No, it shouldn’t, nor should it hurt the transmission. The Volvos I’ve driven seem to engage the OD at around 40-45 MPH, so I’d suggest turning on at that point.
Just a question. Would that have been the case when my car was made 24 years ago? As I said, I always thought of it as fifth, so I only used it when I would naturally use fifth. I agree that it would disengage when the speeds were lower, but I don’t remember ever trying to drive with it engaged and seeing what happened if I took it onto the interstate.
Honestly, I always thought that that was just weird on Volvo’s part. That, plus the odd positioning of reverse. Though I’ve come to wish for both recently, as I’ve had a harder time finding fourth in my Subaru than I ever had in the Volvo, especially coming out of fifth.
If memory serves, on the manuals with overdrive the overdrive only engaged when in 3rd and 4th gear. It was a separate overdrive unit appended onto the transmission. On modern automatics, it’s really just a 4th gear with essentially the same practical effect of having overdrive.
Damn leave you guys alone for 10 hours and see what happens. 
OK, your 240 has a 4 speed Asin-Warner automatic transmission. This is a refinement of the previous 3 speed unit. The fourth gear is an overdrive as everyone has said. The overdrive acts as one extra gear above the 3 that are normally used.
Using the overdrive should improve the gas mileage as the engine revolutions will be less. However, if you are towing a trailer, or hauling a load of bowling balls, gas mileage might be increased with the OD off. This is due to the fact that the gear ratio is very high and acceleration is limited in a high gear. (Think of owning a ten speed bike, you can go really fast in 10th gear, but it is a bitch to start off in)
Using the OD off button will have no effect whatsoever in gears 1, 2, and 3. (Typically speeds below about 45 or so) With the OD available (light OFF) leaving from a stop the trans should shift 1->2->3->4(OD). Pushing the button will make the trans shift 1->2->3. Or if you are in OD all ready 4(OD)->3. Stepping down on the gas pedal will also force a downshift to 3rd and even 2nd if your speed is low enough. (This entire paragraph assumes that your transmission is operating as it was designed, and is not currently subject to some strange problem)
Since OD is a gas saving measure the system is set up that every time the car is started OD is available, and the driver may deselect it if they wish using the button on the shifter.
FWIW, I owned a 240 with a three speed automatic, and when the tranny went south I swapped it out for a 4 speed unit. (a far amount of work, since the car was not built to accommodate the larger trans) anyway my gas mileage went up enough to pay for the new trans in just a few months.
If you have any other questions, feel free to ask, or drop me an e-mail, I made my living working on 240’s for a lot of years.
I had a Toyota Cressida wagon that had that button on the shifter. It was for enabling/disabling the overdrive, and I believe it also locked the torque converter to prevent slip. Problem was, if I left it engaged all of the time, it woud kick in too soon, at about fifty, and the engine would lug when I was still trying to accelerate to sixty-five or so. I don’t know if there was something wrong with a sensor or the engine committee and tranny committe weren’t communicating. I’d just leave it off until I was up to sixty or so, then engage it for the last bit up to cruising speed. I don’t think it had much effect on gas mileage. Besides, it satisfied that macho, “I’m in charge here” urge.
DD
Weren’t those Grace Kelly’s last words?
What was the last thing that went through Grace Kelly’s mind?
The dashboard.
A button on the gear stick? Doesn’t it work the passenger ejector seat?
I wish.
My 1998 S70 has the W button. It geared so you can’t take off fast from a stop (no spinning your wheels) and the gear ratios are different (this is how it was explained to me) so you aren’t as likely to skid to a stop.
I hate that little orange arrow. It either means “you’re in winter” or “stop now or your car will explode”.