Toyota dropped the 4-door Tercel sedan for 1998, leaving only the 2-door sedan. The remaining Tercel model did get a small makeover, including a new grille, front fascia, tail lamps, rear bumper and side moldings. The rear seats also got headrests. This would be the last year that Toyota carried the Tercel. In 2000, Toyota would introduce its new subcompact, the Toyota Echo.

The 1998 Toyota Tercel came in a choice of two body styles, the 2-door coupe and 4-door sedan. The CE line was a combination of the spartan standard model and the better-equipped DX. Both body styles came with a 1.5-liter, 93-horsepower 4-cylinder engine. Not surprisingly, the 1995 Toyota Tercel got excellent gas mileage—about 30 mpg in the city and 39 on the highway.

1998 Toyota Tercel owners are very loyal, praising the car for its reliability and value and dismissing those who characterize the cars as cheap. Some do complain that the car is too small, especially in the back seat and trunk, and that it can be very noisy at freeway speeds.