Parkers overall rating: 4 out of 5 4.0

The S40 has a broad range of engine choices, but the one that steals the headlines is the 1.6D fitted with Volvo's DRIVe technology. From December 2008 the S40 DRIVe uses the original 109bhp diesel engine, but with modified gear ratios and improved aerodynamics it manages to be even more frugal with fuel economy of 63mpg. In July 2008 a version with an engine start/stop system (which cuts the engine in traffic and automatically restarts it when needed) was introduced and this is even cleaner, emitting 104g/km of CO2 and averaging an incredible 72mpg.

There is an impact on the car's performance, however. The longer third, fourth and fifth gear ratios improve fuel consumption and refinement, but can catch you out when you're looking for the usual swell of diesel pulling power for overtaking. The 2.0D with 136bhp adds some noticeable urgency while economy is still 49mpg. The most powerful diesel is the 180bhp D5 which gives the S40 a 0-62mph time of 7.9 seconds.

This may not sound strikingly quick but the engine has superb pulling power and offers great in-gear pace. It's not the most refined of engines though and can feel a little lumpy. Other engines include a 1.6-litre petrol with 100bhp but this can feel underpowered, especially with four on board. The 1.8-litre has a punchier 125bhp and is much better for everyday driving.

The 2.0-litre is quiet, refined and great on the motorway, where there's plenty of pull for overtaking, while the 2.4 (which was dropped in July 2008) is smoother still, but not enough to justify the drop-off in fuel economy compared to the 2.0-litre. The top of the range 2.5-litre T5 with 220bhp turns the S40 into a super saloon - 0-62mph comes up in just 6.8 seconds which is in hot hatch territory.

This is the same engine that's used in the Focus ST and it delivers a characteristic and distinctive engine note. In mid 2007 it got a 10bhp power hike.

The S40 certainly feels nimble, especially if you're used to the traditionally vague handling characteristics of Volvos of old. But although it's composed and tidy it lacks the sparkle of some alternatives. On more demanding roads its shortcomings are evident - the steering is overly light and lacks feel. That said body roll is kept well in check although the pay-off is a somewhat fidgeting ride over rough roads.

But when cruising on the motorway the S40 is smooth and refined. In August 2008 a new Powershift automatic gearbox was introduced that uses two clutches to provide smooth and swift changes. Available only with the 2.0D engine, the six-speed unit offers economy and emissions close to the manual version, but does seem to sap some of the engine's in-gear punch.

Low-emissions DRIVe versions come with lower suspension than standard cars, which, while improving aerodynamics, also helps reduce the car's centre of gravity and make it feel more responsive when cornering.