We just purchased a 1985 240 manual trans with the famous push.button overdrive. Yep, it doesn't engage. However the light on the dash comes on when the button is pushed. This.is.my 2nd Volvo and my husbands first. My first Volvo was a 1979 240 but it had the.3 speed automatic. So, does anyone know what the issue could be? I have.heard the relay and the solenoid can be issues as well as the button itself. I would love it if anyone could shed light on this. Thanks a ton! We love our Volvo!!

 

Yes I had the same problem would only engage after the engine /gearbox had warmed up, which was a clue.
Changed the solenoid in the gearbox the end of which had worn, thus requiring it to expand before it would operate the valve.
That fixed it!
Best
Johnr.