My wife has a 1995 Volvo 850 Turbo wagon (we love it!), with an automatic transmission, and she's had the following symptoms:
1) reverse (back-up) lights don't come on
2) when first starting car for the day, it stays in first gear
3) sometimes goes into 3rd, with the up arrow flashing
4) car sometimes doesn't want to start (more of a rare symptom, but it's happened a few times)
5) check engine light came on
When it doesn't want to shift out of first, I shift it into neutral for a moment, and then back into drive, and then it is fine, 95% of the time. If that doesn't work, I do it again, and then it's OK.
Would these symptoms be indicative of a bad PNP switch/gear selector sensor, or a mechanical problem with the transmission? How can you tell the difference? If it is a transmission problem and not a PNP problem, why would the reverse lights suddenly not work?
Thanks!
I found a shop here in Houston that is going to replace the switch for $250, so I'm going to go ahead and do that.
(I'm keeping my fingers crossed that we don't need a new transmission...)

I have a Volvo 850 1995 wagon and have had the PNP switch replaced at a cost of $375 and it wasn't at a dealership. Didn't solve the problem of taking off in in Drive with no pick up and hardly any acceleration. I now start of in low or third and shift up. The dealership told me I needed a new transmission for $2700. No thanks. Car has 157,000 miles. Is there anything that should be done after the PNP switch is replaced to make it function properly? Help. Would appreciate any helpful suggestions.

Thanks, everyone! I had the PNP switch replaced, and.............. the car works perfectly! We are thrilled. My wife is very happy, which means I'm happy!!!!!!
We've had a couple of mechanics tell us that we would probably need a new transmission, judging by the symptoms... needless to say, we won't be going to those guys anymore.
Thanks again - now I have to have the same thing done in my own 850, a T5R; it has the same symptoms - maybe it caught the shifting disease from the wagon parked next to it...
;-)

$915 at the dealer to replace all 3 switches ,but I told them clear the codes
and don't repair it . It's been running fine for 3 months .Once in a while I feel it slip a little .
My other 850 needed the PNP switch replaced.

It could be dirty contacts .
Turn the key on to the 2nd position without starting the car .
shift from low to park fast about 20 times and see if it helps.

All of the symptoms could be due to PNP switch which controls backup lights and neutral starting as well as transmission functions. It seems unlikely the transmission is bad if it works sometimes. It's normal for the transmission to upshift later when cold than when hot (though Houston probably never gets cold enough to make that noticeable). If the gearbox goes into limp mode (3rd gear) due to the PNP you can sometimes reset the system by cutting the ignition and restarting. Also if the trans is bad it is likely to slip when in a particular gear, e.g. you will see higher revs on the tach for the same road speed. I understand there's a separate code that's set if the trans overheats, for instance due to slipping. The PNP on my 95-850 went bad around 100K miles. So did the equivalent part on a 240 I had before. In both cases I got the old parts and the contact tracks were visibly worn through in places.

I thought my PNP switch was shot .same problems .
The dealer checked it out and said 2 of the 3 tranny solenoids were shot.

If the solenoids are shot, what am I looking at, in terms of repair cost?

I forgot to mention; the car is a 1995, with almost 79,000 miles on it.