TOYOTA MOTOR CREDIT CORP – 10-Q – 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,
2022 ("fiscal 2022"), including the following:

? Risks related to health epidemics and other outbreaks; ?

? 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;

? 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;

? Fluctuations in interest rates and foreign currency exchange rates;

? 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;

? Changes to existing, or adoption of new, accounting standards;

? A security breach or a cyber-attack;

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? 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;

? 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
marketing, 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 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 2023 First Six Months Operating Environment

During the first half of the fiscal year ending March 31, 2023 ("fiscal 2023"),
the United States ("U.S.") economy continued to be impacted by the global
coronavirus and related variants ("COVID-19") pandemic and the conflict in
Ukraine, in addition to inflationary pressures and higher interest rates. The
ongoing challenging economic conditions caused by the COVID-19 pandemic and
geopolitical conflicts, including production halts and supply shortages
affecting the automotive industry and additional delays affecting the supply
chain and logistics networks, have resulted in a decrease in the availability of
new vehicles from pre-pandemic levels. The lack of availability of new vehicles
resulted in decreases in industry-wide vehicle sales and sales incentives in the
U.S. the first half of fiscal 2023, compared to the same period in fiscal 2022.
For more information regarding the potential impact of current market
conditions, refer to Part I. Item 1A. Risk Factors in our Form 10-K for the
fiscal year ended March 31, 2022.

Average used vehicle values in the first half of fiscal 2023 remained elevated
compared to historical levels, primarily due to the lack of availability of new
vehicles. 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 in the future.

During the first half of fiscal 2023, the global capital markets experienced
periods of heightened volatility in response to the ongoing conflict in Ukraine,
increases in the inflation rate, and uncertainty regarding the path of U.S.
monetary policy. U.S. benchmark interest rates and credit spreads both increased
during the first half of the fiscal year. While we continue to maintain broad
global access to both domestic and international markets, these events could
lead to further disruptions in the capital markets and increases in our funding
costs. Future 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.

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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)                  2022           2021        2022         2021
Net income:
Finance operations 1                $      231       $  579     $    621      $ 1,360
Voluntary protection operations 1         (112 )         43         (332 )        183
Total net income                    $      119       $  622     $    289      $ 1,543

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 $289 million and $119 million for the first half
and second quarter of fiscal 2023, respectively, compared to $1,543 million and
$622 million for the same periods in fiscal 2022. The decrease in net income for
the first half of fiscal 2023, compared to the same period in fiscal 2022, was
primarily due to a $607 million decrease in investment and other income, net, a
$559 million increase in interest expense, a $376 million decrease in total
financing revenues, a $226 million increase in provision for credit losses, and
an $81 million increase in operating and administrative expense, partially
offset by a $364 million decrease in provision for income taxes, and a $226
million decrease in depreciation on operating leases. The decrease in net income
for the second quarter of fiscal 2023, compared to the same period in fiscal
2022, was primarily due to a $282 million increase in interest expense, a $208
million decrease in total financing revenues, a $145 million decrease in
investment and other income, net, a $145 million increase in provision for
credit losses, and a $59 million increase in operating and administrative
expense, partially offset by a $194 million decrease in depreciation on
operating leases, and a $148 million decrease in provision for income taxes.

Our overall capital position increased $0.2 billion, bringing total
shareholder's equity to $18.3 billion at September 30, 2022 as compared to $18.1
billion at March 31, 2022. Our debt decreased to $108.9 billion at September 30,
2022 from $109.2 billion at March 31, 2022. Our debt-to-equity ratio decreased
to 5.9 at September 30, 2022 from 6.0 at March 31, 2022.


