Toyota Motor Credit 10Q 2025 Q2 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number 1-9961

TOYOTA MOTOR CREDIT CORPORATION

(Exact name of registrant as specified in its charter)


California		95-3775816
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6565 Headquarters Drive Plano, Texas		75024
(Address of principal executive offices)		(Zip Code)

(469) 486-9300

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Medium-Term Notes, Series B
Stated Maturity Date January 11, 2028

TM/28

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2024, the number of outstanding shares of capital stock, no par value per share, of the registrant was 91,500, all of which shares were held by Toyota Financial Services International Corporation.

Reduced Disclosure Format

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

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TOYOTA MOTOR CREDIT CORPORATION

FORM 10-Q

For the quarter ended September 30, 2024


INDEX
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Consolidated Statements of Income	3
Consolidated Statements of Comprehensive Income	3
Consolidated Balance Sheets	4
Consolidated Statements of Shareholder’s Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7
Note 1. Interim Financial Data	7
Note 2. Investments in Marketable Securities	8
Note 3. Finance Receivables, Net	11
Note 4. Allowance for Credit Losses	16
Note 5. Investments in Operating Leases, Net	17
Note 6. Derivatives, Hedging Activities and Interest Expense	18
Note 7. Debt and Credit Facilities	20
Note 8. Variable Interest Entities	22
Note 9. Commitments and Contingencies	24
Note 10. Income Taxes	26
Note 11. Related Party Transactions	27
Note 12. Fair Value Measurements	28
Note 13. Segment Information	31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	57
Item 4. Controls and Procedures	57
PART II. OTHER INFORMATION	58
Item 1. Legal Proceedings	58
Item 1A. Risk Factors	58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3. Defaults Upon Senior Securities	58
Item 4. Mine Safety Disclosures	58
Item 5. Other Information	58
Item 6. Exhibits	59
Signatures	60

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in millions)

(Unaudited)


	Three months ended					Six months ended
	September 30,					September 30,
	2024		2023			2024		2023
Financing revenues:
Operating lease	$	1,539	$	1,571		$	3,060	$	3,186
Retail		1,487		1,209			2,907		2,313
Dealer		271		206			539		391
Total financing revenues		3,297		2,986			6,506		5,890
Depreciation on operating leases		1,015		918			2,049		2,073
Interest expense		1,584		1,272			3,027		2,171
Net financing revenues		698		796			1,430		1,646

Voluntary protection contract revenues and insurance earned premiums		300		278			595		549
Investment and other income (loss), net		388		(18	)		611		144
Net financing revenues and other revenues		1,386		1,056			2,636		2,339

Expenses:
Provision for credit losses		206		221			395		386
Operating and administrative		453		449			893		897
Voluntary protection contract expenses and insurance losses		161		145			320		291
Total expenses		820		815			1,608		1,574

Income before income taxes		566		241			1,028		765
Provision for income taxes		137		63			242		195

Net income	$	429	$	178		$	786	$	570

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in millions)

(Unaudited)


	Three months ended					Six months ended
	September 30,					September 30,
	2024		2023			2024		2023
Net income	$	429	$	178		$	786	$	570
Other comprehensive income, net of tax
Net unrealized gains (losses) on available-for-sale debt securities [net of tax (provision) benefit of ($6), $6, ($5) and $8, respectively]		21		(21	)		16		(29	)
Reclassification of net (gains) losses realized on available-for-sale debt securities included in investment and other income, net [net of tax provision of $0, $0, $0 and $0, respectively]		-		(1	)		3		(1	)
Other comprehensive income (loss)		21		(22	)		19		(30	)
Comprehensive income	$	450	$	156		$	805	$	540

Refer to the accompanying Notes to Consolidated Financial Statements.

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TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in millions except share data)

(Unaudited)


	September 30,			March 31,
	2024			2024
ASSETS
Cash and cash equivalents	$	10,209		$	8,570
Restricted cash and cash equivalents		2,183			2,251
Investments in marketable securities		4,781			4,505
Finance receivables, net of allowance for credit losses of $1,656 and $1,637, respectively		103,237			101,669
Investments in operating leases, net		28,710			28,013
Other assets		4,431			4,373
Total assets	$	153,551		$	149,381

LIABILITIES AND SHAREHOLDER’S EQUITY
Debt	$	125,956		$	122,420
Deferred income taxes		2,670			3,272
Other liabilities		7,138			6,707
Total liabilities		135,764			132,399

Commitments and contingencies (Refer to Note 9)

Shareholder’s equity:
Capital stock, no par value (100,000 shares authorized; 91,500 issued and outstanding) at September 30, 2024 and March 31, 2024		915			915
Additional paid-in capital		2			2
Accumulated other comprehensive loss		(46	)		(65	)
Retained earnings		16,916			16,130
Total shareholder's equity		17,787			16,982
Total liabilities and shareholder's equity	$	153,551		$	149,381

The following table presents the assets and liabilities of our consolidated variable interest entities (Refer to Note 8).


	September 30,		March 31,
	2024		2024
ASSETS
Finance receivables, net	$	32,137	$	31,130
Investments in operating leases, net		9,027		10,274
Other assets		160		142
Total assets	$	41,324	$	41,546

LIABILITIES
Debt	$	34,459	$	34,337
Other liabilities		58		66
Total liabilities	$	34,517	$	34,403

Refer to the accompanying Notes to Consolidated Financial Statements.

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TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

(Dollars in millions)

(Unaudited)


	Three months ended September 30, 2024
			Additional		Accumulated other
	Capital		paid-in		comprehensive			Retained
	stock		capital		(loss) income			earnings		Total
Balance at June 30, 2024	$	915	$	2	$	(67	)	$	16,487	$	17,337

Net income		-		-		-			429		429
Other comprehensive income, net of tax		-		-		21			-		21
Balance at September 30, 2024	$	915	$	2	$	(46	)	$	16,916	$	17,787

	Six months ended September 30, 2024
			Additional		Accumulated other
	Capital		paid-in		comprehensive			Retained
	stock		capital		(loss) income			earnings		Total
Balance at March 31, 2024	$	915	$	2	$	(65	)	$	16,130	$	16,982

Net income		-		-		-			786		786
Other comprehensive income, net of tax		-		-		19			-		19
Balance at September 30, 2024	$	915	$	2	$	(46	)	$	16,916	$	17,787


	Three months ended September 30, 2023
			Additional		Accumulated other
	Capital		paid-in		comprehensive			Retained
	stock		capital		loss			earnings		Total
Balance at June 30, 2023	$	915	$	2	$	(65	)	$	16,041	$	16,893

Net income		-		-		-			178		178
Other comprehensive loss, net of tax		-		-		(22	)		-		(22	)
Balance at September 30, 2023	$	915	$	2	$	(87	)	$	16,219	$	17,049

	Six months ended September 30, 2023
			Additional		Accumulated other
	Capital		paid-in		comprehensive			Retained
	stock		capital		loss			earnings		Total
Balance at March 31, 2023	$	915	$	2	$	(57	)	$	15,649	$	16,509

Net income		-		-		-			570		570
Other comprehensive loss, net of tax		-		-		(30	)		-		(30	)
Balance at September 30, 2023	$	915	$	2	$	(87	)	$	16,219	$	17,049

Refer to the accompanying Notes to Consolidated Financial Statements.

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TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(Unaudited)


	Six months ended September 30,
	2024			2023
Cash flows from operating activities:
Net income	$	786		$	570
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,087			2,108
Recognition of deferred income and fees		(738	)		(794	)
Provision for credit losses		395			386
Amortization of deferred costs		526			520
Foreign currency and other adjustments to the carrying value of financial instruments, net		406			(108	)
Net (gains) losses from investments in marketable securities		(191	)		186
Net change in:
Derivative assets		(13	)		14
Other assets and accrued interest		(220	)		84
Deferred income taxes		(607	)		(463	)
Derivative liabilities		(14	)		(12	)
Other liabilities		704			708
Net cash provided by operating activities		3,121			3,199

Cash flows from investing activities:
Purchase of investments in marketable securities		(359	)		(424	)
Proceeds from sales of investments in marketable securities		225			295
Proceeds from maturities of investments in marketable securities		74			55
Acquisition of finance receivables		(27,224	)		(26,857	)
Collection of finance receivables		24,841			21,617
Net change in certain wholesale receivables		422			(1,334	)
Acquisition of investments in operating leases		(9,251	)		(6,278	)
Proceeds from disposals of investments in operating leases		6,397			5,805
Long term loans to affiliates		-			(1,010	)
Payments on long term loans from affiliates		190			569
Net change in financing support provided to affiliates		52			61
Other, net		(27	)		(18	)
Net cash used in investing activities		(4,660	)		(7,519	)

Cash flows from financing activities:
Proceeds from issuance of debt		22,922			18,194
Payments on debt		(19,636	)		(16,693	)
Net change in commercial paper and other short-term financing		(168	)		(37	)
Net change in financing support provided by affiliates		(8	)		-
Net cash provided by financing activities		3,110			1,464
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents		1,571			(2,856	)
Cash and cash equivalents and restricted cash and cash equivalents at the beginning of the period		10,821			8,488
Cash and cash equivalents and restricted cash and cash equivalents at the end of the period	$	12,392		$	5,632
Supplemental disclosures:
Interest paid, net	$	2,479		$	2,006
Income taxes paid (received), net	$	343		$	(1	)

Refer to the accompanying Notes to Consolidated Financial Statements.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 1 – Interim Financial Data

Basis of Presentation

The information furnished in these unaudited interim consolidated financial statements as of and for the three and six months ended September 30, 2024 and 2023 has been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In the fourth quarter of fiscal 2024, we changed our accounting method for investment tax credits from the flow-through method to the deferral method. As such, we have retrospectively applied the impact of the accounting method change to conform certain prior period amounts to current period presentation. Refer to Note 1 – Basis of Presentation and Significant Accounting Policies and Note 15 - Selected Quarterly Financial Data (unaudited) in our fiscal 2024 Form 10-K for additional information. In the opinion of management, the unaudited consolidated financial information reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three and six months ended September 30, 2024, do not necessarily indicate the results which may be expected for the full fiscal year ending March 31, 2025 (“fiscal 2025”).

These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Toyota Motor Credit Corporation’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, 2024 (“fiscal 2024”), which was filed with the Securities and Exchange Commission on June 4, 2024. References herein to “TMCC” denote Toyota Motor Credit Corporation, and references herein to “we”, “our”, and “us” denote Toyota Motor Credit Corporation and its consolidated subsidiaries.

Recently Adopted Accounting Guidance

There were no new accounting pronouncements adopted in the first half and second quarter of fiscal 2025.

Accounting Guidance Issued But Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for us on March 31, 2025, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), requiring more granular disclosure of the components of income taxes. This ASU is effective for us on March 31, 2026, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), requiring disclosure in the notes to the financial statements for specified information about certain costs and expenses. This ASU is effective for us on March 31, 2028, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

Other Matters

We have continued to evaluate the private label financial services business, including partnering with or transitioning the business to our affiliates. In August 2024, management presented a plan to the Board of Directors (“Board”) of TMCC to transition the origination and financing of new automotive finance and lease contracts under the Mazda Financial Services (“MFS”) Agreement to Toyota Financial Savings Bank (“TFSB”), an unconsolidated affiliate of TMCC, subject to the successful completion of a trial run with certain Mazda dealers commencing in the third quarter of fiscal year 2025 (the “MFS Transition Plan”). As it was deemed to be in the best interests of the Corporation and its sole shareholder, Toyota Financial Services International Corporation, the Board approved the MFS Transition Plan, including all costs and expenses incurred with the transition, which are not expected to be significant. No existing TMCC private label assets or liabilities will be transitioned to or acquired by TFSB pursuant to the MFS Transition Plan.

In connection with the MFS Transition Plan, TMCC has entered into certain servicing agreements with TFSB to service the retail and lease contracts originated under the MFS Agreement by TFSB. TMCC will continue to offer voluntary protection products to MFS customers.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 2 – Investments in Marketable Securities

Investments in marketable securities consist of debt securities and equity investments. We classify all of our debt securities as available-for-sale (“AFS”). Except when the fair value option is elected, AFS debt securities are recorded at fair value with unrealized gains or losses included in accumulated other comprehensive income (“AOCI”), net of applicable taxes. Interest income is recognized on an accrual basis and determined using the effective interest method. Realized gains and losses from sales of AFS debt securities are determined using the specific identification method or first in first out method. Dividend income, interest income, and realized gains and losses from the sales of AFS debt securities are included in Investment and other income, net in our Consolidated Statements of Income.

We elected the fair value option for certain debt securities held within one of our investment portfolios for operational ease given the size and composition of this portfolio. All debt securities within this specific portfolio are recorded at fair value with changes in fair value included in Investment and other income, net in our Consolidated Statements of Income. AFS debt securities for which the fair value option is elected are not subject to credit loss impairment evaluation. As of September 30, 2024 and March 31, 2024, we held AFS debt securities for which the fair value option was elected of $785 million and $778 million, respectively. The difference between the aggregate fair value and the aggregate unpaid principal balance of AFS debt securities for which the fair value option was elected was an unrealized loss of $43 million and $70 million as of September 30, 2024 and March 31, 2024, respectively.

All equity investments are recorded at fair value with changes in fair value included in Investment and other income, net in our Consolidated Statements of Income. Realized gains and losses from sales of equity investments are determined using the first in first out method and are included in Investment and other income, net in our Consolidated Statements of Income.

Investments in marketable securities consisted of the following:


	September 30, 2024
	Amortized		Unrealized		Unrealized			Fair
	cost		gains		losses			value
Available-for-sale debt securities:
U.S. government and agency obligations	$	805	$	4	$	(65	)	$	744
Foreign government and agency obligations		14		1		(1	)		14
Municipal debt securities		8		1		(1	)		8
Corporate debt securities		469		5		(35	)		439
Mortgage-backed securities:
U.S. government agency		121		1		(2	)		120
Non-agency residential		12		-		(1	)		11
Non-agency commercial		55		-		(6	)		49
Asset-backed securities		128		1		(3	)		126
Total available-for-sale debt securities	$	1,612	$	13	$	(114	)	$	1,511
Equity investments									3,270
Total investments in marketable securities								$	4,781

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 2 – Investments in Marketable Securities (Continued)


	March 31, 2024
	Amortized		Unrealized		Unrealized			Fair
	cost		gains		losses			value
Available-for-sale debt securities:
U.S. government and agency obligations	$	783	$	1	$	(87	)	$	697
Foreign government and agency obligations		13		-		(1	)		12
Municipal debt securities		8		-		(1	)		7
Corporate debt securities		477		2		(49	)		430
Mortgage-backed securities:
U.S. government agency		123		-		(5	)		118
Non-agency residential		12		-		(1	)		11
Non-agency commercial		64		-		(9	)		55
Asset-backed securities		142		1		(5	)		138
Total available-for-sale debt securities	$	1,622	$	4	$	(158	)	$	1,468
Equity investments									3,037
Total investments in marketable securities								$	4,505

A portion of our equity investments are investments in funds that are privately placed and managed by an open-end investment management company (the “Trust”). If we elect to redeem shares, the Trust will normally redeem all shares for cash, but may, in unusual circumstances, redeem amounts exceeding the lesser of $250 thousand or 1 percent of the Trust’s asset value by payment in kind of securities held by the respective fund during any 90-day period.

We also invest in actively traded open-end mutual funds. Redemptions are subject to normal terms and conditions as described in each fund’s prospectus.

