Replaced thermostat for 2001 Volvo S40, however, car is still reading as if it were hot. Coolant also added. What could be further issue? A sensor is what the repair garage suggested. Has anyone else had this issue for this make model? If so, what was the cost or estimate cost and did this solve the problem? Many thanks!

Question edited for clarity.
Question moved to model category.

You have a leak, you just need to find it.

Look for leaks in the hoses. Do a pressure test.

The most common reasons a Volvo S40 has a coolant leak are loose hose connections, a broken radiator, or a failed water pump.

Volvo S40 Coolant Leak - RepairPal.com

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Possible water pump failure. Was temp guage showing "hot" ? , if not maybe coolant sensor issue. Had the car just been driven hard ? Any pressure in coolant expansion tank ?

Have the climate system scanned for fault codes. This willpoint you in the right direction. Need a shop with the Volvo Vida system

Instructions

1. • 1 Open the engine hood by pulling the hood release latch located on the lower kick panel on the driver's side of the Volvo S40. Lift the hood up and prop it on the hood prop.
     
   • 2 Locate the steering shaft that extends from the firewall to lower suspension located inside the engine compartment, by the front right wheel. Halfway down the shaft, you will locate the power steering pump. The pump is a black container that bolts to the driver's side of the engine block. On the top, you will find a cap that says "Power Steering Fluid."
     
   • 3 Look to the left of the cap. Bolted to the power steering pump is the thermostat temperature sensor. The sensor has a black round cap and a black wire extending out of the top.
     

Read more : http://www.ehow.com/how_7439182_locate-temperature-sensor-volvo-s40.html

You need to look at the temp sending unit it's probably faulty anthor issue with volvo is dirty throttle body's this raises havoc on the car they idle up down all over the map also you should change the thermostat too as a precautionary measure make sure it's the right temp for your year of your car thanx Chris

well lucky you i am a certified volvo tech,mostly all coolant temp sensors are located in the general area of the thermostat housing if not directly in it or on top of it,locate your thermostat and you'll find your sensors,also note that there is two one for the computer and one for the guage,good luck,should be easy from hear on in peace....!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Hi!!

Thermostat location in 5 cil. engines, temp sensor is located just right or upper arrow in picture. I've included a picture of temp sensor and installation instruccions.



Never open, service or drain the radiator or cooling system when hot; serious burns can occur from the steam and hot coolant. Also, when draining engine coolant, keep in mind that cats and dogs are attracted to ethylene glycol antifreeze and could drink any that is left in an uncovered container or in puddles on the ground. This will prove fatal in sufficient quantities. Always drain coolant into a sealable container. Coolant should be reused unless it is contaminated or is several years old.

1. Drain the engine coolant.
2. Disconnect the ground cable of battery.
3. Remove the electrical connector from the sensor.
4. Remove the coolant temperature sensor.
   
   Fig. Coolant temperature sensor illustrated
   Coolant temperature sensor illustrated

To install:

1. Apply sealant to sensor threads. Install the sensor and tighten to 15-29 ft. lbs. (20-39 Nm).
2. Attach electrical connector to sensor.
3. Connect the ground cable of battery.
4. Refill the coolant.

If helpful, click below, good luck.

po128 is a coolant temp sensor problem, check wiring to sensor if ok replace sensor,good luck.

Volvo Radiator, Thermostat and Sensors Your cooling system's temperature controls include all coolant temperature sensors, Volvo thermostat, Volvo radiator or expansion tank cap, cooling fan(s) and fan clutch (if equipped). These cooling system parts function primarily independent of the engine but control the engine either through cooling or by sending control signals to your Volvo's electronic systems.
The Volvo thermostat is a spring-loaded valve that opens and closes based on the temperature of the coolant flowing through it. A high temperature reading followed by a drop to normal temperature (or a continuously low temperature) is a common first sign of a sticking Volvo thermostat. However, many other conditions may cause these symptoms, so you need to know how to eliminate each possibility.
The Volvo radiator or expansion tank cap is also a spring-loaded valve reacting to system pressure. It serves to maintain proper system coolant level at predetermined pressures. It must always be replaced with an exact replacement cap with the same pressure setting. Never use other caps except for short-term emergencies!
A belt-driven fan blade for pulling air through the Volvo radiator is usually on the Volvo water pump pulley and should have a fan clutch to control it. The fan clutch allows the fan to turn with the belt at low engine speed and "free-wheel" at higher speeds. A bad fan clutch either doesn't allow the fan to spin at low speed (overheating in traffic) or doesn't allow it to free-wheel at high speed (potential overheating on highway or reduced gas mileage).
An electric fan can be either by itself (usually front-wheel drive) or auxiliary (used with a mechanical fan). Both types are controlled via a temperature sensor - in the Volvo radiator or upper Volvo radiator hose or on the Volvo thermostat or Volvo water pump housing. This sensor is usually an on/off type switch with a fixed temperature setting. (Some vehicles may have 2-3 settings for multi-speed fans.) This sensor is commonly called an "auxilliary fan switch".
Other common temperature sensors are: 1) gauge sender (variable output); 2) warning light sender (on/off type); 3) lambda and/or fuel injection sensor(s) (variable to control fuel injection settings); 4) thermo-time switch (cold start valve control). Your Volvo may have other sensors as well.
Temperature control is critical to both performance and emission control. Unfortunately, this system is the most difficult to troubleshoot without proper equipment and diagrams. It's even more difficult with computers that adjust timing, idle speed, vacuum and fuel delivery automatically to make up for potentially faulty temperature sensor signals.
Maintenance of your cooling system sensors is virtually impossible since there's nothing really to "maintain". Keeping them clean both internally (coolant replacement) and externally (engine cleaning) is the best way to ensure trouble-free driving. Checking and replacing all parts at the factory-recommended time or mileage limits helps as well

Is the temperature reading low? If so, your thermostat is stuck open and needs to be replaced. Or is there another problem?

Bret
RepairPal.com