I see an awful lot of speculation from people in here that haven't actually driven a Veloster N. Well coming from someone that actually has driven one; it's not only better than a GTI, it's better than an R. I currently own a MK7 R and have owned a MK7 GTI, and the funny thing is the N I drove didn't even have the Performance Package and I'd still say it's a much better driver's car. I know I'm gonna get hate for this, but it's true. And really, it's not even close.
So before I get into what's better, we'll go over what's worse about the N. The interior, while nowhere near as bad as people are saying, isn't up to the quality standards of VW. The dash and door panels are all hard touch plastic, though it feels like decent quality stuff, and fits together much better than the crap you see in any Ford, for instance. There's no option for leather or Alcantara, just basic cloth. The back seat is actually big enough to sit in somewhat comfortable for me, and I'm 6' 205, but it is a bit tight getting back there with the one small rear passenger door, and the large C pillars make it feel pretty claustrophobic. No fold down arm rest either, or any other amenities. So not the best if you cart around other adults or bigger kids frequently.
There's also just nowhere near as much tech. No fancy adaptive lighting and the low beams are even incandescent, no adaptive cruise control, and no option for a dual clutch(yet). The infotainment at least is very good with bright, clear graphics and super quick response. If I'm being really nitpicky, the engine doesn't have quite as much energy up high in the rev range as an R, but again, I drove a non-PP car and it's my understanding that extra 25hp occurs more in the top half of the rev range, so this may be a moot point. It's still at least as good as a GTI, as is. The design, I'll leave up to the eye of the beholder. I actually really like the N a lot, but I also think MK7s are beautiful, so that's a positive for both cars and a tie in my book. The N is definitely much more aggressive which is good or bad, depending on your perspective.
So what is better about the N? Literally everything else, and especially everything that makes a car fun and engaging to drive. Just getting settled into the car it has a noticeably more sporty feel. It's much more compact inside, and the driving position and interior layout are more like a traditional sports car or sports coupe, as opposed to the more upright hatchback layout in the Golf. You sit lower in the car, and lower to the ground, with an interior that shrinks around you, with grippy seats that actually offer more support than those in the R. OK, so we're off to a good start here.
Start the car up and get moving, and there's a few impressions that immediately hit me, in this order; the sounds, the clutch and shifter, and the steering. Even at parking lot speeds the car just feels "right" in so many ways, and genuinely exciting.
First, that sound. It sounds better than any Golf MK7 I have ever heard, period. It's truly remarkable, and the one I drove didn't even have the dual mode exhaust! There is literally nothing you can do, short of a VR6 or I5 swap, no matter how much money you spend on exhaust, what combination of parts you use, etc. to get a MK7 to sound that good. The anti-lag pops on upshifts or on a lift of the throttle were enough to make me giggle like a child. And they have a much more natural feel than a pops and bangs tune, without going into the area of being obnoxious or excessive. And it also makes all these wonderful little burbles and rumbles when you let off the gas too. Roll up to a stop sign in 2nd or 3rd in one and you'll understand what I mean. It's like an old-school turbo car with a rich tune and hot exhaust after a hard run. The car sounds like it's alive, making much more organic sounds both under throttle and off than most 4 cylinders could ever muster. The closest thing out there is an Abarth, and those are nowhere near as vocal stock, if that gives you any idea.
Then there's the clutch and shifter, which just have a wonderful, natural feel to them, almost feeling old school in the best of ways. The clutch has none of that weird springy quality of a MK7 clutch, or so many other modern manual cars, so it's easy to find the bite point and modulate smoothly. The shifter strikes a great balance between being mechanical and notchy, while being precise and smooth at the same time. I feel like I could drive the car hard for hour after hour and never come close to missing a shift. I'd put it right up there with the best stock shifter feels in modern cars along with a BRZ. And, yes, that means it's a lot better than a MK7 shifter as well. The only mild downside is a bit of rev hang which requires patience when cruising around to get the smoothest upshifts. It's no worse than any other modern 4 cylinder turbo, though.
As for the steering, I'll start by saying I didn't realize my R had a dead zone on center until I drove the N and got back in my car. It's seriously impressive how precise the steering is, with what feels like effectively zero dead zone. There's solid weight and response from the steering immediately off-center, and yet there's no nervousness either. I could cruise down the highway without the constant small corrections necessary from many electric steering systems. That's a hell of a trick to pull off. Feedback isn't remarkable, like nearly all modern cars unfortunately, but there is actually some feedback to be had, and it's more than in a GTI or R. On a scale of 1-10, 1 being basically none, and 10 being a hyperactive old Miata with no power steering and sticky tires, I'd say it's about a 3 whereas an R is a 2. The small amount of torque steer that's present could be felt clearly through the wheel, and personally I actually love torque steer in a FWD car, so that's fantastic if you ask me.
The nose that steering is connected to is fantastic as well. The car turns in with almost telepathic precision. A bit like a FiST or FoST, but more natural in it's rate of response, rather than feeling unnaturally enhanced. I really can't emphasize enough how much better the N turns in than a GTI or R. Out of the box, it's easily sharper than my R with camber plates and RE71R track tires, so forget about comparing it to a stock MK7. The balance is much more neutral as well. I didn't get the tail to step out on my test drive, but I also never detected even a hint of understeer at lateral loads that would have had a GTI pushing. And that torque steer I mentioned occurs more in a straight line, when it's just fun, rather than while attempting to accelerate out of a tight corner where it could be distracting. Again, I must emphasize the car I drove was a non-PP so it lacked the torque vectoring LSD. I imagine those will turn in and find exit traction even better, though whether it crosses into the realm of feeling artificial, I cannot say.
Overall, the car just has a level of polish to it's dynamics that a MK7, or at least any MK7 sold in the States, just can't touch. The car feels all-of-a-piece, like it was setup by people who really understand driving, and they poured their heart and soul into the car and really nailed it. More than literally any stock car I've ever driven, it just feels right straight out of the box, and I can think of nothing I would want to change. If you're looking for some cars to compare it to, it has the low, compact feeling and fantastic shifter and clutch of a BRZ, with the aggression and sense of playfulness of a Fiesta ST, with the sound of a heavily-modified Abarth, and the engine response and feel of a GTI, yet as fast as an R on the move. Pretty impressive list of attributes.
Quite frankly, I fell in love with the N and didn't want to hand the key back to the salesman after my test drive. If the car they had on the lot had the PP, I likely would have traded my R in on the spot, but I know I would regret not having the big brakes and LSD the first time I hit the track with it, so I must wait. In the end, I think I'll end up with both, as my wife loves driving the R and said she would rather trade in her Jeep and keep the R, so best of both worlds I suppose. But make no mistake, if I had to choose one, I'd take the N over my R, and a GTI isn't even a factor.