Unrealized Losses on Securities

The following table presents the aggregate fair value and unrealized losses on AFS debt securities in a continuous unrealized loss position:


	September 30, 2024
	Less than 12 months				12 months or longer					Total
Available-for-sale debt securities:	Fair value		Unrealized losses		Fair value		Unrealized losses			Fair value		Unrealized losses
U.S. government and agency obligations	$	44	$	-	$	572	$	(65	)	$	616	$	(65	)
Foreign government and agency obligations		-		-		5		(1	)		5		(1	)
Municipal debt securities		-		-		2		(1	)		2		(1	)
Corporate debt securities		4		-		319		(35	)		323		(35	)
Mortgage-backed securities
U.S. Government agency		-		-		40		(2	)		40		(2	)
Non-agency residential		-		-		7		(1	)		7		(1	)
Non-agency commercial		-		-		48		(6	)		48		(6	)
Asset-backed securities		3		-		51		(3	)		54		(3	)
Total available-for-sale debt securities	$	51	$	-	$	1,044	$	(114	)	$	1,095	$	(114	)

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 2 – Investments in Marketable Securities (Continued)


	March 31, 2024
	Less than 12 months					12 months or longer					Total
Available-for-sale debt securities:	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
U.S. government and agency obligations	$	317	$	(13	)	$	336	$	(74	)	$	653	$	(87	)
Foreign government and agency obligations		1		-			8		(1	)		9		(1	)
Municipal debt securities		-		-			2		(1	)		2		(1	)
Corporate debt securities		31		(3	)		339		(46	)		370		(49	)
Mortgage-backed securities
U.S. Government agency		51		(1	)		49		(4	)		100		(5	)
Non-agency residential		1		-			7		(1	)		8		(1	)
Non-agency commercial		1		-			53		(9	)		54		(9	)
Asset-backed securities		17		-			58		(5	)		75		(5	)
Total available-for-sale debt securities	$	419	$	(17	)	$	852	$	(141	)	$	1,271	$	(158	)

An allowance for credit losses is established when it is determined that a credit loss has occurred. As of September 30, 2024 and March 31, 2024, management determined credit losses for securities in an unrealized loss position were not significant. This analysis considered a variety of factors including, but not limited to, performance indicators of the issuer, default rates, industry analyst reports, credit ratings, and other relevant information.

Gains and Losses on Securities

The following table represents gains and losses on our investments in marketable securities presented in our Consolidated Statements of Income:


	Three months ended						Six months ended
	September 30,						September 30,
	2024			2023			2024			2023
Available-for-sale debt securities:
Unrealized gains (losses) on securities for which the fair value option was elected	$	32		$	(38	)	$	27		$	(50	)
Realized gains (losses) on sales, net	$	-		$	(2	)	$	(4	)	$	(2	)

Equity investments:
Unrealized gains (losses)	$	170		$	(146	)	$	184		$	(134	)
Realized losses on sales, net	$	(10	)	$	-		$	(16	)	$	-

Contractual Maturities

The amortized cost and fair value by contractual maturities of available-for-sale debt securities are summarized in the following table. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations.


	September 30, 2024
	Amortized cost		Fair value
Available-for-sale debt securities:
Due within 1 year	$	60	$	59
Due after 1 year through 5 years		342		336
Due after 5 years through 10 years		443		433
Due after 10 years		451		377
Mortgage-backed and asset-backed securities 1		316		306
Total	$	1,612	$	1,511

1. Mortgage-backed and asset-backed securities are shown separately from other maturity groupings as these securities have multiple maturity dates.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 3 – Finance Receivables, Net

Finance receivables, net consists of the retail loan and dealer products portfolio segments, and includes deferred origination costs, deferred income, and allowance for credit losses. Finance receivables, net also includes securitized retail receivables, which represent retail receivables that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements, as discussed further in Note 8 – Variable Interest Entities. Cash flows from these securitized retail receivables are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors.

Finance receivables, net consisted of the following:


	September 30,			March 31,
	2024			2024
Retail receivables 1	$	88,860		$	87,150
Dealer financing		16,380			16,181
		105,240			103,331

Deferred origination costs		1,339			1,399
Deferred income		(1,686	)		(1,424	)
Allowance for credit losses
Retail receivables		(1,563	)		(1,549	)
Dealer financing		(93	)		(88	)
Total allowance for credit losses		(1,656	)		(1,637	)
Finance receivables, net	$	103,237		$	101,669

1 Includes gross securitized retail receivables of $32.5 billion and $31.5 billion as of September 30, 2024 and March 31, 2024, respectively.

Accrued interest related to finance receivables is presented in Other assets on the Consolidated Balance Sheets and was $394 million and $396 million at September 30, 2024 and March 31, 2024, respectively.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 3 – Finance Receivables, Net (Continued)

Credit Quality Indicators

We are exposed to credit risk on our finance receivables. Credit risk is the risk of loss arising from the failure of customers or dealers to meet the terms of their contracts with us or otherwise fail to perform as agreed.

Retail Loan Portfolio Segment

The retail loan portfolio segment consists of one class of finance receivables. While we use various credit quality metrics to develop our allowance for credit losses on the retail loan portfolio segment, we primarily utilize the aging of the individual accounts to monitor the credit quality of these finance receivables. Based on our experience, the payment status of borrowers is the strongest indicator of the credit quality of the underlying receivables. Payment status also impacts charge-offs.

Individual borrower accounts within the retail loan portfolio segment are segregated into aging categories based on the number of days past due. The aging of finance receivables is updated monthly.

The following tables present the amortized cost basis of our retail loan portfolio by origination fiscal year by credit quality indicator based on number of days past due:


	Amortized Cost Basis by Origination Fiscal Year at September 30, 2024
	2025		2024		2023		2022		2021		2020 and Prior		Total
Aging of finance receivables:
Current	$	18,204	$	29,732	$	18,148	$	11,827	$	6,140	$	1,881	$	85,932
30-59 days past due		92		428		506		409		225		102		1,762
60-89 days past due		26		138		162		125		68		35		554
90 days or greater past due		9		70		81		56		29		20		265
Total	$	18,331	$	30,368	$	18,897	$	12,417	$	6,462	$	2,038	$	88,513
Gross Charge-Offs	$	1	$	105	$	161	$	104	$	41	$	23	$	435


	Amortized Cost Basis by Origination Fiscal Year at March 31, 2024
	2024		2023		2022		2021		2020		2019 and Prior		Total
Aging of finance receivables:
Current	$	35,407	$	22,473	$	15,041	$	8,539	$	2,654	$	748	$	84,862
30-59 days past due		301		488		426		242		92		53		1,602
60-89 days past due		77		143		119		68		27		17		451
90 days or greater past due		38		69		53		29		10		11		210
Total	$	35,823	$	23,173	$	15,639	$	8,878	$	2,783	$	829	$	87,125
Gross Charge-Offs	$	38	$	297	$	258	$	111	$	38	$	34	$	776

The amortized cost of retail loan portfolio excludes accrued interest of $321 million and $318 million at September 30, 2024 and March 31, 2024, respectively. The preceding tables include contracts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell, and contracts in bankruptcy.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 3 – Finance Receivables, Net (Continued)

Dealer Products Portfolio Segment

The dealer products portfolio segment consists of three classes of finance receivables: wholesale, real estate, and working capital (includes both working capital and revolving lines of credit). All loans outstanding for an individual dealer or dealer group, which includes affiliated entities, are aggregated and evaluated collectively by dealer or dealer group. This reflects the interconnected nature of financing provided to our individual dealer and dealer group customers, and their affiliated entities.

When assessing the credit quality of the finance receivables within the dealer products portfolio segment, we segregate the finance receivables account balances into four categories representing distinct credit quality indicators based on internal risk assessments. The internal risk assessments for all finance receivables within the dealer products portfolio segment are updated on a monthly basis.

The four credit quality indicators are:

•

Performing – Account not classified as either Credit Watch, At Risk or Default;

•

Credit Watch – Account designated for elevated attention;

•

At Risk – Account where there is an increased likelihood that default may exist based on qualitative and quantitative factors; and

•

Default – Account is not currently meeting contractual obligations or we have temporarily waived certain contractual requirements.

The following tables present the amortized cost basis of our dealer products portfolio by credit quality indicator based on internal risk assessments by origination fiscal year:


	Amortized Cost Basis by Origination Fiscal Year at September 30, 2024
	2025		2024		2023		2022		2021		2020 and Prior		Revolving loans		Total
Wholesale
Performing	$	-	$	-	$	-	$	-	$	-	$	-	$	5,952	$	5,952
Credit Watch		-		-		-		-		-		-		379		379
At Risk		-		-		-		-		-		-		21		21
Default		-		-		-		-		-		-		8		8
Wholesale total	$	-	$	-	$	-	$	-	$	-	$	-	$	6,360	$	6,360
Real estate
Performing	$	713	$	1,094	$	783	$	701	$	800	$	735	$	208	$	5,034
Credit Watch		70		46		-		28		15		-		-		159
At Risk		-		9		-		-		-		2		-		11
Default		5		-		-		-		-		-		-		5
Real estate total	$	788	$	1,149	$	783	$	729	$	815	$	737	$	208	$	5,209
Working Capital
Performing	$	391	$	627	$	286	$	178	$	112	$	231	$	2,939	$	4,764
Credit Watch		11		12		14		4		-		-		2		43
At Risk		-		-		3		-		-		-		1		4
Default		-		-		-		-		-		-		-		-
Working capital total	$	402	$	639	$	303	$	182	$	112	$	231	$	2,942	$	4,811
Total	$	1,190	$	1,788	$	1,086	$	911	$	927	$	968	$	9,510	$	16,380

For the three and six months ended September 30, 2024, there were no gross charge-offs in our dealer product portfolio.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 3 – Finance Receivables, Net (Continued)


	Amortized Cost Basis by Origination Fiscal Year at March 31, 2024
	2024		2023		2022		2021		2020		2019 and Prior		Revolving loans		Total
Wholesale
Performing	$	-	$	-	$	-	$	-	$	-	$	-	$	6,287	$	6,287
Credit Watch		-		-		-		-		-		-		238		238
At Risk		-		-		-		-		-		-		112		112
Default		-		-		-		-		-		-		36		36
Wholesale total	$	-	$	-	$	-	$	-	$	-	$	-	$	6,673	$	6,673
Real estate
Performing	$	1,224	$	883	$	815	$	860	$	128	$	784	$	3	$	4,697
Credit Watch		58		37		44		6		-		-		-		145
At Risk		8		1		10		-		-		2		-		21
Default		4		2		-		25		-		-		-		31
Real estate total	$	1,294	$	923	$	869	$	891	$	128	$	786	$	3	$	4,894
Working Capital
Performing	$	769	$	414	$	235	$	122	$	105	$	159	$	2,715	$	4,519
Credit Watch		20		41		13		-		-		-		2		76
At Risk		-		3		-		-		2		-		1		6
Default		-		-		-		13		-		-		-		13
Working capital total	$	789	$	458	$	248	$	135	$	107	$	159	$	2,718	$	4,614
Total	$	2,083	$	1,381	$	1,117	$	1,026	$	235	$	945	$	9,394	$	16,181

For the twelve months ended March 31, 2024, there were no gross charge-offs in our dealer product portfolio.

The amortized cost of the dealer products portfolio excludes accrued interest of $73 million and $78 million at September 30, 2024 and March 31, 2024, respectively. As of September 30, 2024 and March 31, 2024, the amount of line-of-credit arrangements that are converted to term loans in each reporting period was not significant.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 3 – Finance Receivables, Net (Continued)

Past Due Finance Receivables by Class

Substantially all finance receivables do not involve recourse to the dealer in the event of customer default. Finance receivables include contracts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell, and contracts in bankruptcy. Contracts for which vehicles have been repossessed are excluded. For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 30 days past the contractual due date. For any customer who is granted a payment extension under an extension program, the aging of the receivable is adjusted for the number of days of the extension granted.

The following tables present the aging of the amortized cost basis of our finance receivables by class:


	September 30, 2024
	30 - 59 Days past due		60 - 89 Days past due		90 Days or greater past due		Total Past due		Current		Total Finance receivables		90 Days or greater past due and accruing
Retail loan	$	1,762	$	554	$	265	$	2,581	$	85,932	$	88,513	$	173
Wholesale		1		-		-		1		6,359		6,360		-
Real estate		-		-		-		-		5,209		5,209		-
Working capital		25		-		-		25		4,786		4,811		-
Total	$	1,788	$	554	$	265	$	2,607	$	102,286	$	104,893	$	173


	March 31, 2024
	30 - 59 Days past due		60 - 89 Days past due		90 Days or greater past due		Total Past due		Current		Total Finance receivables		90 Days or greater past due and accruing
Retail loan	$	1,602	$	451	$	210	$	2,263	$	84,862	$	87,125	$	142
Wholesale		-		-		-		-		6,673		6,673		-
Real estate		-		-		-		-		4,894		4,894		-
Working capital		-		-		-		-		4,614		4,614		-
Total	$	1,602	$	451	$	210	$	2,263	$	101,043	$	103,306	$	142

Loan Modifications

Under certain circumstances, we may agree to modify the terms of an existing loan with a borrower for various reasons, including a borrower experiencing financial difficulties. We evaluate all loan modifications, which generally represent a continuation of the existing loan and not a new loan. For borrowers experiencing financial difficulties within the retail loan portfolio segment, we may provide contract term extensions. For borrowers experiencing financial difficulties within the dealer product portfolio segment, we may provide contract term extensions, interest rate adjustments, waivers of loan covenants, or any combination of the three. The effect of these modifications is already included in the allowance for credit losses because our estimated allowance represents currently expected credit losses.

The amortized cost at September 30, 2024 and 2023 of the loans modified during the three and six months ended September 30, 2024 and 2023 were not significant. The unpaid principal balances, net of recoveries, of loans charged off during the reporting period that were modified within 12 months preceding default were not significant for the three and six months ended September 30, 2024 and 2023.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 4 – Allowance for Credit Losses

The following tables provide information related to our allowance for credit losses for finance receivables and certain off-balance sheet lending commitments by portfolio segment:


	Three months ended September 30, 2024
	Retail loan			Dealer products		Total

Beginning balance, July 1, 2024	$	1,559		$	146	$	1,705
Charge-offs		(237	)		-		(237	)
Recoveries		35			-		35
Provision for credit losses		206			-		206
Ending balance, September 30, 2024 ¹	$	1,563		$	146	$	1,709

	Six months ended September 30, 2024
	Retail loan			Dealer products		Total
Beginning balance, April 1, 2024	$	1,549		$	135	$	1,684
Charge-offs		(435	)		-		(435	)
Recoveries		65			-		65
Provision for credit losses		384			11		395
Ending balance, September 30, 2024 ¹	$	1,563		$	146	$	1,709

1 Ending balance includes $53 million of allowance for credit losses recorded in Other liabilities on the Consolidated Balance Sheet which is related to off-balance sheet lending commitments in the dealer products portfolio.


	Three months ended September 30, 2023
	Retail loan			Dealer products		Total

Beginning balance, July 1, 2023	$	1,483		$	90	$	1,573
Charge-offs		(191	)		-		(191	)
Recoveries		25			-		25
Provision for credit losses		212			9		221
Ending balance, September 30, 2023 ¹	$	1,529		$	99	$	1,628

	Six months ended September 30, 2023
	Retail loan			Dealer products		Total
Beginning balance, April 1, 2023	$	1,430		$	83	$	1,513
Charge-offs		(325	)		-		(325	)
Recoveries		54			-		54
Provision for credit losses		370			16		386
Ending balance, September 30, 2023 ¹	$	1,529		$	99	$	1,628

1 Ending balance includes $33 million of allowance for credit losses recorded in Other liabilities on the Consolidated Balance Sheet which is related to off-balance sheet lending commitments in the dealer products portfolio.

We have elected to exclude accrued interest from the measurement of expected credit losses as we apply policies and procedures that result in the timely write-offs of accrued interest. Accrued interest is written off within allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is greater than 120 days past due.

