2023 Volvo XC40

There's no shortage of cut-throat competition in the sub-compact luxury SUV class and although no longer new, the Volvo XC40's competitors have yet to topple it from its podium. The arrival of a mild-hybrid system means all XC40s now feature some form of electrification. It's not quite as plush inside as the XC60, but the inside has flair and is crammed full of newly updated tech and features - and lots of safety equipment, as is expected of the brand. With two engines, two drivetrains, many trim levels, and a starting MSRP of under $37k, the XC40 is not only good value but has hardly any glaring faults. Built on Volvo's Compact Modular Architecture shared with the C40 and Polestar 2, it is fully compatible with electrification; the XC40 has an EV counterpart in the XC40 Recharge.

Hitting the ground running for the new model year and spoiling for a fight, the 2023 XC40 brings with it a few meaningful updates and a trim realignment. It certainly has the credentials and all-around ability to give the BMW X1, Audi Q3, and Mercedes-Benz GLA something to think about.

The Volvo XC40 B4 Core has a starting MSRP of $36,550 in the USA, making it the best value in the lineup. This is followed by the B4 Plus at $40,950 and the B4 Ultimate at $44,700. With the more powerful B5 engine and AWD, the price of the Volvo XC40 is $2,000 more in all cases.

As for the XC40 Recharge, it starts at $53,550 for the Core. It then goes up to $56,250 for the Plus trim and $59,500 for the Ultimate. That's a lot pricier than the gas-powered derivatives. Up until the end of 2022, the Recharge qualified for a federal tax credit of $7,500, but this is subject to change and you'll have to enquire with your state authorities if you want to know for how much the Recharge qualifies this year in your area, while we await official guidance from the IRS, which will likely only be forthcoming in March 2023.

The cost of the Volvo XC40 does not include a destination charge of $1,095.

The base B4 engine with 194 hp and 221 lb-ft of torque offers decent low-down pull, but don't expect energetic acceleration; it's best avoided if you demand an enthusiastic powertrain. The B5 does much better and with 247 hp gets the crossover up and running much quicker. The turbocharged 2.0L four-pot is a bit coarse, though, and can become vocal when working hard. Luckily, the automatic transmission plays well with both engines and nearly always picks the correct gear promptly and with commendable smoothness, keeping the engine in the meat of its torque band.

The XC40 is best in town, where the steering is light, if somewhat vague, and lacking in feedback. It is easy to drive, and its compact size makes it a breeze to park. The ride quality is absorbent and deals with divots and speed bumps well without wallowing or rolling excessively in corners. On the highway, noise levels increase, especially when the engine is asked to deliver its best. The electric variant is naturally a lot quieter and offers strong punch, but it's also more expensive. We review the Volvo XC40 Recharge separately.

Volvo has struck gold with the XC40, and such is its spread of talents that there are few rivals that can seriously challenge it for class honors in the premium subcompact SUV class. It excels as a city car, with competitive space for people and their things, and many smart storage solutions. It drives well, and the B5, in particular, offers strong performance. The ride and handling are expertly judged and the XC40 rarely puts a foot wrong. The few faults it has center around the four-cylinder engine that does its job coarsely and lacks power in the B4 configuration. Both of these problems are solved by the XC40 Recharge - at a price. Even if you go for the gas XC40, you'll enjoy the stylish cabin, up-to-date tech, with its exemplary safety credentials giving you peace of mind. In terms of an overall package, the XC40 offers an unbeatable combination of value, safety, comfort, and style in its class.

To avoid nearing the starting price of the Recharge, we'd exhibit caution when optioning an XC40. At first, the B5 Plus, which is nearly $4k less expensive than the B5 Ultimate, looks like the best value and comes with the must-have 247-hp engine. But you have to add the Driver Assist package to get adaptive cruise control, and at $800, the Harman Kardon audio system is a great upgrade for audiophiles. Now you're $1k away from the B5 Ultimate's price, so the moral of the story is that unless you're happy with a standard B5 Plus, it's better to go for a B5 Ultimate than to spec up the lower trim. The MSRP before destination is still under $47k, making this configuration sound value.

The Recharged is significantly more expensive, but it might still be very good value if the $7,500 tax rebate still applies in 2023. At the time of writing, the IRS has missed the target date of January 1, 2023, to provide new guidelines, moving the timeline to March 2023.