The XC40 is Volvo's third SUV, and its smallest to date. It slots in below the larger XC60 and biggest-of-the-bunch XC90, being the first time the company has offered a vehicle in the booming market that Americans refer to as a "company utility vehicle". It will compete with the incoming Jaguar E-Pace, Range Rover Evoque, BMW X1 (and now X2), Audi Q3 and Mercedes GLA.

Our quick take

Driving a car that's not yet out on the roads is always a novel experience. Often, very few people bat an eyelid about a new car – yet every time we stepped out of the XC40 someone came up to ask us if they could have a look. It's striking looking for sure – in a good way. And it still feels Swedish with it – let's face it, the flag on the edge of the bonnet won't let you forget that. It's just Sweden at the weekend, having a drink and letting its hair down.

It's also a lovely place to climb into at the end of a long day, when it's cold outside. Its size works just fine for a family of four, as despite its 4.4 metre length it feels even more spacious inside. 

Perhaps the biggest surprise of all is that it's refined and oh-so-good to drive. It's the most dynamic Volvo we've ever driven (and we've driven them all).

The negatives? It's looking likely to be a little pricey. Not everyone is likely to appreciate this new design approach. The T5 petrol is likely to be a little too thirsty for many. The switchgear and some functionality isn't as slick as its German competitors.

Speaking of which, its competition is all getting a little long in the tooth. The Range Rover Evoque, Audi Q3, BMW X1, and Mercedes GLA are all ageing, leaving this Volvo to better all of those cars with no ifs or buts. So if you're after the freshest and most sophisticated car in its market, the Volvo XC40 is the compact SUV of the moment.

Alternatives to consider

BMW X1

Currently BMW's smallest SUV, the X1 is front-drive based, quietly ditching BMW's staple rear drive. Most models can be had with X-drive 4-wheel drive though, the engine range is broad and strong, and the tech on-board is top notch (if you pay for the professional system). But it feels and looks clunkier, the interior is much less premium, and the whole car is made to feel a little old-fashioned and lacking polish by the XC40.

Read the full article: BMW X1 review

Range Rover Evoque

A distinctly more premium badge than the Volvo, but a car that it nonetheless fights with for the title of most fashion-conscious small SUV. The Evoque is still a great product; refined, premium-feeling and full of nice design touches. It'd leave the others for dead off-road, but it's getting on a bit, isn't the most spacious, and if you load up the options then the price gets crazy.

Read the full article: Range Rover Evoque review

Volkswagen Tiguan

Ok, on paper the Tiguan might not be an XC40 rival. But the Tiguan range – of trim levels and engines – is so vast that the two cars have a distinct over-lap. Upper-spec Tiguans come loaded with kit, drive very well and have similar space. The VW feels nothing like as special or distinctive to drive as the Volvo though.

Read the full article: Volkswagen Tiguan review

Volvo XC40 - 4.5 / 5

We've said in our reviews of the XC60, XC90 and V90 estate that Volvo seems to be on a bit of a role at the moment. The company's exterior and interior design is, in our view, out-smarting BMW, Audi and even Mercedes, while its Sensus tablet interface is one of the better touchscreen systems you'll find in any car.

While the bigger new Volvo SUVs have all been built on the so-called 'SPA' platform, the XC40 is the first to sit on the company's smaller 'CMA' architecture. That's the kit of bits underneath the vehicle responsible for how well it drives, how refined it is, how well it performs in a crash, and much more besides.

But does the all-new Volvo XC40 successfully stack up against not only its bigger Volvo brothers, but also the increasingly tough opposition? We've been living with one to find out...

A 'trendy' Volvo: No longer a contradiction in terms?

When we were younger, Volvo stood for a couple of things. Namely safety, making it a "sensible" brand. Volvo's cars were square estates driven by your teacher, your granddad, the local antique dealer. They certainly didn't have the image of vehicles driven by people who liked to party at weekends.

One look at the XC40 tells you things have changed. This isn't your old antique dealer's Volvo. It might actually be a Volvo you can choose with your heart as well as your head.

