As stated, 2.5T Last year was 2006 for XC90 2.5T
The 6 cyl B6304 and turbo engines are fairly reliable. The original transmissions are not. The non turbo B6304 XC90 and S80 were better at not having the transmission fail. Same transmission.
The B6304T engines with more power and the heavy 6000# XC90 put too much stress on the transmission. The aluminum end plate of the trans holds the end shafts and bearings. This is the weak point for this trans. Over time the end shaft stress started to wear in the alum end plate.This created aluminum dust to travel thru the transmission oil. Eventually the contaminated oil caused the valve body to fail and set shift codes. When this 1st started happening only the trans was being replaced. Repeat failures were starting to happen. It was determined that the contaminated oil was in the cooler lines and radiator tran cooler. Now the trans, cooler lines, external tran cooler and radiator got replaced. This stopped repeat repairs.Volvo also beefed up the tran end plates to try to stop future failures. This is a Chevy transmission. Chevy cars have used this tran for years with out any problems. The XC90 was probably just too heavy and the B6304T engine had more power that it over stressed and found the tran weak point. Volvo steped up and replaced failed transmissions well beyond warranty, for 2nd and 3rd owners into higher mileage ect.Volvo would on a case by case basis pay for the parts, customer pay labor for higher mileage and 2-3rd owners. On 2003-2004 XC90's the left axle was hollow. it had a freeze pressed inside of it. The freeze plug would work loose and move. This permitted tran oil to travel thru the left axle into the outer CV boot grease. The CV boot grease would mix with the tran oil causing the transmission to fail and set tran codes. First thing we would do is remove the left front axle bolt. If tran oil flowed out of the axle bolt hole, It got the above tran parts mentioned plus a new LF axle. By now the LF replacement axle was a solid axle.
XC90 V8 engines. Not a money pit but expensive to repair anything on the V8 engine. Alternators fail, Valve cover leaks, the drive belt idler pulley bearing grease will dry up, locking up the idler pulley. When this happens the locked up pulley will spin on the aluminum boss that the bearing mounts on to causing it to wear off. When this happens the drive belt jumps off and no alt charging. The fix is to replace the complete front engine end plate. It goes from the below the crank pulley to under each head. Some shops drop the engine out the bottom to replace the end plate. It is not fun and very expensive. I have replace the idle pulleys on partially worn off alum mounting boss with out any problems. If any one has a V8 replace all belt pullies and tensioners and belt before the idler pulley locks up. Replacing plugs on a V8 dried plastic parts can and will break. The power steer pumps leak on V8s, oil runs back, down drips off. Looks like a rear engine seal leaking. Have to remove the upper intake manifold to replace the PS pump. Here again plastic parts break doing the repair. The drive belt tensioner is hyd move it back slowly to release and you need a locking tool to hold it in place.
look for a 2.5 turbo.
Why just Pre-2008? XC90 was P2-chassis through 2014.
Another vote for the 3.2L. I've been pleased as punch doing service on my 2011. TF-80SC transmission cured a lot of ailments found in the earlier models. I'm enamored with the UX in the later P2 XC90's. Gen 4 Haldex is quite good, too. I cal the last-gen (2008-2014) XC90's, as a P2 with P3 guts.
I did a number of jobs that the Volvo dealer wanted to charge $4,000 for on a friend's 2004 T6. That engine is zippy. A nightmare to work on under the hood. I still need to do the serp belt on my 3.2L... but that can't be as bad as a brake booster on the T6.
I know you said pre-08 but I love my 2008 V8. I think most of the bugs were worked out of the V8 by '08.
As mentioned above, if able, 2008+ are a treat.
I've only owned one so I defer to the others on which is best.