I have a bilingual site (Finnish and Swedish) and I'm not sure how to name directories and pages.

Let’s say my site is about cars. I’m considering two alternative naming conventions:

Alt. 1. Language code, URL in English
www.site.com/fi/used-cars/
www.site.com/se/used-cars/

Alt. 2. No language code, URL in native language
www.site.com/kaytetyt-autot/
www.site.com/begagnade-bilar/

Which one would be better from an SEO perspective?

I might also be worth mentioning that;

a) Almost everyone in Finland and Sweden knows a bit of English and is able to figure out the meaning of a URL in English when they see it in the SERP.

b) In Finland and Sweden we use the umlauts å, ä, and ö and those would have to be substituted for a, a, and o in the URL. Google seems to be able to deal with this because when you do a search for names containing umlauts Google treats a as å.

I guess what it boils down to is if Google can do (and does) cross-language semantics.

Well I hate to say it but I would first consider not doing a bi-lingual website. I have seen much better results when building out separate domains, with the right TLD's, targeting different countries

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KBK Marketing | Search Marketing Blog | Cheap Web Hosting

Thanks, but the site is a company site and brand name. The site MUST be/stay multilingual.

OK then, just wanted to mention that. I would go with the URLs in the proper language if you are targeting the SE's of those languages.

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KBK Marketing | Search Marketing Blog | Cheap Web Hosting

I have to agree with incrediblehelp's first suggestion. I've tried both approaches - one site I did has two languages under one .com domain, with spanish in one folder and english in another, whereas another site has one generic domain for english and one local domain for spanish. This second approach is doing a lot better with the SERPS, especially the local domain. So much in fact, that I'm going to separate the first site and attach the spanish side to a local domain.

I have made two forays into multi-lingual sites, one was a joint english/spanish and the other Japanese. The problem that I am having is that the translators are fluent in Spanish/Japanese, etc. and are fluent in English, but aren't 'fluent enough' - ie. they know the word for tree, bark, leaf, etc., but not photosynthesis....so I know that something is getting lost in the translation.

I noted on your post that you are down in Costa Rica, can you take a quick look at corporateleather.com and see if the Spanish looks okay to you?

I spent good money on the transaltion and at the end of the day I have no indication if I have received a quality product!

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Hi cw 1895,
I took a look at some 3 or 4 pages and one thing I can tell you for sure is the translator did not have Spanish spell check on his machine. There's quite a few typos and also a few awkward word choices.
We use tallerdetextos.com, which is based in El Salvador and has excellent prices, are responsible, and the person in charge has two degrees, one in language from a university in Spain. The prices, however, are very, very fair. Consider that young engineers, lawyers, or administrators here earn about $1000 a month, $800 in El Salvador. Write info@tallerdetextos.com
Not that we can't run a spell check for you, but they'll do a better job.

I have one site in 4 languages: English, Spanish, French and German. The site has thousands of pages. The content is databased and visitors are directed to the language of their browser (if enabled) or to English if the language is undetectable or if the language is not a derivative of one of the four. Using a database limits the necessity for a multi-language directory structure.

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I use Country IP Blocks as added security for my networks and servers.

I agree with Tech Manager. A database should work will in your case.