##S60 2.0--right##VOLVO seems to have got the timing right with its new diesel engine. Just as diesel sales have begun to soar in the UK, it has replaced the 2.5-litre turbo diesel in its large cars with a new in-house five cylinder 2.4- litre unit.

The D5 engine uses second-generation common rail technology, produces 163bhp and 251 lb-ft of torque between 1,750 and 3,000rpm, and brings diesel to the S60 sports saloon for the first time since its launch.

Two weeks ago we took delivery of a new S60 D5 SE, and over the next six months we will assess whether or not it cuts the mustard as an alternative to the premium diesels from BMW, Mercedes and Audi.

It's £500 more on the road than a 150bhp BMW 320d SE, and falls halfway between the 130bhp Audi A4 1.9TDI SE and the 180bhp A4 2.5TDI quattro. An entry-level Mercedes C220 CDI Classic would set you back £700 more than the Volvo.

Standard equipment on the S60 includes electric windows and mirrors, six airbags, traction control, steering wheel audio controls, cruise control and air conditioning.

Our SE trim car upgrades air conditioning to automatic climate control and adds front fog lights, leather seats and walnut effect trim, a trip computer, auto-dimming rear view mirror, four-CD radio with Dolby Surround Sound and nine speakers, and 17-inch alloy wheels.

Extras on our test car include metallic paint (£500), an electric tilt-and-slide glass sunroof (£700) and a winter pack (£300) comprising heated front seats, luxury floor mats and headlamp wash/wipe.

We believe the Volvo is something of a high-performance bargain. Its 251 lb-ft of torque endows the S60 with serious pulling power and will thrust forward with surprising ease anywhere between 1,500 and 3,500rpm.

Meanwhile the 2.4-litre diesel is surprisingly quiet from inside, even on start-up, and when you plant your right foot down there is a deep five-cylinder snarl rather than the harsher engine note in the Audi A4 1.9TDI.

Our only disappointment is that the CO2 emissions for the engine are higher than estimated at the car's international launch in June, meaning company car drivers in the S60 D5 will be taxed at 19 per cent, instead of 18 per cent, of list price from April 2002.

The S60 is full of nice attention to detail. The dashboard cup holder adjusts for different cup sizes, while there are two extra holders alongside the handbrake in place of an ashtray. Volvo doesn't want anyone smoking in our car.

In the boot, there is a foldaway panel which stands upright and has four plastic hooks to attach shopping bags, to prevent them from rolling around.

Finally, CAP Network currently predicts the S60 D5 SE will retain 41 per cent of its value after three years/60,000 miles, putting it just behind its premium rivals, which makes the Volvo a sound fleet investment.