We don't tow with one but we had one as a courtesy car in July. Lovely car, but did seem very underpowered and wallowy when we went around corners. We did remark that we didn't think it would be any good for towing, which was a shame as the inside of the car is lovely; much nicer than our Zafira.
I wouldn't worry too much about the engine. I tow a Pathfinder (1000kg max weight) with a Xsara Picasso fitted with the same engine and it's more than powerful enough, so you should be fine even with the bigger car. You do need to keep the revs up a bit as is normal for any turbo diesel, but it's better than many.
I can't comment on the handling, etc. although the Xsara is fine on that front as well (no insult to either car, but I guess they would seem a bit wallowy if you're used to a Zafira).
We have C4 Picasso and its great. We have been using it for camping this year with loads of space for our Big 45 kilo tent and all the camping equipment. I know its only a 1.6 but its turbo charged and 16 valve with lots of low end torque. We are also thinking of getting a pennine fiesta next year and have no doubts about our C4 Picasso pulling it fine.
Go have a test drive you will be surprised how nippy they are.
We tow our 1000kg max caravan with a 1.4 Clio (for short trips IE less than 1000 miles) or our 1.4 Scenic for longer trips. Both are Diesel and both are more than powerful enough.
Really the only difference is that on longer trips we pack more into the car and therefore need the bigger space that we can achieve by removing the rear seats in the Scenic.
So a Grand Picasso should give you oodles of everything!!!
We were looking at buying a 1.6 Diesel Grand Picasso some time back. I'm sure it would have been just fine towing our folding camper. One thing I would watch our for is the maximum nose weight. It's lower on the Grand Picasso than the 5 seat C4 Picasso and it's different by engine size too.
The 1.6 Diesel has a pretty low 50Kg limit which we would have just about been OK with in our case. Note also if you use the 'Towsafe' data through the C&CC for example the data is wrong for the Grand Picasso. It quoted 80Kg in this case. I checked in a vehicle handbook and for a 2007/2008 model it was most definately 50Kg.
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