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I flushed the coolant and replaced the thermostat in my '96 854 two months ago. I highly recommend this procedure. I've done this with my other vehicles and its kept their cooling systems reliable. Anybody with common sense knows that coolant properties have a lifetime. So, with this in mind you need to replace the coolant at least every two years. You don't necessarily have to use Volvo coolant but you must make sure you use a phosphate-free coolant. A really excellent aftermarket coolant is Shell Rotella ELC Pre-Diluted 50/50 since it contains no silicates or phosporates plus its already pre-mixed so all you have to do is pour it in. This stuff is heavy-duty and designed for trucks so it should be more than enough for a Volvo. That means you won't get a build-up of silicate gel(the green goo) or hard-water scale formation. You should be able to get Shell Rotella ELC at any local Autozone or Pep Boys. The only reason Volvo recommends their own coolant is because theirs is phosphate-free and you don't want hard-scale formations occuring in the aluminum passages. It would decrease the efficiency of the cooling system. The url below is the FAQ section for shell coolant. Hope this helps.
http://www.shell-lubricants.com/products/coolant_genreal1.htm
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