The alternator belt is new and is squealing really bad. I know this means the belt it not
tensioned correctly, but the alternator is not a genuine Volvo part and is currently fully
extended, which is not far enough. Instead of buying a new alternator, can I just buy a
smaller belt? If so, which belt would work? Anyone had this problem before? Any
recommendations? Cheers.

 

Get a new belt.

 

The belt is new, but I could try another new belt...

 

If the Alt. Adjuster screw is all the way tightened (Alt. all the way out) then the belt is wrong.
http://www2.swedishpartswholesale.co...t+Set&dp=false

Not sure about your Year but I looked it up for a 89 240 that is the size you should have.