Finance receivables for the dealer products portfolio segment as of September 30, 2024, includes $1.3 billion in finance receivables that are guaranteed by Toyota Motor North America, Inc. (“TMNA”), and $273 million in finance receivables that are guaranteed by third-party private Toyota distributors. Finance receivables for the dealer products portfolio segment as of September 30, 2023, includes $1.2 billion in finance receivables that are guaranteed by TMNA, and $219 million in finance receivables that are guaranteed by third-party private Toyota distributors. These finance receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMNA and third-party private Toyota distributors.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 5 – Investments in Operating Leases, Net

Investments in operating leases, net consists of vehicle lease contracts acquired from dealers, and includes deferred origination fees and costs, deferred income, investment tax credits, and accumulated depreciation. Non-cash investing activities related to investment tax credits on investments in operating leases for the six months ended September 30, 2024 and 2023 were $281 million and $84 million, respectively. Securitized investments in operating leases represent beneficial interests in a pool of certain vehicle leases that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements as discussed further in Note 8 - Variable Interest Entities. Cash flows from these securitized investments in operating leases are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors.

Investments in operating leases, net consisted of the following:


	September 30,			March 31,
	2024			2024
Investments in operating leases 1	$	35,290		$	35,383
Deferred income		(867	)		(609	)
Accumulated depreciation		(5,713	)		(6,761	)
Investments in operating leases, net	$	28,710		$	28,013

1 Includes gross securitized investments in operating leases of $11.9 billion and $13.8 billion as of September 30, 2024 and March 31, 2024, respectively.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 6 – Derivatives, Hedging Activities and Interest Expense

Derivative Instruments

Our liabilities consist mainly of fixed and variable rate debt, denominated in U.S. dollars and various other currencies, which we issue in the global capital markets, while our assets consist primarily of U.S. dollar denominated, fixed rate receivables. We enter into interest rate swaps, and foreign currency swaps to economically hedge the interest rate and foreign currency risks that result from the different characteristics of our assets and liabilities. Our use of derivative transactions is intended to reduce long-term fluctuations in the fair value of assets and liabilities caused by market movements. All of our derivatives are categorized as not designated for hedge accounting, and all of our derivative activities are authorized and monitored by our management and our Asset-Liability Committee which provides a framework for financial controls and governance to manage market risk.

All derivative instruments are recorded on the balance sheet at fair value, taking into consideration the effects of legally enforceable master netting agreements that allow us to net settle asset and liability positions and offset cash collateral with the same counterparty on a net basis. Changes in the fair value of our derivative instruments are recorded in Interest expense in our Consolidated Statements of Income. The derivative instruments are included as a component of Other assets or Other liabilities on our Consolidated Balance Sheets.

Offsetting of Derivatives

Accounting guidance permits the net presentation on our Consolidated Balance Sheets of derivative receivables and derivative payables with the same counterparty and the related cash collateral when a legally enforceable master netting agreement exists, or when the derivative receivables and derivative payables meet all the conditions for the right of setoff to exist. When we meet this condition, we elect to present such balances on a net basis.

Over-the-Counter (“OTC”) Derivatives

Our International Swaps and Derivatives Association Master Agreements are our master netting agreements which permit multiple transactions to be cancelled and settled with a single net balance paid to either party for our OTC derivatives. The master netting agreements also contain reciprocal collateral agreements which require the transfer of cash collateral to the party in a net asset position across all transactions. Our collateral agreements with substantially all our counterparties include a zero threshold, full collateralization arrangement. Although we have daily valuation and collateral exchange arrangements with all of our counterparties, due to the time required to move collateral, there may be a delay of up to one day between the exchange of collateral and the valuation of our derivatives. We would not be required to post additional collateral to the counterparties with whom we were in a net liability position at September 30, 2024, if our credit ratings were to decline, since we fully collateralize without regard to credit ratings with these counterparties. In addition, as our collateral agreements include legal right of offset provisions, collateral amounts are netted against derivative assets or derivative liabilities, and the net amount is included in Other assets or Other liabilities on our Consolidated Balance Sheets.

Centrally Cleared Derivatives

For our centrally cleared derivatives, variation margin payments are legally characterized as settlement payments and accounted for with corresponding derivative positions as one unit of account as opposed to collateral. Initial margin payments are separately recorded in Other assets on our Consolidated Balance Sheets. We perform valuation and margin exchange on a daily basis. Similar to the OTC swaps, there may be a delay of up to one day between the exchange of margin payments and the valuation of our derivatives.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 6 – Derivatives, Hedging Activities and Interest Expense (Continued)

Derivative Activity Impact on Consolidated Financial Statements

The following tables show the financial statement line item and amount of our derivative assets and liabilities that are reported on our Consolidated Balance Sheets:


	September 30, 2024					March 31, 2024
			Fair					Fair
	Notional		value			Notional		value
Other assets:
Interest rate swaps	$	50,878	$	567		$	71,830	$	1,149
Foreign currency swaps		4,859		253			1,759		89
Total	$	55,737	$	820		$	73,589	$	1,238

Counterparty netting				(309	)				(346	)
Collateral held				(457	)				(851	)
Carrying value of derivative contracts – Other assets			$	54				$	41

Other liabilities:
Interest rate swaps	$	61,271	$	24		$	38,920	$	52
Foreign currency swaps		5,337		515			7,433		918
Total	$	66,608	$	539		$	46,353	$	970

Counterparty netting				(309	)				(346	)
Collateral posted				(221	)				(601	)
Carrying value of derivative contracts – Other liabilities			$	9				$	23

As of September 30, 2024 and March 31, 2024, we held excess collateral and variation margin of $5 million, respectively, which we did not use to offset derivative assets and was recorded in Other liabilities on our Consolidated Balance Sheets. As of September 30, 2024 and March 31, 2024, we posted initial margin, excess collateral, and variation margin of $420 million and $311 million, respectively, which we did not use to offset derivative liabilities and was recorded in Other assets on our Consolidated Balance Sheets.

The following table summarizes the components of interest expense, including the location and amount of gains and losses on derivative instruments and related hedged items, as reported in our Consolidated Statements of Income:


	Three months ended						Six months ended
	September 30,						September 30,
	2024			2023			2024			2023
Interest expense on debt	$	1,424		$	1,189		$	2,829		$	2,275
Interest income on derivatives		(39	)		(205	)		(97	)		(414	)
Interest expense on debt and derivatives		1,385			984			2,732			1,861

Losses (gains) on debt denominated in foreign currencies		374			(280	)		394			(243	)
(Gains) losses on foreign currency swaps		(606	)		253			(599	)		297
Losses on U.S. dollar interest rate swaps		431			315			500			256
Total interest expense	$	1,584		$	1,272		$	3,027		$	2,171

Interest expense on debt and derivatives represents net interest settlements and changes in accruals. Gains and losses on derivatives and debt denominated in foreign currencies exclude net interest settlements and changes in accruals. Cash flows associated with derivatives are reported in Net cash provided by operating activities in our Consolidated Statements of Cash Flows.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 7 – Debt and Credit Facilities

Debt and the related weighted average contractual interest rates are summarized as follows:


	September 30, 2024					March 31, 2024
	Face value		Carrying value		Weighted average contractual interest rates	Face value		Carrying value		Weighted average contractual interest rates
Unsecured notes and loans payable	$	91,991	$	91,497	4.17%	$	88,576	$	88,083	4.19%
Secured notes and loans payable		34,513		34,459	4.85%		34,387		34,337	4.64%
Total debt	$	126,504	$	125,956	4.36%	$	122,963	$	122,420	4.32%

The carrying value of our debt includes unamortized premiums, discounts, debt issuance costs and the effects of foreign currency translation adjustments.

Weighted average contractual interest rates are calculated based on original notional or par value before consideration of premium or discount and approximate the effective interest rates. Debt is callable at par value.

Unsecured Notes and Loans Payable

Our unsecured notes and loans payable consist of commercial paper and fixed and variable rate debt. Short-term funding needs are met through the issuance of commercial paper in the U.S. Amount outstanding under our commercial paper programs was $17.1 billion and $17.2 billion as of September 30, 2024 and March 31, 2024, respectively.

Upon issuance of fixed rate debt, we generally elect to enter into pay-float swaps to convert fixed rate payments on debt to floating rate payments. Certain unsecured notes and loans payable are denominated in various foreign currencies. The debt is translated into U.S. dollars using the applicable exchange rate at the transaction date and retranslated at each balance sheet date using the exchange rate in effect at that date. Concurrent with the issuance of these foreign currency unsecured notes and loans payable, we enter into currency swaps in the same notional amount to convert non-U.S. currency payments to U.S. dollar denominated payments. Gains and losses related to foreign currency transactions are included in Interest expense in our Consolidated Statements of Income.

Certain of our unsecured notes and loans payable contain covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. We are currently in compliance with these covenants and conditions.

Secured Notes and Loans Payable

Our secured notes and loans payable are denominated in U.S. dollars and consist of both fixed and variable rate debt. Secured notes and loans payable are issued using on-balance sheet securitization trusts, as further discussed in Note 8 – Variable Interest Entities. These notes are repayable only from collections on the underlying securitized retail finance receivables and the beneficial interests in investments in operating leases and from related credit enhancements. Some of our secured notes are backed by a revolving pool of finance receivables and cash collateral, with the ability to repay the notes in full after the revolving period ends, after which an amortization period begins.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 7 – Debt and Credit Facilities (Continued)

Credit Facilities and Letters of Credit

For additional liquidity purposes, we maintain credit facilities, which may be used for general corporate purposes, as described below:

364-Day Credit Agreement, Three-Year Credit Agreement and Five-Year Credit Agreement

TMCC, Toyota Credit de Puerto Rico Corp. (“TCPR”), a wholly owned subsidiary, and other Toyota affiliates are party to a $5.0 billion 364-day syndicated bank credit facility, a $5.0 billion three-year syndicated bank credit facility, and a $5.0 billion five-year syndicated bank credit facility, expiring in fiscal years ending March 31, 2025, 2027, and 2029, respectively.

The ability to make draws is subject to covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. These agreements were not drawn upon and had no outstanding balances as of September 30, 2024 and March 31, 2024. We are currently in compliance with the covenants and conditions of the credit agreements described above.

Committed Revolving Asset-backed Facility

We are party to a 364-day revolving securitization facility with certain bank-sponsored asset-backed conduits and other financial institutions expiring in fiscal year ending March 31, 2026. Under the terms and subject to the conditions of this facility, the committed lenders under the facility have committed to make advances up to a facility limit of $8.5 billion backed by eligible retail finance receivables transferred by us to a special-purpose entity acting as borrower. We utilized $4.5 billion and $3.4 billion of this facility as of September 30, 2024 and March 31, 2024, respectively.

Other Unsecured Credit Agreements

TMCC is party to additional unsecured credit facilities with various banks. As of September 30, 2024, TMCC had committed bank credit facilities totaling $4.6 billion, of which $2.2 billion, $400 million, $1.7 billion, and $325 million mature in fiscal years ending March 31, 2025, 2026, 2027, and 2028, respectively.

These credit agreements contain covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. These credit facilities were not drawn upon and had no outstanding balances as of September 30, 2024 and March 31, 2024. We are currently in compliance with the covenants and conditions of the credit agreements described above.

TMCC is party to a $5.0 billion three-year revolving credit facility with Toyota Motor Sales U.S.A., Inc. expiring in fiscal year ending March 31, 2027. This credit facility was not drawn upon and had no outstanding balance as of September 30, 2024 and March 31, 2024.

From time to time, we may borrow from affiliates based upon a number of business factors such as funds availability, cash flow timing, relative cost of funds, and market access capabilities. Amounts borrowed from affiliates are recorded in Other liabilities on our Consolidated Balance Sheets.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 8 – Variable Interest Entities

We use one or more special purpose entities that are considered Variable Interest Entities (“VIEs”) to issue asset-backed securities to third-party bank-sponsored asset-backed securitization vehicles and to investors in securitization transactions. The securities issued by these VIEs are backed by the cash flows related to retail finance receivables and beneficial interests in investments in operating leases (“Securitized Assets”). We hold variable interests in the VIEs that could potentially be significant to the VIEs. We determined that we are the primary beneficiary of the securitization trusts because (i) our servicing responsibilities for the Securitized Assets give us the power to direct the activities that most significantly impact the performance of the VIEs, and (ii) our variable interests in the VIEs give us the obligation to absorb losses and the right to receive residual returns that could potentially be significant.

The following tables show the assets and liabilities related to our VIE securitization transactions that are included on our Consolidated Balance Sheets:


	September 30, 2024
			VIE Assets				VIE Liabilities
	Restricted cash and cash equivalents		Net securitized assets		Other assets		Debt		Other liabilities
Retail finance receivables	$	1,551	$	32,137	$	137	$	28,305	$	49
Investments in operating leases		632		9,027		23		6,154		9
Total	$	2,183	$	41,164	$	160	$	34,459	$	58


	March 31, 2024
			VIE Assets				VIE Liabilities
	Restricted cash and cash equivalents		Net securitized assets		Other assets		Debt		Other liabilities
Retail finance receivables	$	1,559	$	31,130	$	125	$	27,351	$	54
Investments in operating leases		692		10,274		17		6,986		12
Total	$	2,251	$	41,404	$	142	$	34,337	$	66

Restricted cash and cash equivalents shown in the preceding tables represent collections from the underlying Net securitized assets and certain reserve deposits held by TMCC for the VIEs and is included as part of Restricted cash and cash equivalents on our Consolidated Balance Sheets. Net securitized assets shown in the preceding tables are presented net of deferred fees and costs, deferred income, accumulated depreciation and allowance for credit losses. Other assets represent accrued interests related to securitized retail finance receivables and used vehicles held-for-sale that were repossessed by or returned to TMCC for the benefit of the VIEs. The related debt of these consolidated VIEs is presented net of $1.6 billion of securities retained by TMCC at September 30, 2024 and March 31, 2024, respectively. Other liabilities represent accrued interest on the debt of the consolidated VIEs.

The assets of the VIEs and the restricted cash and cash equivalents held by TMCC serve as the sole source of repayment for the asset-backed securities issued by these entities. Investors in the notes issued by the VIEs do not have recourse to us or our other assets, with the exception of customary representation and warranty repurchase provisions and indemnities.

As the primary beneficiary of these entities, we are exposed to credit, residual value, interest rate, and prepayment risk from the Securitized Assets in the VIEs. However, our exposure to these risks did not change as a result of the transfer of the assets to the VIEs. We may also be exposed to interest rate risk arising from the secured notes issued by the VIEs.

In addition, we entered into interest rate swaps with certain special purpose entities that issue variable rate debt. Under the terms of these swaps, the special purpose entities are obligated to pay TMCC a fixed rate of interest on certain payment dates in exchange for receiving a floating rate of interest on notional amounts equal to the outstanding balance of the secured debt. This arrangement enables the special purpose entities to mitigate the interest rate risk inherent in issuing variable rate debt that is secured by fixed rate Securitized Assets.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 8 – Variable Interest Entities (Continued)

The transfers of the Securitized Assets to the special purpose entities in our securitizations are considered to be sales for legal purposes. However, the Securitized Assets and the related debt remain on our Consolidated Balance Sheets. We recognize financing revenue on the Securitized Assets and interest expense on the secured debt issued by the special purpose entities. We also maintain an allowance for credit losses on the securitized retail finance receivables using a methodology consistent with that used for our non-securitized asset portfolio. The interest rate swaps between TMCC and the special purpose entities are considered intercompany transactions and therefore are eliminated in our consolidated financial statements.

