Try calling locksmiths, some of which also do auto, you might save a lot of loot.

The dealer quote sounds predatory to me.

Good luck, Bill

I had the same problem on my 2003. It was worse in hot weather when the inside of the car reached 100+ deg inside. In my case the problem turned out to be within the key tumbler itself. When the key is inserted it pulls several spring-loaded brass “pins” or “tabs” away from the locking groove inside of the cylinder. With old age the brass pins become worn such that when you insert the key it doesn’t pull the pins completely out of the locking groove, thus the tumbler won’t turn. A minor surgery is required to extract the tumbler from the cylinder. The pins are all different lengths so their position in the tumbler is important. As long as the key is inserted into the tumbler the pins won’t fall out when you pull it loose from the tumbler. Once the tumbler is extracted from the cylinder a piece of plastic hose can be slid onto it allowing the key to be pulled out of the tumbler without the spring-loaded pins going flying. The hose can be slid a bit at a time to allow removal of one pin at a time along with its associated spring. Each loose pin can then be filed down on an arch matching the outside diameter of the tumbler. Reinserting the key and removing the hose will tell you if you’ve filed the pins enough.
There is a YouTube video that shows how to remove the tumbler from the lock assembly. I will see if I can find it as it is “key” to being able to do this fix.

Here it is:

https://m.youtube.com/watch?v=TzUduzjR9W4


Or there’s this method.....

https://m.youtube.com/watch?v=_t_EW9PeN74

I had this problem with my 2007 (~same car) and I watched the videos Klaus mentioned. Also a friendly guy at a Volvo dealer encouraged me to do it describing it as a "bolt on job".

The PNP switch had to be lifted off the transmission (2 bolts) in order to get the car into neutral so it could be towed to the dealer.

At the time the replacement cylinder would've been ~$300.
I chickened out so $600 is what I paid to have the dealership do it.

Do it or have it done soon as the problem only gets worse and will leave you stranded.

There have been many write ups regarding this problem. First, make sure the steering wheel moves slightly and the locking pin is not stressed before trying to turn the key.

The other problem is that the locking pin breaks and can fall into a position not allowing the lock to turn to position I. In that case, the plastic shell around the column has to be removed. The lock cylinder removed and the broken piece of metal thrown in to the garbage. I think there is a YouTube video describing the procedure.

Spraying lubricant into the cylinder will not help.
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Keeping it running is better than buying new