The scalloped grille, 20-inch wheels, the sharp kick-up of the C-pillar, the split colour roof – all these things point to this crossover being bang on the current fashion trend. It doesn't look wilfully odd like the Nissan Juke did when it first appeared. But it nonetheless looks different to any other Volvo. It's more youthful, more "yes I've had a family but I sometimes still go clubbing at the weekend, thanks".

The XC40 is Volvo trying to be trendy. Which almost sounds like a contradiction in terms (especially to our younger selves). But the car's design works as a cohesive whole, there are cues (like the Thor's hammer headlamps) to link it with other Volvo cars, while the detailing is high-tech, well executed, premium, and different enough from the norm to feel fresh and modern.

Rather than just create trim levels which affect the spec, the grade of XC40 you choose has a big impact on how it will look, too. Our 'First Edition' test car is effectively an R-design, which comes with the black roof – but only comes in white, silver, red, blue or black body colours. The 'Inscription' trim offers a palette of more varied hues, and you can have the roof in the same colour as the body. 'Momentum' is a bit more urban and edgy, offering baby blues with white roofs, plus some cool interior fabrics, and even white wheels. Volvo is not just trying to be trendy, it's being like Mini and Range Rover in its customisation offering. If you're being extra bold you can order lava orange carpets, for example, which actually look rather great.

Inside: More of the same, please!

Jump inside the XC40 and it's ultimately similar to the XC60 and XC90. That's primarily because all XC40 trim levels come with the 9-inch Sensus centre screen and 12-inch driver TFT display – just as you'll find in those larger cars. Which is a very good thing indeed.

Dig in a bit deeper, however, and the XC40 has notable differences to those larger cars. The dashboard architecture, doors, and centre console being the most prominent.

The doors standout for their completely carpeted inner section (it's actually recycled PET – or plastic bottles to the everyman). The rough finish doesn't feel like carpet, but the neat thing is that the single piece liner means you've got a massive door bin, which is lined. Therefore you can put loads of things in it and they don't rattle about. Other car makers: can you take note please?

In the console areas, there's the familiar stubby gear-shifter (of this automatic model), a pair of slightly not-useful-size cupholders (bottles fall over because they're too shallow), a big cubby under the centre screen (which on our test model came with a Qi wireless phone charging pad), plus both a big-lid bin and a smaller spring-lid bin between the seats (our resident three-year-old posted toy cars into this latter bin – and they didn't rattle!).

The seats, like in almost any Volvo, are ultra-comfy – heated and electrically adjustable on this model – with the trim on R-design is a bit more bling. In the back there's enough room for a pair of six-foot adults, or our (massive) Swedish-approved rear-facing child seats.

A key thing about the XC40 is that the boot, at 460 litres, isn't much smaller than the larger XC60 (505 litres). There's a really useful area under its floor, and a spare wheel, too. It raises the question: if you've given thought to whether an XC40 or XC60 is the Volvo SUV you need, would it be better to get the smaller, cheaper and more modern car, then spend a bit extra on the bling options? Having driven both, we'd be tempted unless we really, really needed the space.

Options and trim levels

At £40,055 with the T5 petrol engine fitted, our 'First Edition' XC40 might seem on the expensive side for a small SUV – but, let's not forget, its rivals are all similar in price.

The reason why it's this much is that it's so well kitted out. You get (take a deep breath): 20-inch wheels, LED headlights, leather/suede seats, the Sensus touchscreen system, a digital instrument cluster, a heated steering wheel, Apple CarPlay and Android Auto, a 13-speaker Harmon/Kardon stereo, a wireless charger, panoramic roof, electrically powered tailgate, keyless entry and start (which via Volvo Online even allows you to remotely start and heat up the car from an app). Think anything's missing? Erm, a head-up display is literally all we could think of.

Volvo's raft of safety kit and the semi-autonomous Pilot Assist system – which can steer the car in certain scenarios – is standard fit, too. As is a surround view camera system, which is part of the package to help the car park itself.

The XC40 goes on sale in March 2018, so we drove one of the very first vehicles Volvo brought into the UK. But you won't have to fork out £40K: the Momentum entry-level trim starts at £27,905. Besides our range-topping T5 petrol model, Volvo also offers a D4 diesel engine with 190hp, a 150hp D3 diesel and two further petrols — a 190hp T4 and new, 3-cylinder, 1.5-litre 'T3'.