Amounts due from non-consolidated variable interest entities at September 30, 2024 and March 31, 2024 and revenues earned from non-consolidated variable interest entities for three and six months ended September 30, 2024 and 2023 were not significant.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 9 – Commitments and Contingencies

Commitments and Guarantees

We have entered into certain commitments and guarantees for which the maximum unfunded amounts are summarized in the table below:


	September 30,		March 31,
	2024		2024
Commitments:
Credit facilities commitments with dealers	$	3,130	$	3,244
Commitments under operating lease agreements		118		106
Total commitments		3,248		3,350
Guarantees of affiliate pollution control and solid waste disposal bonds		100		100
Total commitments and guarantees	$	3,348	$	3,450

Wholesale financing is not considered to be a contractual commitment as the arrangements are not binding arrangements under which TMCC is required to perform.

Commitments

We provide fixed and variable rate working capital loans, revolving lines of credit, and real estate financing to dealers and various multi-franchise organizations referred to as dealer groups for facilities construction and refurbishment, working capital requirements, real estate purchases, business acquisitions and other general business purposes. These loans are typically secured with liens on real estate, vehicle inventory, and/or other dealership assets, as appropriate, and may be guaranteed by individual or corporate guarantees of affiliated dealers, dealer groups, or dealer principals. Although the loans are typically collateralized or guaranteed, the value of the underlying collateral or guarantees may not be sufficient to cover our exposure under such agreements. Our pricing reflects market conditions, the competitive environment, the level of support dealers provide our retail, lease and voluntary protection business and the creditworthiness of each dealer. Amounts drawn under these facilities are reviewed for collectability on a quarterly basis, in conjunction with our evaluation of the allowance for credit losses. In addition to the total commitments and guarantees in the preceding table, we have also extended credit facilities to affiliates as described in Note 12 – Related Party Transactions in our fiscal 2024 Form 10-K.

Lease Commitments

Our operating lease portfolio consists of real estate leases. We have a lease agreement through August 2032 with TMNA for our headquarters facility in Plano, Texas. Commitments under operating lease agreements in the preceding table include $58 million and $62 million for facilities leases with affiliates at September 30, 2024 and March 31, 2024, respectively.

Lease terms may contain renewal and extension options or early termination features. Generally, these options do not impact the lease term because TMCC is not reasonably certain that it will exercise the options. These lease agreements do not impose restrictions on our ability to pay dividends, engage in debt or equity financing transactions or enter into further lease agreements, nor do they have residual value guarantees. We exclude from our Consolidated Balance Sheets leases with a term equal to one year or less and do not separate non-lease components from our real estate leases. Total operating lease expense, including payments to affiliates for the first half and second quarter of fiscal 2025 and fiscal 2024 were not significant.

Operating lease liabilities and right-of-use (“ROU”) assets are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. As the interest rate implicit in the lease contract is typically not readily determinable, we utilize our incremental borrowing rate at the lease commencement date for the duration of the lease term. As of September 30, 2024 and March 31, 2024, operating lease liabilities and ROU assets related to our operating lease agreements for which we are the lessee were not significant.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 9 – Commitments and Contingencies (Continued)

Guarantees and Other Contingencies

TMCC has guaranteed bond obligations totaling $100 million in principal that were issued by Putnam County, West Virginia and Gibson County, Indiana to finance the construction of pollution control facilities at manufacturing plants of certain TMCC affiliates. The bonds mature in the following fiscal years ending March 31: 2028 - $20 million; 2029 - $50 million; 2030 - $10 million; 2031 - $10 million; and 2032 - $10 million. TMCC would be required to perform under the guarantees in the event of non-payment on the bonds and other related obligations. TMCC is entitled to reimbursement by the applicable affiliates for any amounts paid. TMCC receives a nominal annual fee for guaranteeing such payments. TMCC has not been required to perform under any of these affiliate bond guarantees as of September 30, 2024 and March 31, 2024.

Indemnification

In the ordinary course of business, we enter into agreements containing indemnification provisions standard in the industry related to several types of transactions, including, but not limited to, debt funding, derivatives, securitization transactions, and our vendor, supplier and service agreements. Performance under these indemnities would generally occur upon a breach of the representations, warranties, covenants or other commitments made or given in the agreement, or as a result of a third-party claim. In addition, we have agreed in certain debt and derivative issuances, and subject to certain exceptions, to gross-up payments due to third parties in the event that withholding tax is imposed on such payments. In addition, certain of our funding arrangements may require us to pay lenders for increased costs due to certain changes in laws or regulations. Due to the difficulty in predicting events which could cause a breach of the indemnification provisions or trigger a gross-up or other payment obligation, we are not able to estimate our maximum exposure to future payments that could result from claims made under such provisions. We have not made any material payments in the past as a result of these provisions, and as of September 30, 2024, we determined that it is not probable that we will be required to make any material payments in the future. As of September 30, 2024 and March 31, 2024, no amounts have been recorded under these indemnification provisions.

Litigation and Governmental Proceedings

Various legal actions, governmental proceedings and other claims are pending or may be instituted or asserted in the future against us with respect to matters arising in the ordinary course of business. Certain of these actions are or purport to be class action suits, seeking sizeable damages and/or changes in our business operations, policies and practices. Certain of these actions are similar to suits that have been filed against other financial institutions and captive finance companies. In addition, we are subject to governmental and regulatory examinations, information-gathering requests, and investigations from time to time at the state and federal levels. It is inherently difficult to predict the course of such legal actions and governmental inquiries.

We perform periodic reviews of pending claims and actions to determine the probability of adverse verdicts and resulting amounts of liability. We establish accruals for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. When we are able, we also determine estimates of reasonable possibility of loss or range of loss, whether in excess of any related accrued liability or where there is no accrued liability. Given the inherent uncertainty associated with legal matters, the actual costs of resolving legal claims and associated costs of defense may be substantially higher or lower than the amounts for which accruals have been established. Based on available information and established accruals, we do not believe it is reasonably probable that the results of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial condition or results of operations.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 10 – Income Taxes

Our provision for income taxes was $137 million and $242 million for the three and six months ended September 30, 2024, respectively, compared to $63 million and $195 million for the same periods in fiscal 2024. Our effective tax rate was 24 percent for the three and six months ended September 30, 2024, compared to 26 percent and 25 percent for the same periods in fiscal 2024. The increase in the provision for income taxes for the three and six months ended September 30, 2024, compared to the same periods in fiscal 2024, was primarily due to the increase in income before income taxes. The lower effective tax rate for the three and six months ended September 30, 2024, compared to the same periods in fiscal 2024, was primarily attributable to the decrease in state tax provision in the current year and the valuation allowance against the deferred tax asset related to mark-to-market of investments in marketable securities recorded in fiscal 2024.

Tax-related Contingencies

As of September 30, 2024, we remain under IRS examination for fiscal 2018 through fiscal 2025.

We periodically review our uncertain tax positions. Our assessment is based on many factors including any ongoing IRS audits. For the three months ended September 30, 2024, our assessment did not result in a material change in unrecognized tax benefits.

Our deferred tax assets include the cumulative state net operating loss carry forwards, deferred deduction of allowance for credit losses and residual value loss estimates, mark-to-market adjustment of derivatives, and other deferred costs. The total deferred tax liability, net of these deferred tax assets, was $2.7 billion and $3.3 billion at September 30, 2024 and March 31, 2024, respectively. Although realization of the deferred tax assets is not assured, management believes it is more likely than not that the deferred tax assets will be realized. The amount of the deferred tax assets considered realizable could be reduced if management’s estimates change.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 11 – Related Party Transactions

In April 2024, TMCC renewed a three-year revolving credit agreement with Toyota Motor Sales U.S.A., Inc. (“TMS”), pursuant to which TMCC is entitled to borrow a maximum amount of $5 billion. Except for the transaction noted above, there were no material changes to our related party agreements or relationships as described in our fiscal 2024 Form 10-K. The tables below show the financial statement line items and amounts included in our Consolidated Statements of Income and on our Consolidated Balance Sheets under various related party agreements or relationships:


	Three months ended					Six months ended
	September 30,					September 30,
	2024		2023			2024		2023
Net financing revenues:
Manufacturer's subvention and other revenues	$	239	$	253		$	464	$	523
Depreciation on operating leases	$	4	$	(118	)	$	21	$	(87	)

Interest expense:
Credit support fees, interest and other expenses	$	28	$	24		$	57	$	48

Voluntary protection contract revenues and insurance earned premiums:
Voluntary protection contract revenues and insurance earned premiums	$	42	$	39		$	83	$	77

Investment and other income, net:
Interest and other income	$	35	$	11		$	48	$	19

Expenses:
Operating and administrative	$	26	$	22		$	52	$	46


	September 30,			March 31,
	2024			2024
Assets:
Finance receivables, net
Accounts receivable	$	91		$	49
Deferred retail subvention income	$	(1,078	)	$	(953	)

Investments in operating leases, net
Investments in operating leases, net	$	(97	)	$	(80	)
Deferred lease subvention income	$	(451	)	$	(323	)

Other assets
Notes receivable	$	1,494		$	1,724
Other receivables, net	$	73		$	86

Liabilities:
Other liabilities
Unearned voluntary protection contract revenues and insurance earned premiums	$	444		$	433
Other payables, net	$	809		$	771
Notes payable	$	-		$	8

TMCC receives subvention payments from TMNA which result in a gross monthly subvention receivable. As of September 30, 2024 and March 31, 2024, the subvention receivable from TMNA was $101 million and $111 million, respectively. We have a master netting agreement with TMNA which allows us to net settle payments for shared services and subvention transactions. Under this agreement, as of September 30, 2024 and March 31, 2024, respectively, we had a net amount payable to TMNA which is recorded in Other payables, net in Other liabilities.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 12 – Fair Value Measurements

Recurring Fair Value Measurements

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables summarize our financial assets and financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy except for certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient and are excluded from the leveling information provided in the tables below. Fair value amounts presented below are intended to permit reconciliation of the fair value hierarchy to the amounts presented on our Consolidated Balance Sheets.


	September 30, 2024
								Counterparty
								netting &			Fair
	Level 1		Level 2			Level 3		collateral			value
Investments in marketable securities:
Available-for-sale debt securities:
U.S. government and agency obligations	$	740	$	4		$	-	$	-		$	744
Foreign government and agency obligations		-		14			-		-			14
Municipal debt securities		-		8			-		-			8
Corporate debt securities		-		439			-		-			439
Mortgage-backed securities:
U.S. government agency		-		120			-		-			120
Non-agency residential		-		7			4		-			11
Non-agency commercial		-		45			4		-			49
Asset-backed securities		-		70			56		-			126
Available-for-sale debt securities total		740		707			64		-			1,511
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value 1												1,220
Total return bond funds		877		-			-		-			877
Equity mutual funds		1,173		-			-		-			1,173
Equity investments total		2,050		-			-		-			3,270
Investments in marketable securities total		2,790		707			64		-			4,781
Derivative assets:
Interest rate swaps		-		567			-		-			567
Foreign currency swaps		-		253			-		-			253
Counterparty netting and collateral		-		-			-		(766	)		(766	)
Derivative assets total		-		820			-		(766	)		54
Assets at fair value		2,790		1,527			64		(766	)		4,835
Derivative liabilities:
Interest rate swaps		-		(24	)		-		-			(24	)
Foreign currency swaps		-		(515	)		-		-			(515	)
Counterparty netting and collateral		-		-			-		530			530
Liabilities at fair value		-		(539	)		-		530			(9	)
Net assets at fair value	$	2,790	$	988		$	64	$	(236	)	$	4,826

1 Measured at net asset value and therefore excluded from leveling.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 12 – Fair Value Measurements (Continued)


	March 31, 2024
								Counterparty
								netting &			Fair
	Level 1		Level 2			Level 3		collateral			value
Investments in marketable securities:
Available-for-sale debt securities:
U.S. government and agency obligations	$	693	$	4		$	-	$	-		$	697
Foreign government and agency obligations		-		12			-		-			12
Municipal debt securities		-		7			-		-			7
Corporate debt securities		-		430			-		-			430
Mortgage-backed securities:
U.S. government agency		-		118			-		-			118
Non-agency residential		-		7			4		-			11
Non-agency commercial		-		46			9		-			55
Asset-backed securities		-		82			56		-			138
Available-for-sale debt securities total		693		706			69		-			1,468
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value 1												1,134
Total return bond funds		830		-			-		-			830
Equity mutual funds		1,073		-			-		-			1,073
Equity investments total		1,903		-			-		-			3,037
Investments in marketable securities total		2,596		706			69		-			4,505
Derivative assets:
Interest rate swaps		-		1,149			-		-			1,149
Foreign currency swaps		-		89			-		-			89
Counterparty netting and collateral		-		-			-		(1,197	)		(1,197	)
Derivative assets total		-		1,238			-		(1,197	)		41
Assets at fair value		2,596		1,944			69		(1,197	)		4,546
Derivative liabilities:
Interest rate swaps		-		(52	)		-		-			(52	)
Foreign currency swaps		-		(918	)		-		-			(918	)
Counterparty netting and collateral		-		-			-		947			947
Liabilities at fair value		-		(970	)		-		947			(23	)
Net assets at fair value	$	2,596	$	974		$	69	$	(250	)	$	4,523

1 Measured at net asset value and therefore excluded from leveling.

Level 3 Fair Value Measurements

The Level 3 financial assets and liabilities recorded at fair value which are subject to recurring and nonrecurring fair value measurement, and the corresponding activity and change in the fair value measurements of these assets and liabilities, were not significant to our Consolidated Balance Sheets as of September 30, 2024 and March 31, 2024, or Consolidated Statements of Income for the three and six months ended September 30, 2024 and 2023.

Nonrecurring Fair Value Measurements

Nonrecurring fair value measurements include Level 3 net finance receivables that are not measured at fair value on a recurring basis but are subject to fair value adjustments utilizing the fair value of the underlying collateral when there is evidence of impairment. We did not have any significant nonrecurring fair value items as of September 30, 2024 and March 31, 2024.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 12 – Fair Value Measurements (Continued)

The following tables provide information about assets and liabilities not carried at fair value on a recurring basis on our Consolidated Balance Sheets:


	September 30, 2024
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		value
Financial assets
Finance receivables
Retail loan	$	87,262	$	-	$	-	$	89,656	$	89,656
Wholesale		6,369		-		-		6,409		6,409
Real estate		5,192		-		-		5,246		5,246
Working capital		4,707		-		-		4,677		4,677

Financial liabilities
Unsecured notes and loans payable	$	91,497	$	-	$	90,844	$	-	$	90,844
Secured notes and loans payable		34,459		-		-		34,527		34,527


	March 31, 2024
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		value
Financial assets
Finance receivables
Retail loan	$	85,886	$	-	$	-	$	86,575	$	86,575
Wholesale		6,690		-		-		6,710		6,710
Real estate		4,900		-		-		4,890		4,890
Working capital		4,531		-		-		4,494		4,494

Financial liabilities
Unsecured notes and loans payable	$	88,083	$	-	$	86,133	$	-	$	86,133
Secured notes and loans payable		34,337		-		-		34,003		34,003

Accrued interest related to finance receivables is in Other assets on the Consolidated Balance Sheets; however, TMCC measures the fair value of each class of finance receivables using scheduled principal and interest payments. Therefore, accrued interest has been included in the carrying value of each class of finance receivables in the preceding tables, along with the finance receivables, deferred origination costs, deferred income, and allowance for credit losses.

Finance receivables in the preceding tables exclude related party transactions which are classified as Level 3 within the fair value hierarchy. The preceding tables also exclude related party notes receivables and notes payables recorded in Other assets and Other liabilities on the Consolidated Balance Sheets which are classified as Level 3 within the fair value hierarchy. Refer to Note 11 - Related Party Transaction for additional information.

For Cash and cash equivalents and Restricted cash and cash equivalents on our Consolidated Balance Sheets, the fair value approximates the carrying value and these instruments are classified as Level 1 within the fair value hierarchy.

