The third generation Toledo (Typ 5P) was introduced in 2004 and as a production car made its début at the 2004 Paris Motor Show, though a preview of it had already been revealed at the 2004 Madrid Motor Show with the presentation of the SEAT Toledo Prototipo.
Its bodywork is completely different from the previous two generations: abandoning the traditional three-box saloon format, the Toledo Mk3 has a five-door hatchback sedan design penned by Walter de'Silva, although now closer to a compact MPV with the Altea's front section, a high roof, and a rear end inspired by the unsuccessful Renault Vel Satis, paying homage to the original Toledo's hatchback/saloon rear.
All pretence of a sporty identity was thrown out, in favour of a more upscale and alternative image. A large 500 litre DIN boot is an interesting feature, while it can be increased to 1440 litres after folding rear seats.Under the bodywork, the SEAT Toledo uses the same underpinnings as the Volkswagen Golf Mk5. All engines are identical to other Volkswagen Group units, with petrol engines ranging from 102 PS (75 kW; 101 bhp) to 150 PS (110 kW; 148 bhp) and diesel engines from 105 PS (77 kW; 104 bhp) to 140 PS (103 kW; 138 bhp).
Updates include the arrival of a 170 PS (125 kW; 168 bhp) TDI engine in 2006, as well as a tiptronic gearbox in the 2.0 FSI model. A 1.8 L turbocharged version of this engine became available in mid-2007.