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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)        2022             2021          Change        2022          2021          change
Financing revenues:
Operating lease           $     1,817      $    2,128       (15)%      $    3,717     $   4,248       (13)%
Retail                            900             821        10%            1,745         1,612         8%
Dealer                            107              83        29%              193           171        13%
Total financing
revenues                        2,824           3,032        (7)%           5,655         6,031        (6)%
Depreciation on
operating leases                1,305           1,499       (13)%           2,714         2,940        (8)%
Interest expense                  705             423        67%            1,268           709        79%
Net financing revenues            814           1,110       (27)%           1,673         2,382       (30)%

Investment and other
income, net                        55               9        511%              88            28        214%
Net financing and other
revenues                          869           1,119       (22)%           1,761         2,410       (27)%

Expenses:
Provision for credit
losses                            213              68        213%             291            65        348%
Operating and
administrative                    339             287        18%              638           579        10%
Total expenses                    552             355        55%              929           644        44%

Income before income
taxes                             317             764       (59)%             832         1,766       (53)%
Provision for income
taxes                              86             185       (54)%             211           406       (48)%

Net income from finance
operations                $       231      $      579       (60)%      $      621     $   1,360       (54)%




Our finance operations reported net income of $621 million and $231 million for
the first half and second quarter of fiscal 2023, respectively, compared to
$1,360 million and $579 million for the same periods in fiscal 2022. The
decrease in net income from finance operations for the first half of fiscal
2023, compared to the same period in fiscal 2022 was primarily due to a $559
million increase in interest expense, a $376 million decrease in total financing
revenues, and a $226 million increase in provision for credit losses, partially
offset by a $226 million decrease in depreciation on operating leases and a $195
million decrease in provision for income taxes. The decrease in net income from
finance operations for the second quarter of fiscal 2023, compared to the same
period in fiscal 2022 was primarily due to a $282 million increase in interest
expense, a $208 million decrease in total financing revenues, and a $145 million
increase in provision for credit losses, partially offset by a $194 million
decrease in depreciation on operating leases, and a $99 million decrease in
provision for income taxes.

Financing Revenues

Total financing revenues decreased 6 percent and 7 percent during the first half
and second quarter of fiscal 2023, as compared to the same periods in fiscal
2022 due to the following:

•

Operating lease revenues decreased 13 percent and 15 percent for the first half
and second quarter of fiscal 2023, respectively, compared to the same periods in
fiscal 2022, due to lower average outstanding earning asset balances and lower
yields.

•

Retail financing revenues increased 8 percent and 10 percent for the first half
and second quarter of fiscal 2023, respectively, as compared to the same periods
in fiscal 2022, primarily due to higher average outstanding earning asset
balances.

•

Dealer financing revenues increased 13 percent and 29 percent for the first half
and second quarter of fiscal 2023, respectively, as compared to the same periods
in fiscal 2022, primarily due to higher yields.

As a result of the above, our total portfolio yield, which includes operating
lease, retail and dealer financing revenues, was 4.8 percent and 5.0 percent for
the first half and second quarter of fiscal 2023, respectively, compared to 5.1
percent, respectively, for the same periods in fiscal 2022.


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Depreciation on Operating Leases

We recorded depreciation on operating leases of $2,714 million and $1,305
million for the first half and second quarter of fiscal 2023, compared to $2,940
million and $1,499 million for the same periods in fiscal 2022, primarily due to
lower average operating lease units outstanding.

The ongoing challenging economic conditions have resulted in a decrease in the
availability of new vehicles from pre-pandemic levels. The lower levels of new
vehicle inventory and higher off-lease vehicle purchases by dealers have led to
historically high levels of average used vehicle values. 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

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. The following
table summarizes the components of interest expense:

                                               Three months ended              Six months ended
                                                  September 30,                 September 30,
(Dollars in millions)                         2022             2021           2022          2021
Interest expense on debt                   $      623       $      382     $    1,069     $     771
Interest (income) expense on derivatives         (120 )             48           (182 )         114
Interest expense on debt and derivatives          503              430            887           885

Gains on debt denominated in foreign
currencies                                       (590 )           (287 )       (1,181 )        (277 )
Losses on foreign currency swaps                  743              333          1,456           358
Losses (gains) on U.S. dollar interest
rate swaps                                         49              (53 )          106          (257 )
Total interest expense                     $      705       $      423     $    1,268     $     709