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 13 – Segment Information

Financial information for our reportable operating segments, which includes allocated corporate expenses, is summarized as follows:


	Three months ended September 30, 2024
	Finance		Voluntary protection		Intercompany
	operations		operations		eliminations			Total

Total financing revenues	$	3,297	$	-	$	-		$	3,297
Depreciation on operating leases		1,015		-		-			1,015
Interest expense		1,584		-		-			1,584
Net financing revenues		698		-		-			698

Voluntary protection contract revenues and insurance earned premiums		-		300		-			300
Investment and other income, net		136		252		-			388
Net financing and other revenues		834		552		-			1,386

Expenses:
Provision for credit losses		206		-		-			206
Operating and administrative		332		121		-			453
Voluntary protection contract expenses and insurance losses		-		161		-			161
Total expenses		538		282		-			820

Income before income taxes		296		270		-			566
Provision for income taxes		74		63		-			137

Net income	$	222	$	207	$	-		$	429

	Six months ended September 30, 2024
	Finance		Voluntary protection		Intercompany
	operations		operations		eliminations			Total

Total financing revenues	$	6,506	$	-	$	-		$	6,506
Depreciation on operating leases		2,049		-		-			2,049
Interest expense		3,027		-		-			3,027
Net financing revenues		1,430		-		-			1,430

Voluntary protection contract revenues and insurance earned premiums		-		595		-			595
Investment and other income, net		302		309		-			611
Net financing and other revenues		1,732		904		-			2,636

Expenses:
Provision for credit losses		395		-		-			395
Operating and administrative		659		234		-			893
Voluntary protection contract expenses and insurance losses		-		320		-			320
Total expenses		1,054		554		-			1,608

Income before income taxes		678		350		-			1,028
Provision for income taxes		161		81		-			242

Net income	$	517	$	269	$	-		$	786

Total assets at September 30, 2024	$	145,636	$	8,008	$	(93	)	$	153,551

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 13 – Segment Information (Continued)


	Three months ended September 30, 2023
	Finance		Voluntary protection			Intercompany
	operations		operations			eliminations			Total

Total financing revenues	$	2,986	$	-		$	-		$	2,986
Depreciation on operating leases		918		-			-			918
Interest expense		1,272		-			-			1,272
Net financing revenues		796		-			-			796

Voluntary protection contract revenues and insurance earned premiums		-		278			-			278
Investment and other income (loss), net		119		(137	)		-			(18	)
Net financing and other revenues		915		141			-			1,056

Expenses:
Provision for credit losses		221		-			-			221
Operating and administrative		332		117			-			449
Voluntary protection contract expenses and insurance losses		-		145			-			145
Total expenses		553		262			-			815

Income (loss) before income taxes		362		(121	)		-			241
Provision (benefit) for income taxes		83		(20	)		-			63

Net income (loss)	$	279	$	(101	)	$	-		$	178

	Six months ended September 30, 2023
	Finance		Voluntary protection			Intercompany
	operations		operations			eliminations			Total

Total financing revenues	$	5,890	$	-		$	-		$	5,890
Depreciation on operating leases		2,073		-			-			2,073
Interest expense		2,171		-			-			2,171
Net financing revenues		1,646		-			-			1,646

Voluntary protection contract revenues and insurance earned premiums		-		549			-			549
Investment and other income (loss), net		233		(89	)		-			144
Net financing and other revenues		1,879		460			-			2,339

Expenses:
Provision for credit losses		386		-			-			386
Operating and administrative		666		231			-			897
Voluntary protection contract expenses and insurance losses		-		291			-			291
Total expenses		1,052		522			-			1,574

Income (loss) before income taxes		827		(62	)		-			765
Provision (benefit) for income taxes		202		(7	)		-			195

Net income (loss)	$	625	$	(55	)	$	-		$	570

Total assets at September 30, 2023	$	133,013	$	6,780		$	(78	)	$	139,715

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TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

Note 13 – Segment Information (Continued)

Voluntary protection operations – Contract revenues

For the three and six months ended September 30, 2024, approximately 86 percent and 85 percent, respectively, of voluntary protection contract revenues in the Voluntary protection operations segment were accounted for under the guidance for revenue from contracts with customers, compared to 84 percent for the same periods in fiscal 2024.

The Voluntary protection operations segment defers contractually determined incentives paid to dealers as contract costs for selling voluntary protection products. These costs are recorded in Other assets on our Consolidated Balance Sheets and are amortized to Operating and administrative expenses in the Consolidated Statements of Income using a methodology consistent with the recognition of revenue. The amount of capitalized dealer incentives and the related amortization was not significant to our consolidated financial statements as of and for the three and six months ended September 30, 2024 and 2023.

We had $3.1 billion and $2.9 billion of unearned voluntary protection contract revenues from contracts with customers included in Other liabilities on our Consolidated Balance Sheets as of March 31, 2024 and March 31, 2023, respectively. We recognized $234 million and $466 million of these balances in voluntary protection contract revenues in our Consolidated Statements of Income during the three and six months ended September 30, 2024, respectively, compared to $212 million and $421 million during the same periods in fiscal 2024. As of September 30, 2024, we had unearned voluntary protection contract revenues of $3.3 billion included in Other liabilities on our Consolidated Balance Sheets, and with respect to this balance we expect to recognize revenue of $516 million during fiscal 2025, and $2.8 billion thereafter. At September 30, 2023, we had unearned voluntary protection contract revenues of $3.0 billion associated with outstanding contracts.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this Form 10-Q are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, our performance and results may differ materially from those described or implied by such forward-looking statements. Words such as “believe,” “anticipate,” “expect,” “estimate,” “project,” “should,” “intend,” “will,” “may” or words or phrases of similar meaning are intended to identify forward-looking statements. We caution that the forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the risk factors set forth in “Part II. Other Information – Item 1A. Risk Factors” and “Item 1A. Risk Factors” of our Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, 2024 (“fiscal 2024”), including the following:

 Changes in general business, economic, and geopolitical conditions, including trade policy, as well as in consumer demand and the competitive environment in the automotive markets in the United States;

 Changes in interest rates and credit spreads;

 A decline in Toyota Motor North America, Inc. (“TMNA”) or any private label sales volume and the level of TMNA or any private label sponsored subvention, cash, and contractual residual value support incentive programs;

 Extreme weather conditions, natural disasters, changes in fuel prices, manufacturing disruptions and production suspensions of Toyota, Lexus, and private label vehicles and related parts supply;

 Increased competition from other financial institutions seeking to increase their share of financing Toyota, Lexus, and private label vehicles;

 Changes in consumer behavior;

 Recalls announced by TMNA or private label companies and the perceived quality of Toyota, Lexus, and any private label vehicles;

 Availability and cost of financing;

 Failure or interruption in our operations, including our communications and information systems, or as a result of our failure to retain existing or to attract new key personnel;

 Increased cost, credit and operating risk exposure, or our failure to realize the anticipated benefits, from our private label financial services to third-party automotive and mobility companies, including Mazda and Bass Pro Shops;

 Changes in our credit ratings and those of our ultimate parent, Toyota Motor Corporation (“TMC”) and changes in our credit support arrangements;

 Changes in our financial position and liquidity, or changes or disruptions in our funding sources or access to the global capital markets;

 Revisions to the estimates and assumptions for our allowance for credit losses;

 Flaws in the design, implementation and use of quantitative models and revisions to the estimates and assumptions that are used to determine the value of certain assets;

 Fluctuations in the value or market prices of our investment securities;

 Changes in prices of used vehicles and their effect on residual values of our off-lease vehicles and return rates;

 Failure of our customers or dealers to meet the terms of any contract with us, or otherwise perform as agreed;

 Market risks including changes in interest rates and foreign currency exchange rates and market prices;

 Failure or changes in commercial soundness of our counterparties and other financial institutions;

 Insufficient establishment of reserves, or the failure of a reinsurer to meet its obligations, in our voluntary protection operations;

 A security breach or a cyber-attack;

 Failure to maintain compliant enterprise data practices, including the collection, use, sharing, and security of personally identifiable and financial information of our customers and employees;

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 Compliance with current laws and regulations or becoming subject to more stringent laws, regulatory requirements and regulatory scrutiny; and

 Changes in the economies and applicable laws in the states where we have concentration risk.

Forward-looking statements speak only as of the date they are made. We will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements.

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OVERVIEW

Key Performance Indicators and Factors Affecting Our Business

In our finance operations, we generate revenue, income, and cash flows by providing retail, lease, and dealer financing to dealers and their customers. We measure the performance of our finance operations using the following metrics: financing volume, market share, Net financing revenues, Operating and administrative expense, residual value and credit loss metrics.

In our voluntary protection operations, we generate revenue primarily through underwriting and providing claims administration for products that cover certain risks of customers. We measure the performance of our voluntary protection operations using the following metrics: issued contract volume, average number of contracts in force, loss metrics and investment income.

Our financial results are affected by a variety of economic and industry factors including, but not limited to, new and used vehicle markets, Toyota, Lexus, and private label new vehicle production volume, vehicle inventory levels, vehicle sales and incentive programs, consumer behavior, employment levels, our ability to respond to changes in inflation and interest rates with respect to both contract pricing and funding, the actual or perceived quality, safety or reliability of Toyota, Lexus, and private label vehicles, the financial health of the dealers we finance, and competitive pressure. Our financial results may also be affected by the regulatory environment in which we operate, including as a result of new legislation or changes in regulation and any compliance costs or changes we may be required to make to our business practices. All of these factors can influence consumer contract and dealer financing volume, the number of consumer contracts and dealers that default and the loss per occurrence, our inability to realize originally estimated contractual residual values on leased vehicles, the volume and performance of our voluntary protection operations, and our Net financing revenues on consumer and dealer financing volume. Changes in the volume of vehicle sales, sales of our voluntary protection products, or the level of voluntary protection expenses and insurance losses could materially and adversely impact our voluntary protection operations. Additionally, our funding programs and related costs are influenced by changes in the global capital markets, prevailing interest rates, and our credit ratings and those of our parent companies, which may affect our ability to obtain cost effective funding to support earning asset growth.

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Fiscal 2025 First Six Months Operating Environment

During the first half of the fiscal year ending March 31, 2025 (“fiscal 2025”), the United States (“U.S.”) economy continued to be impacted by higher interest rates and consumer price increases, which have had an adverse effect on our business, financial condition and results of operations by increasing our cost of capital and the rates we charge to our customers and dealers which negatively impacts our financing volumes and market share, as a result of customers and dealers seeking alternative solutions or increasing the amount of cash purchases, thereby resulting in a decline of our competitive position. These economic conditions have also negatively impacted some consumers ability to make scheduled payments which has resulted in an increase in consumer delinquencies and charge-offs.

While economic conditions had an adverse effect, a general increase of inventory levels of new vehicles, along with an increase in sale incentives, resulted in relatively consistent industry-wide vehicle sales in the U.S. for the first half of fiscal 2025, compared to the same period in fiscal 2024. There has been a decline in average used vehicle values in the first half of fiscal 2025; however, values still remained elevated compared to historic levels. Additional future declines in used vehicle values resulting from increases in the supply of new and used vehicles and increases in new vehicle sales incentives could unfavorably impact return rates, residual values, depreciation expense and credit losses.

We continue to maintain broad global access to both domestic and international funding markets. Conditions in the global capital markets were generally stable during the first half of fiscal 2025, although interest rates remained elevated as a result of the central banks’ efforts to lower inflation to target levels. During the first half of fiscal 2025, our interest expense increased as compared to the same period in fiscal 2024 as a result of higher interest rates. Future disruptions and changes in interest rates in the U.S. and foreign markets could result in volatility in our interest expense, which could affect our results of operations.

Mazda Financial Services Transition Plan

The MFS Transition Plan, if fully implemented, will include the origination of all new MFS retail and lease contracts by TFSB rather than TMCC and is anticipated to affect our results of operation and financial statements by reducing financing revenue and related expenses reported on our consolidated statements of income and reducing finance receivables, net and investments in operating leases, net reported on our consolidated balance sheets. Revenue to be earned from service fees related to originating and servicing new MFS retail and lease contracts on behalf of TFSB is not expected to offset the reduction in financing revenue resulting from the implementation of the MFS Transition Plan. The implementation of the MFS Transition Plan is also expected to reduce our future funding needs.

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RESULTS OF OPERATIONS

The following table summarizes total net income by our reportable operating segments:


	Three months ended					Six months ended
	September 30,					September 30,
(Dollars in millions)	2024		2023			2024		2023
Net income:
Finance operations 1	$	222	$	279		$	517	$	625
Voluntary protection operations 1		207		(101	)		269		(55	)
Total net income	$	429	$	178		$	786	$	570

1 Refer to Note 13 - Segment Information of the Notes to Consolidated Financial Statements for the total asset balances of our finance and voluntary protection operations.

Our consolidated net income was $786 million and $429 million for the first half and second quarter of fiscal 2025, respectively, compared to $570 million and $178 million for the same periods in fiscal 2024.

The increase in net income for first half of fiscal 2025, compared to the same period in fiscal 2024, was primarily due to a $616 million increase in total financing revenues, a $467 million increase in investment and other income, net, a $46 million increase in voluntary protection contract revenues and insurance earned premiums, and a $24 million decrease in depreciation on operating leases, partially offset by a $856 million increase in interest expense, a $47 million increase in provision for income taxes, and a $29 million increase in voluntary protection contract expenses and insurance losses.

The increase in net income for the second quarter of fiscal 2025, compared to the same period in fiscal 2024, was primarily due to a $406 million increase in investment and other income, net, a $311 million increase in total financing revenues, a $22 million increase in voluntary protection contract revenues and insurance earned premiums, and a $15 million decrease in provision for credit losses, partially offset by a $312 million increase in interest expense, a $97 million increase in depreciation on operating leases, a $74 million increase in provision for income taxes, and a $16 million increase in voluntary protection contract expenses and insurance losses.

Our overall capital position increased $805 million, bringing total shareholder’s equity to $17.8 billion at September 30, 2024 as compared to $17.0 billion at March 31, 2024. Our debt increased to $126.0 billion at September 30, 2024 from $122.4 billion at March 31, 2024. Our debt-to-equity ratio decreased to 7.1 at September 30, 2024 from 7.2 at March 31, 2024.

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Finance Operations

The following table summarizes key results of our Finance Operations:


	Three months ended					Six months ended
	September 30,				Percentage	September 30,				Percentage
(Dollars in millions)	2024		2023		Change	2024		2023		change
Financing revenues:
Operating lease	$	1,539	$	1,571	(2)%	$	3,060	$	3,186	(4)%
Retail		1,487		1,209	23%		2,907		2,313	26%
Dealer		271		206	32%		539		391	38%
Total financing revenues		3,297		2,986	10%		6,506		5,890	10%
Depreciation on operating leases		1,015		918	11%		2,049		2,073	(1)%
Interest expense		1,584		1,272	25%		3,027		2,171	39%
Net financing revenues		698		796	(12)%		1,430		1,646	(13)%
Investment and other income, net		136		119	14%		302		233	30%
Net financing and other revenues		834		915	(9)%		1,732		1,879	(8)%
Expenses:
Provision for credit losses		206		221	(7)%		395		386	2%
Operating and administrative		332		332	0%		659		666	(1)%
Total expenses		538		553	(3)%		1,054		1,052	0%
Income before income taxes		296		362	(18)%		678		827	(18)%
Provision for income taxes		74		83	(11)%		161		202	(20)%

Net income from finance operations	$	222	$	279	(20)%	$	517	$	625	(17)%

Our finance operations reported net income of $517 million and $222 million for the first half and second quarter of fiscal 2025, respectively, compared to $625 million and $279 million for the same periods in fiscal 2024.

