Your mechanic is correct, avoid 2001 and 2002 because of tranny issues.

I would look for 2004+ XC70s, the 5 cyl versions. Quite reliable, if maintained. So make sure there is maint history on any used car you get. A one owner would be great and bypass those brokers who buy at auction and 'flip' cars.

The normal mpg is 20 around town and 26 highway. The AWD does use more bhp and lowers the mpg verses a V70 FWD, but less than 2mpg for most cars. The newer cars use a Haldex system to drive the wheels and because of the complete electronic control can eliminate spin outs while on the throttle.

An E350 wagon uses a bit more premium gas(required) and has less interior room, but it is quieter. Maintenance is the problem there as parts are quite expensive and if you don't DIY, watch out for the hourly fee.

Audi wagons... If you enjoy taking the front of the car off to get to the thermostat, or most any other engine part. Like Mercedes, rear room is smaller.

VW has the same problems as the Audi, and is smaller and cheaper. The TDI sounds good, but diesel fuel is harder to find and costs $1 more per gallon. Plus the carbon buildup in the intake manifold will be costly at about 120-150K miles.
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My back feels better when I sit in a Volvo seat