At the demonstration earlier this week at Microsoft's headquarters in Seattle, USA, the companies showed off how the technology could work in a showroom.
Both the dealer and customer don HoloLens goggles, which display can hologram-like visions within a real world environment. Both googles are hooked up to a central system so that all parties can view and interact with the same "mixed reality" setup.
Via the system's hologram-like projections, customers are able to customise a vehicle they're interested in, changing colours, alloy wheel designs, trim specifications and adjusting options. They're also able to see how some of the car's safety features work, as well as strip away layers of the vehicle to, say, inspect the drivetrain and body structure.
According to Volvo, the HoloLens system may also free some dealership staff from the showroom floor, with the technology allowing them to setup pop-up stores and interactive displays in shopping centres or main streets.
Volvo has also postulated that, one day, the augmented reality technology may also find its way onto the production line, providing workers there with always visible builds sheets.
The companies also confirmed that they are also looking into other collaborative projects, including autonomous driving technology and utilising data captured from connected vehicles.