The decrease in net income from finance operations for the first half of fiscal 2025, compared to the same period in fiscal 2024 was primarily due to an $856 million increase in interest expense, partially offset by a $616 million increase in total financing revenues, a $69 million increase in investment and other income, net, a $41 million decrease in provision for income taxes, and a $24 million decrease in depreciation on operating leases.

The decrease in net income from finance operations for the second quarter of fiscal 2025, compared to the same period in fiscal 2024 was primarily due to a $312 million increase in interest expense and a $97 million increase in depreciation on operating leases, partially offset by a $311 million increase in total financing revenues, a $17 million increase in investment and other income, net, and a $15 million decrease in provision for credit losses.

Financing Revenues

Total financing revenues increased 10 percent during the first half and second quarter of fiscal 2025, respectively, as compared to the same periods in fiscal 2024 due to the following:

•

Operating lease revenues decreased 4 percent and 2 percent for the first half and second quarter of fiscal 2025, respectively, as compared to the same periods in fiscal 2024, primarily due to lower average outstanding earning asset balances.

•

Retail financing revenues increased 26 percent and 23 percent for the first half and second quarter of fiscal 2025, respectively, as compared to the same periods in fiscal 2024, due to higher yields and higher average outstanding earning asset balances.

•

Dealer financing revenues increased 38 percent and 32 percent for the first half and second quarter of fiscal 2025, respectively, as compared to the same periods in fiscal 2024, due to higher average outstanding earning asset balances and higher yields.

As a result of the above, our total portfolio yield, which includes operating lease, retail and dealer financing revenues, was 6.7 percent and 6.8 percent for the first half and second quarter of fiscal 2025, compared to 6.1 percent and 6.5 percent for the same periods in fiscal 2024.

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Depreciation on Operating Leases

We recorded depreciation on operating leases of $2.0 billion for the first half of fiscal 2025, compared to $2.1 billion for the same period in fiscal 2024. The decrease in depreciation on operating leases for the first half of fiscal 2025, compared to the same period in fiscal 2024, was due to lower average operating lease units outstanding, mostly offset by higher expected residual value losses. We recorded depreciation on operating leases of $1.0 billion for the second quarter of fiscal 2025, compared to $918 million for the same period in fiscal 2024. The increase in depreciation on operating leases for the second quarter of fiscal 2025, compared to the same period in fiscal 2024, was primarily due to higher expected residual value losses, partially offset by lower average operating lease units outstanding.

Declines in used vehicle values resulting from increases in the supply of new vehicles and increases in new vehicle sales incentives could unfavorably impact return rates, residual values, and depreciation expense in the future.

Interest Expense


	Three months ended						Six months ended
	September 30,						September 30,
(Dollars in millions)	2024			2023			2024			2023
Interest expense on debt	$	1,424		$	1,189		$	2,829		$	2,275
Interest income on derivatives		(39	)		(205	)		(97	)		(414	)
Interest expense on debt and derivatives		1,385			984			2,732			1,861

Losses (gains) on debt denominated in foreign currencies		374			(280	)		394			(243	)
(Gains) losses on foreign currency swaps		(606	)		253			(599	)		297
Losses on U.S. dollar interest rate swaps		431			315			500			256
Total interest expense	$	1,584		$	1,272		$	3,027		$	2,171

During the first half and second quarter of fiscal 2025, total interest expense increased to $3.0 billion and $1.6 billion, respectively, from $2.2 billion and $1.3 billion for the same periods in fiscal 2024. The increase in total interest expense for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024 is primarily attributable to an increase in interest expense on debt and derivatives, losses on U.S. dollar interest rate swaps, partially offset by changes on debt denominated in foreign currencies net of foreign currency swaps.

Interest expense on debt and derivatives primarily represents contractual net interest settlements and changes in accruals on secured and unsecured notes and loans payable and derivatives, and includes amortization of discounts, premiums, and debt issuance costs. During the first half and second quarter of fiscal 2025, interest expense on debt and derivatives combined increased to $2.7 billion and $1.4 billion, respectively, from $1.9 billion and $984 million for the same periods in fiscal 2024. The increase in interest expense on debt is primarily due to an increase in weighted average interest rates and debt outstanding. The decrease in interest income on derivatives is primarily due to a decrease in net interest income on pay-fixed swaps.

Gains or losses on debt denominated in foreign currencies represent the impact of translation adjustments. We use foreign currency swaps to economically hedge the debt denominated in foreign currencies. During the first half and second quarter of fiscal 2025, we recorded net gains of $205 million and $232 million, respectively, primarily due to decreases in foreign currency swap rates across the various currencies in which our debt is denominated. During the first half of fiscal 2024, we recorded net losses of $54 million, primarily due to increases in foreign currency swap rates across the various currencies in which our debt is denominated. During the second quarter of fiscal 2024, we recorded net gains of $27 million, as the impact from net interest income outweighed the impact attributable to yield curve movements.

Gains or losses on U.S. dollar interest rate swaps represent the change in the valuation of interest rate swaps. During the first half and second quarter of fiscal 2025, we recorded losses of $500 million and $431 million, respectively, primarily due to a downward shift of U.S. dollar swap rates resulting in losses on pay-fixed swaps exceeding gains on our pay-float swaps. During the first half and second quarter of fiscal 2024, we recorded losses of $256 million and $315 million, respectively, as the impact from net interest income outweighed the impact attributable to increases in U.S. dollar swap rates.

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Future changes in interest and foreign currency exchange rates could continue to result in significant volatility in our interest expense, thereby affecting our results of operations.

Investment and Other Income, Net

We recorded investment and other income, net of $302 million and $136 million for the first half and second quarter of fiscal 2025, respectively, compared to $233 million and $119 million for the same periods in fiscal 2024. The increase in investment and other income, net for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024, was primarily due to higher yields and higher average balances on our cash and cash equivalents.

Provision for Credit Losses

We recorded a provision for credit losses of $395 million and $206 million for the first half and second quarter of fiscal 2025, respectively, compared to $386 million and $221 million for the same periods in fiscal 2024. The increase in provision for credit losses for the first half of fiscal 2025, compared to the same period in fiscal 2024, was due to an increase in consumer delinquencies and charge-offs, partially offset by lower growth of our retail loan and dealer portfolios.

The decrease in the provision for credit losses in the second quarter of fiscal 2025, compared to the same period in fiscal 2024, was due to lower growth of our retail loan and dealer portfolios, partially offset by an increase in consumer delinquencies and charge-offs.

Operating and Administrative Expenses

We recorded operating and administrative expenses of $659 million and $332 million for the first half and second quarter of fiscal 2025, respectively, compared to $666 million and $332 million for the same periods in fiscal 2024.

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Voluntary Protection Operations

The following table summarizes key results of our Voluntary Protection Operations:


	Three months ended						Six months ended
	September 30,					Percentage	September 30,					Percentage
	2024		2023			Change	2024		2023			change
Contracts (units in thousands)
Issued		822		802		2%		1,651		1,592		4%
Average in force		11,168		10,820		3%		11,177		10,616		5%

(Dollars in millions)
Voluntary protection contract revenues and insurance earned premiums	$	300	$	278		8%	$	595	$	549		8%
Investment and other income (loss), net		252		(137	)	(284)%		309		(89	)	(447)%
Revenues from voluntary protection operations		552		141		291%		904		460		97%
Expenses:
Voluntary protection contract expenses and insurance losses		161		145		11%		320		291		10%
Operating and administrative		121		117		3%		234		231		1%
Total expenses		282		262		8%		554		522		6%
Income (loss) before income taxes		270		(121	)	(323)%		350		(62	)	(665)%
Provision (benefit) for income taxes		63		(20	)	(415)%		81		(7	)	(1257)%
Net income (loss) from voluntary protection operation	$	207	$	(101	)	(305)%	$	269	$	(55	)	(589)%

Our voluntary protection operations reported net income of $269 million and $207 million for the first half and second quarter of fiscal 2025, respectively, compared to net loss of $55 million and $101 million for the same periods in fiscal 2024.

The increase in net income from voluntary protection operations for the first half of fiscal 2025, compared to the same period in fiscal 2024, was primarily due to a $398 million increase in investment and other income (loss), net and a $46 million increase in voluntary protection contract revenues and insurance earned premiums, partially offset by an $88 million increase in provision for income taxes, and a $29 million increase in voluntary protection contract expenses and insurance losses.

The increase in net income from voluntary protection operations for the second quarter of fiscal 2025, compared to the same period in fiscal 2024, was primarily due to a $389 million increase in investment and other income, net and a $22 million increase in voluntary protection contract revenues and insurance earned premiums, partially offset by an $83 million increase in provision for income taxes, and a $16 million increase in voluntary protection contract expenses and insurance losses.

Contracts issued increased 4 percent and 2 percent for the first half and second quarter of fiscal 2025, respectively, compared to the same period in fiscal 2024, primarily due to growth in our private label business. The average number of contracts in force increased 5 percent and 3 percent for the first half and second quarter of fiscal 2025, respectively, compared to the same periods in fiscal 2024, due to net growth in the voluntary protection portfolio primarily in prepaid maintenance contracts.

Revenue from Voluntary Protection Operations

Our voluntary protection operations reported voluntary protection contract revenues and insurance earned premiums of $595 million and $300 million for the first half and second quarter of fiscal 2025, respectively, compared to $549 million and $278 million for the same periods in fiscal 2024. Voluntary protection contract revenues and insurance earned premiums represent revenues from in force contracts and are affected by issuances as well as the level of coverage, age, and mix of in force contracts. Voluntary protection contract revenues and insurance earned premiums are recognized over the term of the contracts in relation to the timing and level of anticipated claims. The increase in voluntary protection contract revenues and insurance earned premiums for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024, was primarily due to an increase in our average in force contracts resulting from net growth in the voluntary protection portfolio.

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Investment and Other Income (Loss), Net

Our voluntary protection operations reported investment and other income, net of $309 million and $252 million for the first half and second quarter of fiscal 2025, respectively, compared to investment and other loss, net of $89 million and $137 million for the same periods in fiscal 2024. Investment and other income, net, consists primarily of dividend and interest income, realized gains and losses on investments in marketable securities, changes in fair value from equity and available-for-sale debt securities for which the fair value option was elected, and credit loss expense on available-for-sale debt securities, if any. The increase in investment and other income, net for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024, was primarily due to gains from changes in fair value on our equity investments and available-for-sale debt securities for which the fair value option was elected, as a result of market volatility, and increased interest income due to higher interest rates.

Voluntary Protection Contract Expenses and Insurance Losses

Our voluntary protection operations reported voluntary protection contract expenses and insurance losses of $320 million and $161 million for the first half and second quarter of fiscal 2025, respectively, compared to $291 million and $145 million for the same periods in fiscal 2024. Voluntary protection contract expenses and insurance losses incurred are a function of the amount of covered risks, the frequency and severity of claims associated with in force contracts, and the level of risk retained by our voluntary protection operations. Voluntary protection contract expenses and insurance losses include amounts paid and accrued for reported losses, estimates of losses incurred but not reported, and any related claim adjustment expenses. The increase in voluntary protection contract expenses and insurance losses for the first half of fiscal 2025, compared to the same period in fiscal 2024, was primarily due to an increase in frequency of claims in our prepaid maintenance contracts and an increase in frequency and severity of claims in our guaranteed auto protection and vehicle service contracts. The increase in voluntary protection contract expenses and insurance losses for the second quarter of fiscal 2025, compared to the same period in fiscal 2024, was primarily due to an increase in frequency of claims in our prepaid maintenance contracts and an increase in frequency and severity of claims in our vehicle service contracts.

Operating and Administrative Expenses

Our voluntary protection operations reported operating and administrative expenses of $234 million and $121 million for the first half and second quarter of fiscal 2025, respectively, compared to $231 million and $117 million for the same periods in fiscal 2024.

Provision for Income Taxes

Our provision for income taxes was $242 million and $137 million for the first half and second quarter of fiscal 2025, respectively, compared to $195 million and $63 million for the same periods in fiscal 2024. Our effective tax rate was 24 percent for the first half and second quarter of fiscal 2025, respectively, compared to 25 percent and 26 percent for the same periods in fiscal 2024. The increase in the provision for income taxes for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024, was primarily due to the increase in income before income taxes. The lower effective tax rate for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024, was primarily attributable to the decrease in state tax provision in the current year and the valuation allowance against the deferred tax asset related to mark-to-market of investments in marketable securities recorded in fiscal 2024.

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FINANCIAL CONDITION

Vehicle Financing Volume and Net Earning Assets

The composition of our vehicle contract volume and market share is summarized below:


	Three months ended							Six months ended
	September 30,						Percentage	September 30,						Percentage
(Units in thousands):	2024			2023			change	2024			2023			Change
Vehicle financing volume 1:
New retail contracts		200			206		(3)%		418			403		4%
Used retail contracts		74			111		(33)%		164			217		(24)%
Lease contracts		111			79		41%		229			160		43%
Total		385			396		(3)%		811			780		4%

TMNA subvened vehicle financing volume 2:
New retail contracts		112			105		7%		231			216		7%
Used retail contracts		13			15		(13)%		31			27		15%
Lease contracts		69			49		41%		140			103		36%
Total		194			169		15%		402			346		16%

Market share of TMNA sales 3:		55.4	%		52.8	%			56.9	%		53.4	%

Total financing volume was comprised of approximately 77 percent Toyota/Lexus, 20 percent private label, and 3 percent non-Toyota/Lexus/private label for the first half of fiscal 2025. Total financing volume was comprised of approximately 75 percent Toyota/Lexus, 22 percent private label, and 3 percent non-Toyota/Lexus/private label for the second quarter of fiscal 2025. Total financing volume was comprised of approximately 80 percent Toyota/Lexus, 15 percent private label, and 5 percent non-Toyota/Lexus/private label for the first half of fiscal 2024. Total financing volume was comprised of approximately 81 percent Toyota/Lexus, 14 percent private label, and 5 percent non-Toyota/Lexus/private label for the second quarter of fiscal 2024.

TMNA subvened volume units are included in the total vehicle financing. Units exclude third-party subvened units.

Represents the percentage of total domestic TMNA sales of new Toyota and Lexus vehicles financed by us, excluding sales under dealer rental car and commercial fleet programs, sales of a private Toyota distributor and private label vehicles financed.

Vehicle Financing Volume

The volume of our retail and lease contracts, which are acquired primarily from Toyota, Lexus, and private label dealers, is dependent upon TMNA and private label sales volume, the level of TMNA, private label, and third-party sponsored subvention and other incentive programs, as well as TMCC competitive rate and other incentive programs.

Our financing volume increased 4 percent for the first half of fiscal 2025, compared to the same period in fiscal 2024, primarily due to higher levels of subvention and other incentives programs, as well as the availability of new vehicles in the first quarter of fiscal 2025.

Our financing volume decreased 3 percent for the second quarter of fiscal 2025, compared to the same period in fiscal 2024, primarily due to a decrease in used retail contracts from lower levels of subvention and other incentives programs, mostly offset by an increase in lease contracts from higher levels of subvention and other incentives programs.

Our market share of TMNA sales increased approximately 4 percentage points and approximately 3 percentage points for the first half and second quarter of fiscal 2025, respectively, compared to the same periods in fiscal 2024, primarily due to higher levels of subvention and other incentives programs.