T3 is the entry level, and comes with a 6-speed manual gearbox, while ours and many others come with an 8-speed auto. Other trims levels above Momentum are sporty R-Design (which will look similar to our test car, and have the same seats, 19-inch wheels, black gloss trim and details) and the more luxury-orientated Inscription (leather seats, chrome, crystal gear knob and driftwood inlays, powered boot and driver's seat) which starts at £30,405. You can add a 'pro' pack to any level, which on Momentum brings heated seats and windscreen and bending headlamps with clever high-beam. R-Design Pro adds this plus 20-inch wheels, while on Inscription Pro you also get a powered seat on the passenger side, in addition to the standard driver's side power adjustment.

Volvo's Intellisafe suite (blind spot, collision avoidance, lane-keeping assist, obstacle detection etc) is standard on all models and as ever a huge added extra over the competition. Beyond that, we're not clear yet about the full standard equipment list — if this sounds vague, it's because Volvo hasn't yet confirmed full specs, so we'll update this review as we know more. The sweet spot, we suspect, will be a D3 or D4 diesel R-Design model with added Pro pack – which is likely to cost you somewhere in the region of £36-38,000.

While the Sensus system, with navigation and real time traffic is standard, on its larger SUVs, Volvo charges a steep £300 for Apple CarPlay/Android Auto functionality. It's standard on this First Edition model, but not yet clear of the price on as an option on other XC40s. 

What might be of interest to some readers is the new 'care by Volvo' usage model. Instead of plonking down the full 30+ grand in one go, or as most people do, pay a deposit and then monthly payments for three years, the new model is charged at £629/month for Momentum models, with no deposit. That sounds steep, but it includes everything (tax, tyres, servicing, etc). The only thing you'll have to pay for is fuel — and if you fancy a different Volvo car after 12 months or so, you'll probably be able to swap to one.

The standard Navigation system features 3D maps and real-time traffic, which works pretty well. The overall system – as we've said before – would benefit from a little more colour and slightly better graphical layouts in some menus, but is quite easy to use, fast in response, and fairly hard to get completely lost in. We'd prefer a BMW-style scroll wheel, ultimately, but Sensus will feel modern to most, because it behaves very much like an iPad or iPhone does.

The most dynamic Volvo ever?

Volvo has never been famed for rivalling BMW in the dynamic driving stakes. With XC40, however, the Swedish company might be onto something. Bear in mind that our test model had 20-inch alloy wheels – which tend to wreck the ride on most cars – and we were extremely impressed with the ride quality. Indeed, we'd say it's probably better than anything in this class right now.

It handles very well, too. It feels agile, turns direction nicely, while the steering is light, true and well judged. It's still an SUV, of course, so there's some roll, but we were impressed with it on a Range Rover Evoque kind of level, which is high praise indeed.

The XC40 is actually a fun car to drive when the mood takes you. Which is something we never thought we'd write about a Volvo.

Only the engine and gearbox on our T5 petrol version let the side down. Sure, it's quite quick, but you have to work it, it's coarse and a little unrefined. Because you're revving it more than you would a diesel, we struggled to better 23mpg. So getting 200 miles on a single tank will feel like a challenge.

We know many buyers are worried about diesel cars, their related emissions and uncertainty about future tax penalised and residual value. The reality – and we say this having driven the D4 diesel engines elsewhere in Volvo's range – is that we'd not worry about sticking with a diesel for now. The D4 has around 190hp, and while it's not the quietest engine going it has got decent low-down torque, which is spot-on for an SUV. Grip and power aren't an issue with all-wheel drive, whichever engine you choose. 

Smaller, lower-powered diesel and petrol models will come available in the XC40's lifetime, along with a plug-in hybrid (which will cost more to buy but is likely to make a very compelling car).

To recap

It's pretty obvious after five minutes behind the wheel that Volvo has got a star on its hands in the XC40. If you're after the freshest and most sophisticated car in its market, this is the compact SUV of the moment. Only its price, badge perception, a thirsty petrol engine and some functionality not being as slick as the German competition are our minor complaints.