The next time you visit a car showroom, do not just check out the vehicle's price, features and the deals on offer. Add to the checklist the car's performance in the second-hand market. The price, the demand and the availability of your favourite car in the second-hand market could be your best guide to buying a new vehicle. And you don't have to take the words of a roadside car dealer. There are now broad estimates of how much a car bought today can be sold for after two years of ownership.

For years the invisible and unorganised underbelly of the Rs 60,000-crore automobile industry, the used-car market is finally getting a shape, a size and, most importantly, some transparency. A recent study done by NFO Automotive provides some useful insights into the resale values of different vehicles in India. Multi-utility vehicles (MUVs) command the maximum resale price. On an average, an MUV owner can sell his vehicle at 57 per cent of the purchase price after two years of use. Among cars, the compact category has the highest second-hand value. In that category, Hyundai's Santro ranks first, commanding a resale value equivalent to 60 per cent of its purchase price after two years of ownership. Maruti's three models-Zen, Alto and Wagon-R-occupy the second, third and fourth ranks in this segment (see graphic).

Across most categories, cars commanding the highest price in the resale market are the ones that are selling the most in the new car market. Diesel cars in general-Tata Motors' Indica being one big exception-are not a good bet in the second-hand market.

Availability of such precise estimates of the resale values of cars is one more step toward the ongoing consolidation in the used-car market. Though word of mouth and neighbourhood dealers still dominate the business, auto and finance companies have entered the business in a big way in recent years. That has lent the much-needed quality and reliability to the second-hand car market. Maruti's pre-owned car division, True Value, which was launched two years ago, sells about 1,500 cars a month. Maruti Service Masters, a company-owned service centre, expects 25-30 per cent of its business to come from used cars in future.

The company is using its second-hand car business to boost the sale of new cars as well as retain its customers. Maruti car owners get a special loyalty discount on the price of a new car when they exchange old cars with new. Says Jagdish Khattar, managing director, Maruti Udyog Ltd: "It is an important revenue stream. It also helps us build a relationship with future customers."

Though small in scale, other companies are also tapping the used-car market. Honda gets 10 per cent of its business from its pre-owned cars. Hyundai allows exchange of all competing models with its cars, but loyalty bonus is reserved for existing Hyundai owners. Ford dealers, under the brand name Ford Assured, have been dealing in used cars of all makes for over two years now. Both Ford and Maruti undertake 120-point checks to ascertain the condition of a car before buying it.

Such a formal push is showing in numbers. In 2003-4, about eight lakh new cars will be sold in the country, whereas the number of used cars sold during the year is estimated at 7.5 lakh, more than doubling from 3.5 lakh in 1998-99. That's not surprising, considering that over 38 lakh new vehicles have been added to Indian roads in the past five years.

Adding fuel to the used-car market is urban India's rising appetite for replacement. The car ownership period has slipped from 10-12 years in the mid-1990s to about five years now. In metros the dip has been sharper, with people upgrading their cars every three to four years. That means newer and better quality cars coming to the used-car market, making it even more lucrative. Till the mid-1990s, the average number of owners per car in India was two. That figure has gone up to three-and for some models even more. All this means that the value a car fetches in the second-hand market is more important than ever in the past. Says Satish Kumar, a Delhi-based software engineer who sold his three-year-old Palio to buy a brand new Accent: "How well and easily a car sells in the second-hand market is important when I want to change my car so frequently."

The buyer's profile has changed too. Affordability used to be the primary driver of the demand for used cars. No longer. Cheap and easy loans have pushed many Indians to buy new cars rather than used cars. But new kinds of buyers have emerged for second-hand cars. A rising percentage of the floating population which moves from one city to another on short-term assignments prefers buying a used car which can be resold when moving out of the city. A small but growing proportion of college students prefers a second-hand car to a two-wheeler. For families looking for a second car, a used car is often the first choice. Also, many first time car buyers opting to buy a second-hand mid-size car instead of a new small car.

Credit finance is also helping. Almost 25 per cent of the second-hand cars are sold on credit finance. But the interest rate of about 18 per cent is double the 9 per cent being charged on loans for new cars. Yet the potential is enormous. ICICI Bank, which offers loans at 16-18 per cent for old cars, has seen its used-car business grow at over 30 per cent. Indications are that interest rates will come down. Maruti has tied up with SBI to offer loans to True Value customers at 9 per cent.

By all accounts, the used-car market is set to explode in India. In the US, 45 million used cars are sold in a year- more than double the size of the 18 million-plus new-car market. The day is not far when the second-hand car market will be bigger than the new-car market in India.