Sometime in the last decade or so, luxury car brands came to an important realization: If they didn’t start catering to younger, less-affluent drivers, they would soon run out of the older, wealthier customers who typically buy their posher offerings.

To address that issue, they started adding subcompact models to their lineups. And as the crossover craze caught fire, many of those upscale brands narrowed their focus further and began flooding the marketplace with small SUV models.

Volvo’s XC40 is one of the most recent additions to the subcompact luxury SUV field – and a noteworthy one it is, earning itself the title of Best Subcompact Luxury SUV in the 2021 autoTRADER.ca Awards. That result comes after our jury of more than 20 auto industry experts looked at every offering in this fast-growing class to vote on the model we’d be most confident recommending to family, friends and you, the consumers who rely on our reviews to help you make informed car-buying decisions.

The XC40 has won the autoTRADER.ca Award for this segment since its launch in 2019 – an especially impressive feat because the competition grows fiercer every year.

Volvo’s record here is notable because the makers of the other four finalists in this group all have a lot more experience building subcompact crossovers than the little Swedish brand does. The Audi Q3, Lexus NX, and Mercedes-Benz GLA-Class all rolled into showrooms in 2015. The BMW X2 arrived for 2018, but builds on the brand’s X1 subcompact, which debuted in 2012. So the Volvo is definitely the new kid in town.

Part of the XC40’s attraction is styling that draws on cues introduced in the larger XC90 SUV and refined in the gorgeous V90 mid-size station wagon. But while Volvo’s larger models exude the class and refinement that shoppers in those segments expect, the XC40 blends those traits with fun touches inside and out conceived to boost the car’s appeal among younger shoppers.

It’s a nice change, to be honest. The three German models look like they take themselves altogether too seriously, while the NX’s face is tough to love.

The XC40’s look got our reviewers excited to hop behind the wheel, where it continued to impress them with a driving feel more engaging than many expected. The XC40 comes to the segment with enough performance to keep up with the Germans, including an AWD system that helps conservative drivers feel safe in wintry conditions and brings a dose of playfulness to satisfy those who revel in plowing through the slippery stuff.

Volvo was wise to lean on the turbo engine technology that is de rigueur in small upscale SUVs. Most of our reviewers have noted that the 250-hp four-cylinder in the XC40 feels more powerful than its numbers suggest and helps its chances against the more powerful options offered by BMW and Mercedes. Right now, the AMG GLA 45 is the class’s powerhouse with 382 hp, but Volvo will move ahead later this year when it launches the all-electric XC40 Recharge, which will boast 402 hp and a massive 486 lb-ft of torque. That will also make Volvo the first mainstream brand to go head-to-head with the Tesla Model Y in the segment’s EV subset.

While performance is a key selling point in upscale cars, practicality is a major driver in crossover sales, and that’s another area where the XC40 won points with our jury. Volvo managed to fit an interior roomy enough for four adults into the car’s small footprint. The brand did it the old-fashioned way: with a tall, boxy body that would look dowdy next to its sleeker competitors, were it not for Volvo’s deft design touches.

One of the XC40’s few weak points is its use of Volvo’s Sensus infotainment system. It places a large, vertically oriented screen in the middle of the dash and then nests most secondary controls within it. That allows for an exceptionally tidy dashboard, but the Sensus system draws complaints for requiring users to dig through too many menus to adjust A/C settings, for example.

Audi, BMW and Mercedes-Benz have refined their dial-based infotainment systems to the point where they’re pretty intuitive. However, Volvo has the edge over Lexus’s touchpad-based infotainment setup, which nets negative notes from almost all of our car reviewers.

In the end, the XC40’s positives far outweigh its negatives. The XC40 impresses with its chic style, clever interior, excellent powertrain, and overall excellence, which is why it’s been voted as the Best Subcompact Luxury SUV in the 2021 autoTRADER.ca Awards.