The number of premium vehicles in the lower medium segment is on the rise. A sector previously sewn up by the Audi A3, with the second-generation BMW 1-series as the only other true competitor, is about to change with the new Mercedes A-class due in 2013 and the arrival of Volvo‘s V40 this September.

Due to replace both the outgoing S40 and the V50, the five-door hatchback is tipped to be the Swedish firm’s biggest-selling car. It’s also pitched squarely at the fleet community, with business car drivers expected to account for around 60% of sales.

With that in mind, Volvo is offering Bluetooth as standard on all trim levels and plans to introduce a business pack tailored to fleets later in the model’s lifetime, while claimed headline figures of 94g/km and 78.5mpg render it tempting to the corporate sector from a costs perspective.

Of the five available engines, the 115hp D2 is predicted to be the biggest seller, no doubt due to its lower P11D price and enviable running costs. Go for larger wheels and tyres and you’ll suffer a slight economy and emissions penalty, but you’ll still see 74.3mpg and 99g/km, neither of which are bank-breaking figures.

When fitted with the cleanest 115hp unit, the V40 struggles at less than 2000rpm, as the relatively low power and long gearing render it less able at such speeds. It finds its feet further up the power band though, and delivers smooth but not exhilarating performance. The more powerful variants cater well enough for those in need of extra oomph.

Most impressive is its ride comfort and refinement, both of which are good enough to trump the 1-series and at least match, if not better the A3. The handling is less to write home about – the V40 is responsive enough but the steering will never match the BMW’s system for delicacy and feedback.

Space for rear passengers is acceptable but roomier offerings can be found among non-premium lower medium rivals, while the high rear lip and 335-litre boot mean practicality isn’t the car’s strongest suit.

Keen to cash-in on its reputation for safety, Volvo has introduced what it claims is the world’s first pedestrian airbag, which pops up just above the bonnet and around the A-pillars in the event of a pedestrian impact. Other standard safety kit includes City Safety, which automatically stops the car to avoid an impending low-speed collision, while pedestrian detection and collision warning systems can be added as options.

If you require vast quantities of space and/or a BMW-style driving experience then the Volvo isn’t ideal, but it ticks just about every other box as far as business drivers’ needs go. It occupies a convenient halfway house in the lower medium segment, offering a tempting leg-up to Focus, Golf and Astra types and a well-rounded alternative to the A3 and the 1-series.

Volvo V40 D2 SE
P11D price £21,290
Model price range £19,745-£26,795
Residual value 40.3%
Depreciation £12,715
Fuel £5396
SMR £2060
VED £55
National Insurance £1234
Cost per mile 45.91p
Fuel consumption 78.5mpg
CO2 (tax) 94g/km (13%)
BIK 20/40%
per month
£46.1/£92.3
Service interval 12,500 miles
Warranty 3yrs 60,000 mls
Boot space 335/1032 litres
Engine size/power 1560cc/115hp
Top speed/0-60mph 118mph/11.7secs
On sale September 2012
Score 8/10
Verdict Comfortable and refined
enough to worry the
class best – a
solid alternative