During the first half and second quarter of fiscal 2023, total interest expense
increased to $1,268 million and $705 million, respectively, from $709 million
and $423 million for the same periods in fiscal 2022. The increase in total
interest expense for the first half of fiscal 2023, compared to the same period
in fiscal 2022 is primarily attributable to losses on U.S. dollar interest rate
swaps and losses on foreign currency swaps net of gains from debt denominated in
foreign currencies. The increase in total interest expense for the second
quarter of fiscal 2023, compared to the same period in fiscal 2022 is primarily
attributable to losses on U.S. dollar interest rate swaps, losses on foreign
currency swaps net of gains from debt denominated in foreign currencies, and an
increase in interest expense on debt.

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
2023, interest expense on debt and derivatives combined increased to $887
million and $503 million, respectively, from $885 million and $430 million for
the same periods in fiscal 2022. The increase in interest expense on debt is due
to an increase in weighted average interest rates, partially offset by a
decrease in average debt outstanding. The decrease in interest expense on
derivatives is primarily due to a decrease in interest expense on pay-fixed
swaps, partially offset by an increase in interest expense on pay-float 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 2023, we recorded net losses of $275 million and $153 million,
respectively, compared to $81 million and $46 million, for the same periods in
fiscal 2022, primarily due to increases in foreign currency swap rates across
various currencies in which our debt is denominated.

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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 2023, we recorded losses of $106 million and $49 million, respectively,
as losses on pay-float swaps exceeded gains on pay-fixed swaps, primarily due to
increases in U.S. dollar swap rates. During the first half and second quarter of
fiscal 2022, we recorded gains of $257 million and $53 million, respectively, as
the impact from net interest income outweighed the impact attributable to the
shifting of U.S. dollar swap rates.

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 $88 million and $55 million for
the first half and second quarter of fiscal 2023, respectively, compared to $28
million and $9 million for the same periods in fiscal 2022. The increase in
investment and other income, net for the first half and second quarter of fiscal
2023, compared to the same periods in fiscal 2022, was primarily due to higher
yields on our investment in marketable securities portfolio.

Provision for Credit Losses

We recorded a provision for credit losses of $291 million and $213 million for
the first half and second quarter of fiscal 2023, respectively, compared to a
provision for credit losses of $65 million and $68 million for the same periods
in fiscal 2022. The increase in the provision for credit losses for the first
half and second quarter of fiscal 2023, compared to the same periods in fiscal
2022, was primarily due to the increase in size of our retail loan portfolio and
an increase in delinquencies.

Operating and Administrative Expenses

We recorded operating and administrative expenses of $638 million and $339
million for the first half and second quarter of fiscal 2023, respectively,
compared to $579 million and $287 million for the same periods in fiscal 2022.
The increase in operating and administrative expenses for the first half and
second quarter of fiscal 2023, compared to the same periods in fiscal 2022,
respectively, was primarily due to higher technology expenses and employee
expenses.



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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
                                2022           2021         Change       2022          2021         change
Contracts (units in
thousands)
Issued                               756          796        (5)%          1,526        1,692       (10)%
Average in force                  10,329        9,942         4%          10,180        9,732         5%

(Dollars in millions)
Voluntary protection
contract revenues
  and insurance earned
premiums                     $       263     $    254         4%       $     522     $    503         4%
Investment and other
(loss) income, net                  (193 )         (2 )     9550%           (532 )        135       (494)%
Revenues from voluntary
protection operations                 70          252       (72)%            (10 )        638       (102)%

Expenses:
Voluntary protection
contract expenses
 and insurance losses                114           99        15%             221          207         7%
Operating and
administrative                       105           98         7%             212          190        12%
Total expenses                       219          197        11%             433          397         9%

(Loss) income before
income taxes                        (149 )         55       (371)%          (443 )        241       (284)%
(Benefit) provision for
income taxes                         (37 )         12       (408)%          

