I have a 2005 S40, which I understand is virtually identical to the 2006 model. The thing that initially drew me to the car, and which I still like, is the simplicity of appearance of the displays and controls. They're very intuitive after getting used to them. The trunk is amazingly large for a car this size. The car has a "tight" suspension feel, a compromise between a "cushy" luxury car and the hard suspension of a sports car. The car is very responsive to the throttle and steering, and I always feel "in control" even in wet weather. Road noise is a little less than I expected in a car this size and the car "feels" bigger than it is. My only problems have been an intermittently squeaky seat belt and a radio that occasionally doesn't work when the car is turned on. I've read that the radio problem can be fixed with a free software upgrade from a Volvo dealer. This is a well-engineered, well-built car that looks really cool just standing still and is a blast to drive.
I purchased a 2006 S40 2.5T AWD sedan. So far the vehicle has been a wonderful purchase. Other than a Volvo recall to fix the radio interference problem, I haven't had a moment's trouble. Everyone from the salesperson to the service advisor has been a pleasure to work with. Overall, I would say that the model I purchased compares favorably to the BMW 3-Series. While not as flashy or quick, the car looks nice traveling down the road and costs $$$ less doing so.
I have always liked Volvos, however I thought I would never be able to afford one. I have had absolutely no regrets with this purchase. My previous car was such a disappointment but this car I would and have recommended to everyone. The warranty is also very good with wonderful service from the local Volvo dealer. I am looking forward to upgrading and purchasing a S60 next.