I think that if you are ready for a new car then you should go ahead and start the process. It may take some time to find a car to your liking since it is an in-demand model which will become even scarcer as fuel prices increase this summer. I see only one economic benefit to waiting, which is that it is certainly cheaper for you to hang on to your Volvo until it turns to dust (up to a point). Since it's paid off and well depreciated your only real expenses are putting fuel in it, insuring it, and repairing it. My wager is that it would only be more expensive than a new Prius if it is in horrendous shape with parts falling off of it daily (which I doubt). That might mean more time to save up cash for a larger down payment.

In short, do what makes the most sense for you. The Volvo is old enough that the big picture won't be influenced too much by the timing of its replacement.