The Toyota Paseo was introduced for the 1992 model year as a replacement for the Corolla GT-S and SR5. Smaller and cheaper than a Celica, the Paseo was a small, economy car that attempted a sporty look and feel. However, with a tiny engine, the Paseo was no substitute for a Celica. The Paseo was built on the Tercel platform but differed dramatically in looks and had a firmer suspension and larger wheels.

The 1992 Toyota Paseo came in one trim level, a two-door coupe. It had a 1.5-liter, 99 horsepower four-cylinder as its only available engine. A five-speed manual transmission was standard, with the option of a four-speed automatic. Fuel economy was about 26/34 mpg.

Owners of the 1992 Paseo liked the car because it was cute, sporty, and got excellent gas mileage. It also came with a rock-solid Toyota reputation. However, the car was a little too small for many, and many owners said the backseat was for children only.