The 30% deposit that works for a container of consumer goods behaves quite differently when the container holds four vehicles worth six figures. The percentages look the same; the exposure does not.
Why vehicle orders sit apart
Three properties change the calculation:
- Unit value. A single vehicle can exceed the total value of a normal consumer-goods shipment. A 30% deposit on a mixed order of ten vehicles is a large sum to place with a counterparty you have not worked with.
- Serialised goods. Every unit carries a chassis number, and the paperwork is tied to it. This is a disadvantage administratively and an advantage commercially — payment milestones can be tied to specific chassis numbers rather than to a vague production status.
- Long production and shipping cycle. Vehicles are built to order in batches and shipped on scheduled sailings. Money sits committed for longer than in most trades.
A structure that reflects those properties
A workable split for a first order, and what each stage buys:
- Deposit on order confirmation — typically 20–30%. Funds the production slot and any specification work. Below this, the factory will not schedule the build.
- Progress payment on chassis number allocation — often another 30–40%. This is the milestone worth insisting on, because a chassis number is verifiable evidence that specific vehicles exist for you, not a general assurance that production is proceeding.
- Balance against shipping documents — the remainder, released against a bill of lading copy listing the chassis numbers.
The middle milestone is what distinguishes a vehicle payment schedule from a generic one. Asking for the chassis numbers before the second payment converts an abstract promise into a list you can check.
When a letter of credit earns its cost
An L/C costs money and administrative effort, so it has to be worth it. For general goods the usual threshold is around USD 50,000. For vehicles, the threshold is reached by almost any order — a single container of passenger vehicles clears it.
What an L/C gives you in this trade specifically:
- The bank pays only against a document set that includes the chassis numbers, so a shipment of different vehicles than ordered creates a documentary discrepancy.
- Payment is tied to shipment, not to the exporter's word that shipment is imminent.
- For buyers who need to raise finance, an L/C is often what their own bank requires anyway.
What it does not give you: any protection against quality problems. The bank examines documents, not vehicles. An L/C and a pre-shipment inspection are complements, not alternatives.
Documentary discrepancies, and how to avoid them
L/Cs in the vehicle trade fail on discrepancies more often than in other trades because there is more to get wrong: chassis numbers, engine numbers, model designations and specification descriptions all appear across several documents and all have to agree exactly.
Two habits prevent most of it. Agree the exact wording of the goods description before the L/C is opened, so the invoice and the credit use identical text. And have the chassis number list circulated and confirmed in writing before documents are prepared, rather than transcribed independently by each party.
Patterns that should end a negotiation
- Payment to a personal account when the contract names a company. In a trade with this unit value, this is the single most serious warning sign.
- Bank details changed by email shortly before a payment. Verify by voice on a number you already held, never on one supplied in the same message. This attack is common and specifically targets high-value trades.
- Refusal to provide chassis numbers before the balance is due. There is no legitimate production reason for this once vehicles are built.
- Pressure to pay 100% in advance on a first order, justified by a discount. The discount is smaller than the exposure.
Settle before the deposit moves
- The exact payment split and what verifiable event triggers each stage.
- Whether chassis numbers are supplied before the second payment.
- Whether the balance is against bill of lading, against inspection, or both.
- What happens if the sailing is delayed beyond an agreed date.
- The beneficiary name, confirmed against the exporter's business licence.
That last check costs a day and is worth it on every first order, regardless of how the negotiation has gone.