I've just bought a V40 (the estate (UK)/station wagon (US) version of the S40). One problem I had and which seems to affect every S40/V40 ever made is that the gear wheels on the motor controlling the air recirculation break.
On the dashboard, there should be a rectangular push-button that controls whether the air getting into the car is fresh or recirculated. Put this on recirculate ( a little light in the switch lights up) and wait 10 seconds. The press it again, the light goes out, and you now have fresh air. Wait another 10 seconds or so. Listen for a click...click...click sound from behind the dashboard, with the clicks a little less than a second apart.
If you hear the clicking sound, that's bad news - the cog has broken, and the control is stuck on one setting or the other (probably on 'recirculate', which is a real pain in the butt). To do a proper repair, the entire dashboard needs to be removed; this is labour-intensive and can be expensive.
The good news is that it's pretty simple to repair if you are confident with elementary mechanics. All you need are a Phillips screwdriver and a Stanley knife - instructions are here http://www.volvoforums.org.uk/showthread.php?t=28299
It really is quite simple - I fixed mine in about 30 minutes this afternoon - but if you are not ready to do this, then you looking at quite an expensive job.
Having said all that, I am delighted with my car, and my early experiences are that I'd happily buy another in the future. If you do not hear the clicking, maybe it's already been replaced in the past? Ask the owner.