UK vs. US
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As cars began to take shape a couple of popular general forms began to emerge. Generally the bulk of the vehicle would be a large area to sit the driver and passengers, and then in front of that, but low enough to allow the driver to still see where they were going, was a smaller ‘box’ to house the engine and other mechanicals. Sometimes the luggage compartments (if any were included) were added into the passenger area, creating what’s known as a 2-box design like a modern hatchback or estate/station wagon. Sometimes, however, there’d be a third box with it’s own separate access attached to the back of the passenger department, and again this would be smaller to allow the driver and passengers to see out of the back. This third ‘box’ created the 3-box design . In basic terms this created the layout called ‘sedan’ by Americans, and ‘saloon’* by Brits.
So why ‘saloon’ for the Brits? The word saloon was used for the luxury carriages on a train, and so suited the ideology of the early motor manufacturers. The word of course existed before that, and was used for a place to sit or gather – usually in a nice environment and with good company. The word itself, if traced back, finds its way onto mainland Europe and the likes of ‘salon’ in French and before that ‘sala’ in Italian – meaning a hall, which is where people would gather.
The American word sedan is a different idea, coming from the notion of sitting down rather than gathering together. A sedan existed before the automobile and was a mode of transport for the well-off, usually carried by servants and with a seating area for the passengers in the middle. It was often also referred to as a ‘litter’ – which could well have ended up being the name Americans took instead. This idea of the passengers being in a comfortable large box between two functional parts to the front and rear nicely fit the 3-box design, and so the name stuck. Interestingly if traced back far enough we end up in Italy again, with the word ‘sedia’ meaning ‘sit’.
*Pedants amongst us will surely point out that some two-box designs also qualify as a saloon – where the rear window does not open when the compartment is accessed, making it an access panel rather than a ‘door’ (like in an original Mini, making that a 2-box, 2 door saloon; as opposed to a modern MINI, which is a 2-box, 3-door hatchback).
