My dad has a Gen3 that I've driven for awhile before getting my C. I would have to see that they both have their advantages and disadvantages. Some thoughts... Gen3: more comfortable inside due to space, more unique dash and shifter rear seating space is much much better, the C's rear seating is pretty poor if you have adults in the front much more power friendly C: smaller, easier to park and maneuver easier to get higher mpg than the Gen3
I have a 2010 and I test-drove C... 2010: much better quality interior feels much heavier better acceleration, more stable C: feels nimble, light got 54 mpg from cold start on my test drive of ~ 6 miles - Alex
I actually test drove the GenIII before the C as the C was not available till Feb 2012 (in Hawaii). I was impressed with the acceleration and smoothness but I did not and do not like the look of the rear end of the Prius "hatchback". I liked the looks and setup of the v - even sat in one but refused to test drive the car. To do so might have meant spending $6000 more for my new car. The v's MPG rating was/is the only down side for me. My C2 is kinda like a trainer - I'm still contemplating getting the v. All that said: My C2 still makes me smile every time (Really!!) I drive it.
After test driving both, I settled for the more refined interior of the GenIII. The biggest question was whether the GenIII was worth the $3k -4k more.
I owned a 2010 MY Gen III and now own a 2012 C4. The Gen III can hold more cargo, but the handling is not that great. The Prius C4 is more "nimble" in city traffic and responds better to input from the steering wheel. In my opinion the Prius C is a lot more fun to drive.