Volvo offered two versions of the S40 sedan in 2004. The first generation returns with two trim levels: the base 1.9T and the new LSE. A second-generation S40 debuted midway through the year, as a 2004.5 model. This fully redesigned S40 included two new trim levels, called the 2.4i and the T5. The 2004.5 models are differentiated from their predecessor by a longer wheelbase, shorter overall length, and several mechanical changes.

There are now several engine and drivetrain options for the S40 lineup. First-generation models retain the turbocharged 1.9-liter inline 4-cylinder, which supplies 170 hp and 177 lb-ft of torque. The 5-speed automatic is again the only transmission offered. The new S40s have two engine options. The 2.4i is powered by a 2.4-liter inline 5-cylinder, providing 168 hp and 170 lb-ft of torque. The T5 houses a turbocharged version of the 2.4, which bumps horsepower to 218 and torque to 236 pound-feet. The 2.4i's powerplant can be mated to either a 5-speed manual or a 5-speed automatic transmission. The T5 has the 5-speed automatic option, but also upgrades to a 6-speed manual.

The LSE trim was available in very limited production, with just 2,500 units. This trim gets a special exterior finish and unique alloy wheels. The 1.9T returns without any significant changes for this final year of production. The new 2.4i comes with a familiar selection of features, like full power accessories, cruise control, keyless entry, a CD player, and heated power mirrors. This new model adds traction control. The T5 adds a trip computer and some additional leather interior trim.

Volvo has attempted to grab younger buyers with the S40, following the lead of entry-level luxury models like the Acura TL, Infinity I30, Audi A4, and Lexus ES. The S40 has an attractive base price, but the sub-$25,000 entry point becomes a distant memory if additional amenities are desired. The S40's interior presentation is reminiscent of the larger and more expensive Volvos, but closer inspection will reveal the presence of many lower-quality materials.