Automobile companies, realising that an organised second-hand car market will push up sales of new cars, are now joining hands to beat the uncertainties plaguing the used-car market.

"Car makers are planning to offer performance guarantees for at least six months, so as to give customers the confidence to go for second-hand cars.

The guarantees may be offered directly by a car company or through its dealers," industry sources said.Worldwide, the used-car market is almost 50 per cent of the size of the new car sales, while in India the market is estimated to be even bigger. "The problem in India, however, is that there is no authentic data on price of used-cars, while there is no guarantees on the qualitative aspects of the vehicles," sources add.

Kotak Mahindra Primus, the auto financing arm of Kotak Mahindra,has already put together an exhaustive database on used car prices and plans to update it every year. Even auto dealers are at it and collecting details of used-car transactions, so as to convince buyers on the price front.

Although quite a few auto dealers also trade in second-hand vehicles, not much effort goes into winning over confidence of the customers on both price and quality fronts. Besides, most of the sales are one-off transactions involving dealers or brokers. According to Kotak Mahindra Primius CEO Dipak Gupta, "Not many organised players are into second-hand cars, and prices fluctuate wildly. In the absence of an organised used-car market, two-wheelers are fast eating into car sales as there exists a yawning gap between the price of a basic new car and two-wheelers."

This is evident from the fact that last year, for for the first time, the car market shrank in size by 5 per cent, while two-wheeler sales grew by 15 per cent.

"While the basic model of a new Maruti costs around Rs 2.25lakh, even the top-of-the-line two wheelers do not cost more than Rs 40,000. There is thus an enormous demand for a vehicle in the Rs 1.25 lakh-odd segment, and used-cars can perfectly fit the bill," Gupta added. The salaried middle class, which is a big target segment today, however does not want to buy from dealers or brokers who wash their hands off the car once the deal is over. Customers instead want car makers to offer some performance guarantee on used cars. With auto makers taking active interest, more and more car dealers are lining up to plunge into the second-hand car business as it offers higher returns. Besides, to top it all, the business does not call for high investments and also helps them earn through sale of spares.

With hectic activity expected in the used car market, players expect the share of used car loans to zoom. "Used car loans currently account for 2-3 per cent of our car financing portfolio at present. We're confident that in the next five years, used car finance schemes willaccount for 20-25 per cent of the car finance market," Gupta said.