The 1994 model year brought major changes to the Cougar. Perhaps the most startling detail (although inevitable) was the discontinued use of the 5.0 V8. The all-new 4.6 SOHC V8 was the engine of choice now. This new V8 brought an air of technical sophistication to the Cougar program, as no other rear drive coupe made in America at that time (besides the T-Bird and the new Mark VIII) had a standard OHC V8. The Cougar gained a few ponies from the previous year (from 200 to 205) but lost 10 lb-ft of torque; however, the 4.6 was still potent enough to haul the big Cat when necessary. Also debuting with the motor was Ford's new EEC-V electronics system, which vastly eclipsed the EEC-IV of the past. The standard 3.8 V6 still retained the EEC-IV system (which, incidentally, is STILL one of the most sophisticated electronics systems ever installed in a passenger vehicle), and was again rated at 140 hp with no changes made.

Also of high note was the all-new interior. Ford had begun using "themes" for their interiors in the early '90's---The 1992 Taurus had a "flow-through" design, The new-for-1993 Mark VIII had a "two-tier wraparound" interior, and the new 1994 Mustang debuted with a "twin hump" interior reminiscent of the original Pony cars. So it was fitting that Ford again experimented with themes with the Cougar. The look can be called "wraparound", and it is truly one of Ford's best interiors ever. It was ergonomically designed for easy reach of everything, and all switches were repositioned, with high-use switches (power windows, power door locks) illuminated at night. Rear seat heat ducts became standard, as well as CFC-free air conditioning, dual airbags, side-impact door beams, and a stand-alone clock. All fasteners for interior panels were now hidden, adding to further refinement. Also, all surfaces had new softer materials, and hard plastic surfaces were coated with "soft touch" paint that gives a velvety feel. The digital instument cluster was now a thing of the past; all Cougars from 1994-on had analog gauges. Optional stereos included an in-dash CD player and a trunk-mounted 10-disc CD changer.

On the outside, not much changed, although there are some details that got reshaped. The grille was new (while still keeping the same trapezoidal shape), and the taillights were further refined. The front bumpers were all new as well---they looked nearly identical to the 1991-93 bumpers, but lost the chrome strip running along the top and had 3 cooling slots on the bottom. A new rear bumper had a squarer profile. The side trim was new, with an oval shape, suggesting a "floating" molding. And, all the 4.6 V8 cars had a new "V8" badge behind the front wheelwell openings. Wheel choices continued to be the same as the previous year. Much of the Cougar's sheetmetal was now two-sided galvanized steel for additional corrosion resistance.

Mechanically, the XR7 gained some definite improvements. The new transmission of choice was Ford's full electronic 4R70W overdrive unit, with push-button lockout on the floor shifter. This transmission is rated for 700 ft.-lb. capacity! Also, a brand new Traction Control system became an option; this system used the ABS system for less wheelspin on slippery surfaces. A new transmission crossmember and trunk support structures meant less NVH (noise, vibration, and harshness). All suspension components became self-sealed, never needing lubrication for life. The new taillights had reflective stripes instead of black stripes, and chrome trim on the bottom. Note the lack of chrome trim on the bumper.

In all, 1994 marked a pivotal change in direction for the Cougar. Sales for the new model maintained their pace nicely as customers flocked to the new V8 and smoother styling. The 1994-95 Cougars will probably go down in history as the epitome of the 1989-97 design.