping at that point.
If it was a $3000 Jetta vs a $3000 Prius I'd say get the Prius.
If you put $3000 into a $500 car to make it good then you have a good car for $3500.
If you buy a $3500 Prius you won't know what might be wrong with it.
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2013 Toyota Prius C 2 (my car)
2015 Mazda 3 iTouring Hatchback w/ Tech Package (wife's car)
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