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The composition of our net earning assets is summarized below:


	September 30,		March 31,		Percentage
(Dollars in millions)	2024		2024		change
Net Earning Assets
Finance receivables, net
Retail finance receivables, net	$	86,950	$	85,576	2%
Dealer financing, net 1		16,287		16,093	1%
Total finance receivables, net		103,237		101,669	2%
Investments in operating leases, net		28,710		28,013	2%
Net earning assets	$	131,947	$	129,682	2%

Dealer Financing
(Number of dealers serviced)
Toyota, Lexus, and private label dealers1		1,215		1,245	(2)%
Dealers outside of the Toyota/Lexus/private label dealer network		386		392	(2)%
Total number of dealers receiving wholesale financing		1,601		1,637	(2)%

1 Includes wholesale and other credit arrangements in which we participate as part of a syndicate of lenders.

Retail Contract Volume and Earning Assets

Our new retail contract volume increased 4 percent for the first half of fiscal 2025, compared to the same period in fiscal 2024, primarily due to higher levels of subvention and other incentives programs. Despite higher levels of subvention and other incentives programs, our new retail contract volume decreased 3 percent for the second quarter of fiscal 2025, compared to the same period in fiscal 2024, primarily due to lower new vehicles inventory levels.

Our used retail contracts decreased 24 percent and 33 percent for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024, due to increased competition in the used vehicle marketplace as well as lower levels of subvention and other incentives programs.

Our retail finance receivables, net increased 2 percent at September 30, 2024 as compared to March 31, 2024 due to higher retail contracts outstanding and higher average amount financed.

Lease Contract Volume and Earning Assets

Our lease contract volume increased 43 percent and 41 percent for the first half and second quarter of fiscal 2025, compared to the same periods in fiscal 2024, primarily due to higher levels of subvention and other incentives programs. Our investments in operating leases, net, increased 2 percent at September 30, 2024, compared to March 31, 2024, primarily due to higher vehicle values.

Dealer Financing and Earning Assets

Dealer financing, net increased 1 percent at September 30, 2024, as compared to March 31, 2024, primarily due to an increase in financing for revolving lines of credit and real estate.

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Residual Value Risk

The primary factors affecting our exposure to residual value risk are the levels at which residual values are established at lease inception, current economic conditions and outlook, projected end-of-term market values, and the resulting impact on depreciation expense and lease return rates. Higher average operating lease units outstanding and the resulting increase in future maturities, a higher supply of used vehicles, as well as future deterioration in actual and expected used vehicle values for Toyota, Lexus, and private label vehicles could unfavorably impact return rates, residual values, and depreciation expense.

On a quarterly basis, we review the estimated end-of-term market values of leased vehicles to assess the appropriateness of our carrying values. To the extent the estimated end-of-term market value of a leased vehicle is lower than the residual value established at lease inception, the residual value of the leased vehicle is adjusted downward so that the carrying value at lease end will approximate the estimated end-of-term market value. For investments in operating leases, adjustments are made on a straight-line basis over the remaining terms of the lease contracts and are included in Depreciation on operating leases in our Consolidated Statements of Income as a change in accounting estimate.

Depreciation on Operating Leases

Depreciation on operating leases and average operating lease units outstanding are as follows:


	Three months ended					Six months ended
	September 30,				Percentage	September 30,				Percentage
	2024		2023		change	2024		2023		change
Depreciation on operating leases (dollars in millions)	$	1,015	$	918	11%	$	2,049	$	2,073	(1)%
Average operating lease units outstanding (in thousands)		886		992	(11)%		893		1,012	(12)%

Depreciation expense on operating leases decreased 1 percent for the first half of fiscal 2025, compared to the same period in fiscal 2024, due to lower average operating lease units outstanding, mostly offset by higher expected residual value losses. Depreciation expense on operating leases increased 11 percent for the second quarter of fiscal 2025, compared to the same period in fiscal 2024, primarily due to higher expected residual value losses, partially offset by lower average operating lease units outstanding.

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Origination, Credit Loss, and Delinquency Experience

Our credit loss experience may be affected by a number of factors including the economic environment, our purchasing, servicing and collections practices, used vehicle market conditions and subvention. Changes in the economy that impact the consumer such as increasing interest rates, and a rise in the unemployment rate as well as higher debt balances, coupled with deterioration in actual and expected used vehicle values, could increase our credit losses. In addition, a decline in the effectiveness of our collection practices could also increase our credit losses. We continuously evaluate and refine our purchasing practices and collection efforts to minimize risk. In addition, subvention contributes to our overall portfolio quality, as subvened contracts typically have higher credit scores than non-subvened contracts.

The following table provides information related to our origination experience:


	September 30,		March 31,		September 30,
	2024		2024		2023
Average consumer portfolio origination FICO score		758		756		753
Average consumer retail loan origination term (months) 1		69		69		69

1 Retail loan origination greater than or equal to 78 months was 11% as of September 30, 2024, March 31, 2024, and September 30, 2023, respectively.

While we have included the average origination FICO score to illustrate origination trends, we also use a proprietary credit scoring system to evaluate an applicant’s risk profile. Refer to Part I. Item 1. Business “Finance Operations” in our fiscal 2024 Form 10-K for further discussion of the proprietary manner in which we evaluate risk.

The following table provides information related to our finance receivables and investment in operating leases:


	September 30,		March 31,		September 30,
	2024		2024		2023
Net charge-offs as a percentage of average finance receivables 1, 5	0.69%		0.69%		0.57%
Default frequency as a percentage of outstanding consumer finance receivables contracts 1	1.48%		1.25%		1.20%
Average consumer finance receivables loss severity per unit 2	$	13,871	$	14,113	$	13,534
Aggregate balances for accounts 60 or more days past due as a percentage of earning assets 3, 4, 5
Finance receivables	0.78%		0.64%		0.68%
Operating leases	0.54%		0.48%		0.44%

1 The ratio for net charge-offs and the ratio for default frequency have been annualized using six-month results for the periods ended September 30, 2024 and 2023. Net charge-off includes the write-offs of accounts deemed to be uncollectable and accounts greater than 120 days past due.

2 Average loss per unit upon disposition of repossessed vehicles or charge-off prior to repossession.

3 Substantially all retail receivables do not involve recourse to the dealer in the event of customer default.

4 Includes accounts in bankruptcy and excludes accounts for which vehicles have been repossessed.

5 Excludes accrued interest from average finance receivables.

Management considers historical credit loss information when assessing the allowance for credit losses. Historical credit losses are primarily driven by two factors: default frequency and loss severity. Our net charge-offs as a percentage of average finance receivables for the first half of fiscal 2025 increased to 0.69 percent from 0.57 percent for the same period in fiscal 2024. Our default frequency as a percentage of outstanding finance receivable contracts increased to 1.48 percent for the first half of fiscal 2025, compared to 1.20 percent in the same period in fiscal 2024. The increases in net charge-offs and default frequency were due to an increase in higher average amounts financed and economic conditions, including consumer price increases and higher interest rates, have negatively impacted some consumers ability to make scheduled payments. Our average finance receivables loss severity per unit for the first half of fiscal 2025 increased to $13,871 from $13,534 in the first half of fiscal 2024. The increase in loss severity is primarily due to higher average amounts financed, partially offset by a decrease in full balance charge offs in the second quarter of fiscal 2025.

Our aggregate balances for accounts 60 or more days past due as a percentage of finance receivables was 0.78 percent at September 30, 2024, compared to 0.68 percent at September 30, 2023, and 0.64 percent at March 31, 2024. Our aggregate balances for accounts 60 or more days past due as a percentage of operating leases was 0.54 percent at September 30, 2024, compared to 0.44 percent at September 30, 2023, and 0.48 percent at March 31, 2024. The increase in our aggregate balances for accounts 60 or more days past due as a percentage of finance receivables and operating leases was primarily due to the economic conditions.

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Allowance for Credit Losses

We maintain an allowance for credit losses which is measured by an impairment model that reflects lifetime expected losses.

The allowance for credit losses for our retail loan portfolio is measured on a collective basis when loans have similar risk characteristics such as loan-to-value ratio, book payment-to-income ratio, FICO score at origination, collateral type (new or used, Lexus, Toyota, or private label), contract term, and other relevant factors. We use statistical models to estimate lifetime expected credit losses of our retail loan portfolio segment by applying probability of default and loss given default to the exposure at default on a loan level basis. Probability of default models are developed from internal risk scoring models which consider variables such as delinquency status, historical default frequency, and other credit quality indicators. Other credit quality indicators include loan-to-value ratio, book payment-to-income ratio, FICO score at origination, collateral type, and contract term. Loss given default models forecast the extent of losses given that a default has occurred and consider variables such as collateral, trends in recoveries, historical loss severity, and other contract structure variables. Exposure at default represents the expected outstanding principal balance, including the effects of expected prepayment when applicable. The lifetime expected credit losses incorporate the probability-weighted forward-looking macroeconomic forecasts for baseline, favorable, and adverse scenarios. The loan lifetime is regarded by management as the reasonable and supportable period. We use macroeconomic forecasts from a third party and update such forecasts quarterly. On an ongoing basis, we review our models, including macroeconomic factors, the selection of macroeconomic scenarios and their weighting to ensure they reflect the risk of the portfolio.

For the allowance for credit losses for our dealer portfolio, an allowance for credit losses is established for both outstanding dealer finance receivables and certain unfunded off-balance sheet lending commitments. The allowance for credit losses is measured on a collective basis when loans have similar risk characteristics such as dealer group internal risk rating and loan-to-value ratios. We measure lifetime expected credit losses of our dealer products portfolio segment by applying probability of default and loss given default to the exposure at default on a loan level basis. Probability of default is primarily established based on internal risk assessments. The probability of default model also considers qualitative factors related to macroeconomic outlooks. Loss given default is established based on the nature and market value of the collateral, loan-to-value ratios and other credit quality indicators. Exposure at default represents the expected outstanding principal balance. The lifetime of the loan or lending commitment is regarded by management as the reasonable and supportable period. On an ongoing basis, we review our models and the macroeconomic outlook, to ensure they reflect the risk of the portfolio.

If management does not believe the models adequately reflect lifetime expected credit losses, a qualitative adjustment is made to reflect management judgment regarding observable changes in recent or expected economic trends and conditions, portfolio composition, and other relevant factors.

The following table provides information related to our allowance for credit losses for finance receivables and certain off-balance sheet lending commitments:


	Three months ended						Six months ended
	September 30,						September 30,
(Dollars in millions)	2024			2023			2024			2023
Allowance for credit losses at beginning of period	$	1,705		$	1,573		$	1,684		$	1,513
Charge-offs		(237	)		(191	)		(435	)		(325	)
Recoveries		35			25			65			54
Provision for credit losses		206			221			395			386
Allowance for credit losses at end of period 1	$	1,709		$	1,628		$	1,709		$	1,628

1 Ending balances as of September 30, 2024 and 2023 include $53 million and $33 million, respectively, of allowance for credit losses recorded in Other liabilities on the Consolidated Balance Sheets which is related to off-balance-sheet lending commitments.

Our allowance for credit losses increased by $81 million from $1.6 billion at September 30, 2023 to $1.7 billion at September 30, 2024, due to an increase in size of our retail loan portfolio and an increase in consumer delinquencies and charge-offs.

Future changes in the economy that impact the consumer and consumer confidence such as increasing interest rates and a rise in the unemployment rate as well as higher debt balances, coupled with deterioration in actual and expected used vehicle values, could result in further increases to our allowance for credit losses. In addition, a decline in the effectiveness of our collection practices could also increase our allowance for credit losses.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Requirements

Our primary material cash requirements include the acquisition of finance receivables and investment in operating leases from dealers, providing various financing to dealers, payments related to debt and swaps, operating expenses, voluntary protection contract expenses, income taxes, and dividend payments.

Guarantees

TMCC has guaranteed the payments of principal and interest with respect to the bond obligations that were issued by Putnam County, West Virginia and Gibson County, Indiana to finance the construction of pollution control facilities at manufacturing plants of certain TMCC affiliates. Refer to Note 9 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for further discussion.

Commitments

A description of our lending commitments is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources” and Note 12 - Related Party Transactions of the Notes to Consolidated Financial Statements in our fiscal 2024 Form 10-K, as well as in Note 9 - Commitments and Contingencies of the Notes to Consolidated Financial Statements.

Indemnification

Refer to Note 9 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for a description of agreements containing indemnification provisions.

Liquidity

Liquidity risk is the risk relating to our ability to meet our financial obligations when they come due. Our liquidity strategy is to ensure that we maintain the ability to fund assets and repay liabilities in a timely and cost-effective manner, even in adverse market conditions. Our strategy includes raising funds via the global capital markets and through loans, credit facilities, and other transactions as well as generating liquidity from our earning assets. This strategy has led us to develop a diversified borrowing base that is distributed across a variety of markets, geographies, investors, and financing structures.

Liquidity management involves forecasting and maintaining sufficient capacity to meet our cash needs, including unanticipated events. To ensure adequate liquidity through a full range of potential operating environments and market conditions, we conduct our liquidity management and business activities in a manner that will preserve and enhance funding stability, flexibility and diversity. Key components of this operating strategy include a strong focus on developing and maintaining direct relationships with commercial paper investors and wholesale market funding providers and maintaining the ability to sell certain assets when and if conditions warrant.

We develop and maintain contingency funding plans and regularly evaluate our liquidity position under various operating circumstances, allowing us to assess how we will be able to operate through a period of stress when access to normal sources of capital is constrained. The plans project funding requirements during a potential period of stress, specify and quantify sources of liquidity, and outline actions and procedures for effectively managing through the problem period. In addition, we monitor the ratings and credit exposure of the lenders that participate in our credit facilities to ascertain any issues that may arise with potential draws on these facilities if that contingency becomes warranted.

We maintain broad access to a variety of domestic and global markets and may choose to realign our funding activities depending upon market conditions, relative costs, and other factors. We believe that our funding sources, combined with operating and investing activities, provide sufficient liquidity to meet future funding requirements and business growth. For liquidity purposes, we hold cash in excess of our immediate funding needs. These excess funds are invested in short-term, highly liquid and investment grade money market instruments, which provide liquidity for our short-term funding needs and flexibility in the use of our other funding sources. We maintained excess funds ranging from $4.9 billion to $10.6 billion with an average balance of $7.6 billion during the quarter ended September 30, 2024. The amount of excess funds we hold excludes amounts related to voluntary protection operations, and may fluctuate, depending on market conditions and other factors. We also have access to liquidity under a $5.0 billion credit facility with Toyota Motor Sales U.S.A., Inc. (“TMS”), which as of September 30, 2024, was not drawn upon and had no outstanding balance as further described in Note 7 – Debt and Credit Facilities of the Notes to the Consolidated Financial Statements. We believe we have sufficient capacity to meet our short-term funding requirements and manage our liquidity, including payment of dividends.

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Credit support is provided to us by our indirect parent Toyota Financial Services Corporation (“TFSC”), and, in turn to TFSC by TMC. Taken together, these credit support agreements provide an additional source of liquidity to us, although we do not rely upon such credit support in our liquidity planning and capital and risk management. The credit support agreements are not a guarantee by TMC or TFSC of any securities or obligations of TFSC or TMCC, respectively. The fees paid pursuant to these agreements are disclosed in Note 11 – Related Party Transactions of the Notes to Consolidated Financial Statements.

TMC’s obligations under its credit support agreement with TFSC rank pari passu with TMC’s senior unsecured debt obligations. Refer to Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations “Liquidity and Capital Resources” in our fiscal 2024 Form 10-K for further discussion.

We routinely monitor global financial conditions and our financial exposure to our global counterparties, particularly in those countries experiencing significant economic, fiscal or political strain, and the corresponding likelihood of default. As of September 30, 2024, our exposure to foreign sovereign and non-sovereign counterparties was not significant. Refer to the “Liquidity and Capital Resources - Credit Facilities and Letters of Credit” section and Part I, Item 1A. Risk Factors – “The failure or commercial soundness of our counterparties and other financial institutions may have an effect on our liquidity, results of operations or financial condition” in our fiscal 2024 Form 10-K for further discussion.

Funding

The following table summarizes the components of our outstanding debt which includes unamortized premiums, discounts, debt issuance costs and the effects of foreign currency translation adjustments:


	September 30, 2024					March 31, 2024
(Dollars in millions)	Face value		Carrying value		Weighted average contractual interest rates	Face value		Carrying value		Weighted average contractual interest rates
Unsecured notes and loans payable
Commercial paper	$	17,303	$	17,069	5.24%	$	17,462	$	17,222	5.59%
U.S. medium term note ("MTN") program		55,141		54,979	4.19%		53,146		52,981	4.06%
Euro medium term note ("EMTN") program		16,027		15,930	2.74%		13,637		13,550	2.54%
Other debt		3,520		3,519	5.12%		4,331		4,330	5.44%
Total Unsecured notes and loans payable		91,991		91,497	4.17%		88,576		88,083	4.19%
Secured notes and loans payable		34,513		34,459	4.85%		34,387		34,337	4.64%
Total debt	$	126,504	$	125,956	4.36%	$	122,963	$	122,420	4.32%

Unsecured notes and loans payable

The following table summarizes the significant activities by program of our Unsecured notes and loans payable:


(Dollars in millions)	Commercial paper 1			MTNs			EMTNs			Other 1			Total Unsecured notes and loans payable
Balance at March 31, 2024	$	17,462		$	53,146		$	13,637		$	4,331		$	88,576
Issuances		-			10,535			2,370			-			12,905
Maturities and terminations		(159	)		(8,540	)		(378	)		(811	)		(9,888	)
Non-cash changes in foreign currency rates		-			-			398			-			398
Balance at September 30, 2024	$	17,303		$	55,141		$	16,027		$	3,520		$	91,991

1 Changes in Commercial paper and certain Other unsecured notes are shown net due to their short duration.

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Commercial paper

Short-term funding needs are met through the issuance of commercial paper in the U.S. Commercial paper outstanding under our commercial paper programs ranged from approximately $17.3 billion to $18.0 billion during the quarter ended September 30, 2024, with an average outstanding balance of $17.6 billion. Our commercial paper programs are supported by the credit facilities discussed under the heading “Credit Facilities and Letters of Credit.” We believe we have sufficient capacity to meet our short-term funding requirements and manage our liquidity.

MTN program

We maintain a shelf registration statement with the Securities and Exchange Commission (“SEC”) to provide for the issuance of debt securities in the U.S. capital markets to retail and institutional investors. We currently qualify as a well-known seasoned issuer under SEC rules, which allows us to issue under our registration statement an unlimited amount of debt securities during the three-year period ending January 2027. Debt securities issued under the U.S. shelf registration statement are issued pursuant to the terms of an indenture which requires TMCC to comply with certain covenants, including negative pledge and cross-default provisions. We are currently in compliance with these covenants.

EMTN program

Our EMTN program, shared with our affiliates Toyota Motor Finance (Netherlands) B.V., Toyota Credit Canada Inc. and Toyota Finance Australia Limited (TMCC and such affiliates, the “EMTN Issuers”), provides for the issuance of debt securities in the international capital markets. In September 2024, the EMTN Issuers renewed the EMTN program for a one-year period. The maximum aggregate principal amount authorized under the EMTN Program to be outstanding at any time is €60.0 billion or the equivalent in other currencies. The authorized amount is shared among all EMTN Issuers. The authorized aggregate principal amount under the EMTN program may be increased from time to time. Debt securities issued under the EMTN program are issued pursuant to the terms of an agency agreement. Certain debt securities issued under the EMTN program are subject to negative pledge provisions. We are currently in compliance with these covenants.

Other debt

TMCC has entered into term loan agreements with various banks. These term loan agreements contain covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. We are currently in compliance with these covenants and conditions.

We may borrow from affiliates on terms based upon a number of business factors such as funds availability, cash flow timing, relative cost of funds, and market access capabilities. Amounts borrowed from affiliates are recorded in Other liabilities on our Consolidated Balance Sheets and are therefore excluded from Debt amounts.

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Secured Notes and Loans Payable

Asset-backed securitization of our earning asset portfolio provides us with an alternative source of funding. We regularly execute public or private securitization transactions.

The following table summarizes the significant activities of our Secured notes and loans payable:


(Dollars in millions)	Secured notes and loans payable
Balance at March 31, 2024	$	34,387
Issuances		10,092
Maturities and terminations		(9,966	)
Balance at September 30, 2024	$	34,513

We securitize finance receivables and beneficial interests in investments in operating leases (“Securitized Assets”) using a variety of structures. Our securitization transactions involve the transfer of Securitized Assets to bankruptcy-remote special purpose entities. These bankruptcy-remote entities are used to ensure that the Securitized Assets are isolated from the claims of creditors of TMCC and that the cash flows from these assets are available solely for the benefit of the investors in these asset-backed securities. Investors in asset-backed securities do not have recourse to our other assets, and neither TMCC nor our affiliates guarantee these obligations. We are not required to repurchase or make reallocation payments with respect to the Securitized Assets that become delinquent or default after securitization. As seller and servicer of the Securitized Assets, we are required to repurchase or make a reallocation payment with respect to the underlying assets that are subsequently discovered not to have met specified eligibility requirements. This repurchase obligation is customary in securitization transactions. With the exception of our revolving asset-backed securitization program, funding obtained from our securitization transactions is repaid as the underlying Securitized Assets amortize.

We service the Securitized Assets in accordance with our customary servicing practices and procedures. Our servicing duties include collecting payments on Securitized Assets and submitting them to a trustee for distribution to security holders and other interest holders. We prepare monthly servicer certificates on the performance of the Securitized Assets, including collections, investor distributions, delinquencies, and credit losses. We also perform administrative services for the special purpose entities.

Our use of special purpose entities in securitizations is consistent with conventional practice in the securitization market. None of our officers, directors, or employees hold any equity interests or receive any direct or indirect compensation from our special purpose entities. These entities do not own our stock or the stock of any of our affiliates. Each special purpose entity has a limited purpose and generally is permitted only to purchase assets, issue asset-backed securities, and make payments to the security holders, other interest holders and certain service providers as required under the terms of the transactions.

Our securitizations are structured to provide credit enhancement to reduce the risk of loss to security holders and other interest holders in the asset-backed securities. Credit enhancement may include some or all of the following:

•

Overcollateralization: The principal of the Securitized Assets that exceeds the principal amount of the related secured debt.

•

Excess spread: The expected interest collections on the Securitized Assets that exceed the expected fees and expenses of the special purpose entity, including the interest payable on the debt, net of swap settlements, if any.

•

Cash reserve funds: A portion of the proceeds from the issuance of asset-backed securities may be held by the securitization trust in a segregated reserve fund and may be used to pay principal and interest to security holders and other interest holders if collections on the underlying receivables are insufficient.

•

Yield supplement arrangements: Additional overcollateralization may be provided to supplement the future contractual interest payments from securitized receivables with relatively low contractual interest rates.

•

Subordinated notes: The subordination of principal and interest payments on subordinated notes may provide additional credit enhancement to holders of senior notes.

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In addition to the credit enhancement described above, we may enter into interest rate swaps with our special purpose entities that issue variable rate debt. Under the terms of these swaps, the special purpose entities are obligated to pay TMCC a fixed rate of interest on payment dates in exchange for receiving a floating rate of interest on notional amounts equal to the outstanding balance of the secured notes and loans payable. This arrangement enables the special purpose entities to mitigate the interest rate risk inherent in issuing variable rate debt that is secured by fixed rate Securitized Assets.

Securitized Assets and the related debt remain on our Consolidated Balance Sheets. We recognize financing revenue on the Securitized Assets. We also recognize interest expense on the secured notes and loans payable issued by the special purpose entities and maintain an allowance for credit losses on the Securitized Assets to cover estimated lifetime expected credit losses using a methodology consistent with that used for our non-securitized asset portfolio. The interest rate swaps between TMCC and the special purpose entities are considered intercompany transactions and therefore are eliminated in our consolidated financial statements.

Our secured notes also include a revolving asset-backed securitization program backed by a revolving pool of finance receivables and cash collateral. Cash flows from these receivables during the revolving period in excess of what is needed to pay certain expenses of the securitization trust and contractual interest payments on the related secured notes may be used to purchase additional receivables, provided that certain conditions are met following the purchase. The secured notes feature a scheduled revolving period, with the ability to repay the secured notes in full, after which an amortization period begins. The revolving period may also end with the amortization period beginning upon the occurrence of certain events that include certain segregated account balances falling below their required levels, credit losses or delinquencies on the pool of assets supporting the secured notes exceeding specified levels, the adjusted pool balance falling to less than 50% of the initial principal amount of the secured notes, or interest not being paid on the secured notes.

Public Securitization

We maintain a shelf registration statement with the SEC to provide for the issuance of securities backed by Securitized Assets in the U.S. capital markets during the three-year period ending December 2024. We regularly sponsor public securitization trusts that issue securities backed by retail finance receivables, including registered securities that we retain. None of these securities have defaulted, experienced any events of default or failed to pay principal in full at maturity. As of September 30, 2024 and March 31, 2024, we did not have any outstanding lease securitization transactions registered with the SEC.

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Credit Facilities and Letters of Credit

For additional liquidity purposes, we maintain credit facilities, which may be used for general corporate purposes, as described below:

364-Day Credit Agreement, Three-Year Credit Agreement and Five-Year Credit Agreement

TMCC, Toyota Credit de Puerto Rico Corp. (“TCPR”), and other Toyota affiliates are party to a $5.0 billion 364-day syndicated bank credit facility, a $5.0 billion three-year syndicated bank credit facility, and a $5.0 billion five-year syndicated bank credit facility, expiring in fiscal years ending March 31, 2025, 2027 and 2029, respectively.

Committed Revolving Asset-backed Facility

Other Unsecured Credit Agreements

TMCC is party to additional unsecured credit facilities with various banks. As of September 30, 2024, TMCC had committed bank credit facilities totaling $4.6 billion of which $2.2 billion, $400 million, $1.7 billion, and $325 million mature in fiscal years ending March 31, 2025, 2026, 2027, and 2028, respectively.

TMCC is party to a $5.0 billion three-year revolving credit facility with TMS expiring in fiscal year ending March 31, 2027. This credit facility was not drawn upon and had no outstanding balance as of September 30, 2024 and March 31, 2024.

From time to time, we may borrow from affiliates based upon a number of business factors such as funds availability, cash flow timing, relative cost of funds, and market access capabilities.

Credit Ratings

The cost and availability of unsecured financing is influenced by credit ratings, which are intended to be an indicator of the creditworthiness of a particular company, security, or obligation. Lower ratings generally result in higher borrowing costs as well as reduced access to capital markets. Credit ratings are not recommendations to buy, sell, or hold securities, and are subject to revision or withdrawal at any time by the assigning credit rating organization. Each credit rating organization may have different criteria for evaluating risk, and therefore ratings should be evaluated independently for each organization. Our credit ratings depend in part on the existence of the credit support agreements of TFSC and TMC. Refer to “Part I, Item 1A. Risk Factors - Our borrowing costs and access to the unsecured debt capital markets depend significantly on the credit ratings of TMCC and its parent companies and our credit support arrangements” in our fiscal 2024 Form 10-K.

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Derivative Instruments

Our liabilities consist mainly of fixed and variable rate debt, denominated in U.S. dollars and various other currencies, which we issue in the global capital markets, while our assets consist primarily of U.S. dollar denominated, fixed rate receivables. We enter into interest rate swaps and foreign currency swaps to economically hedge the interest rate and foreign currency risks that result from the different characteristics of our assets and liabilities. Our use of derivative transactions is intended to reduce long-term fluctuations in the fair value of assets and liabilities caused by market movements. All of our derivatives are categorized as not designated for hedge accounting, and all of our derivative activities are authorized and monitored by our management and our Asset-Liability Committee which provides a framework for financial controls and governance to manage market risk.

Refer to Note 6 – Derivatives, Hedging Activities and Interest Expense of the Notes to Consolidated Financial Statements for further discussion and disclosure on derivative instruments.

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NEW ACCOUNTING STANDARDS

Refer to Note 1 – Interim Financial Data of the Notes to Consolidated Financial Statements.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make certain estimates which affect reported financial results. The evaluation of the factors used in determining each of our critical accounting estimates involves significant assumptions, complex analyses, and management judgment. Changes in the evaluation of these factors may have a significant impact on the consolidated financial statements. Additionally, due to inherent uncertainties in making estimates, actual results could differ from those estimates, and those differences could be material. The critical accounting estimates that affect the consolidated financial statements and the judgment and assumptions used are consistent with those described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates” in our fiscal 2024 Form 10-K.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have omitted this section pursuant to General Instruction H(2) of Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the principal executive officer) and Chief Financial Officer (the principal financial officer), of the effectiveness of our “disclosure controls and procedures” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) concluded that the disclosure controls and procedures were effective as of September 30, 2024, to ensure that information required to be disclosed in reports filed under the Exchange Act was recorded, processed, summarized and reported within the time periods specified by the SEC’s rules, regulations, and forms and that such information is accumulated and communicated to our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

There have been no changes in our internal control over financial reporting that occurred during the three and six months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Litigation

For a discussion of legal proceedings, see “Part I. Financial Information – Item 1. Financial Statements - Note 9 – Commitments and Contingencies of the Notes to Consolidated Financial Statements – Litigation and Governmental Proceedings.”

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors set forth under “Item 1A. Risk Factors” in our fiscal 2024 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We have omitted this section pursuant to General Instruction H(2) of Form 10-Q.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

We have omitted this section pursuant to General Instruction H(2) of Form 10-Q.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit Number	Description	Method of Filing

3.1	Restated Articles of Incorporation of Toyota Motor Credit Corporation filed with the California Secretary of State on April 1, 2010	(1)

3.2	Bylaws of Toyota Motor Credit Corporation as amended through December 8, 2000	(2)

4.1	Amended and Restated Agency Agreement, dated September 13, 2024, among Toyota Motor Credit Corporation, Toyota Motor Finance (Netherlands) B.V., Toyota Credit Canada Inc., Toyota Finance Australia Limited and The Bank of New York Mellon, acting through its London branch	(3)

4.2	Amended and Restated Note Agency Agreement, dated September 13, 2024, among Toyota Motor Credit Corporation, The Bank of New York Mellon SA/NV, Dublin Branch and The Bank of New York Mellon, acting through its London branch	(4)

31.1	Certification of Chief Executive Officer	Filed Herewith

31.2	Certification of Chief Financial Officer	Filed Herewith

32.1	Certification pursuant to 18 U.S.C. Section 1350	Furnished Herewith

32.2	Certification pursuant to 18 U.S.C. Section 1350	Furnished Herewith

101.INS	Inline XBRL instance document	Filed Herewith

101.SCH	Inline XBRL taxonomy extension schema with embedded linkbases document	Filed Herewith

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	Filed Herewith

(1) Incorporated herein by reference to Exhibit 3.1, filed with our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, Commission File Number 1-9961.

(2) Incorporated herein by reference to Exhibit 3.2, filed with our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, Commission File Number 1-9961.

(3) Incorporated herein by reference to Exhibit 4.1, filed with our Current Report on Form 8-K filed September 16, 2024, Commission File Number 1-9961.

(4) Incorporated herein by reference to Exhibit 4.2, filed with our Current Report on Form 8-K filed September 16, 2024, Commission File Number 1-9961.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TOYOTA MOTOR CREDIT CORPORATION
	(Registrant)



Date: November 6, 2024	By	/s/ Scott Cooke
		Scott Cooke
		President and Chief Executive Officer
		(Principal Executive Officer)



Date: November 6, 2024	By	/s/ James Schofield
		James Schofield
		Group Vice President and Chief Financial Officer (Principal Financial Officer)

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Toyota Motor Credit (TM/28) 10-Q2025 Q2 Quarterly report

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