(111 ) 58 (291)%

Net (loss) income from
voluntary protection
operations                   $      (112 )   $     43       (360)%     $    (332 )   $    183       (281)%


Our voluntary protection operations reported net loss of $332 million and $112
million for the first half and second quarter of fiscal 2023, respectively,
compared to net income of $183 million and $43 million for the same periods in
fiscal 2022. The decrease in net income from voluntary protection operations for
the first half of fiscal 2023, compared to the same period in fiscal 2022, was
primarily due to a $667 million decrease in investment and other income, net,
and a $22 million increase in operating and administrative expenses, partially
offset by a $169 million decrease in provision for income taxes. The decrease in
net income from voluntary protection operations for the second quarter of fiscal
2023, compared to the same periods in fiscal 2022, was primarily due to a $191
million decrease in investment and other income, net, and a $15 million increase
in voluntary protection contract expenses and insurance losses, partially offset
by a $49 million decrease in provision for income taxes.

Contracts issued decreased 10 percent and 5 percent in the first half and second
quarter of fiscal 2023, respectively, compared to the same periods in fiscal
2022, primarily due to a decrease in financing contract volumes as a result of
lower new vehicles inventory levels. The average number of contracts in force
increased 5 percent and 4 percent for the first half and second quarter of
fiscal 2023, respectively, compared to the same periods in fiscal 2022, due to
net growth in the voluntary protection portfolio compared to prior years,
primarily in prepaid maintenance and vehicle services contracts.

Revenue from Voluntary Protection Operations

Our voluntary protection operations reported voluntary protection contract
revenues and insurance earned premiums of $522 million and $263 million for the
first half and second quarter of fiscal 2023, respectively, compared to $503
million and $254 million for the same periods in fiscal 2022. 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 2023, compared to the same
periods in fiscal 2022, was primarily due to an increase in our average in force
contracts resulting from net growth in the voluntary protection portfolio
compared to prior years.


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Investment and Other (Loss) Income, Net

Our voluntary protection operations reported investment and other loss, net of
$532 million and $193 million the first half and second quarter of fiscal 2023,
respectively, compared to investment and other income, net of $135 million for
the first half of fiscal 2022, and investment and other loss, net of $2 million
for the second quarter of fiscal 2022. Investment and other (loss) 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
decrease in investment and other (loss) income, net for the first half and
second quarter of fiscal 2023, compared to the same periods in fiscal 2022, was
primarily due to losses from changes in fair value on our equity investments and
available-for-sale debt securities for which the fair value option was elected
and losses from sales of marketable securities as a result of market volatility.
Should market volatility persist or become more severe, it could continue to
negatively impact results from voluntary protection operations.

Voluntary Protection Contract Expenses and Insurance Losses

Our voluntary protection operations reported voluntary protection contract
expenses and insurance losses of $221 million and $114 million for the first
half and second quarter of fiscal 2023, respectively, compared to $207 million
and $99 million for the same periods in fiscal 2022. 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 and second quarter of
fiscal 2023, compared to the same periods in fiscal 2022, was primarily due to
an increase in frequency of claims in our prepaid maintenance and tire and wheel
contracts, and an increase in severity of claims in our vehicle service and tire
and wheel contracts. These increases were partially offset by a decrease in
frequency and severity of claims in guaranteed auto protection contracts.

Operating and Administrative Expenses

Our voluntary protection operations operating and administrative expenses
increased to $212 million and $105 million for the first half and second quarter
of fiscal 2023, respectively, compared to $190 million and $98 million for the
same periods in fiscal 2022. The increase in operating and administrative
expenses for the first half and second quarter of fiscal 2023, compared to the
same periods in fiscal 2022, was primarily attributable to higher product
expenses driven by the continued growth of our voluntary protection product
business.

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Provision for Income Taxes

We recorded a provision for income taxes of $100 million and $49 million for the
first half and second quarter of fiscal 2023, respectively, compared to $464
million and $197 million for the same periods in fiscal 2022. Our effective tax
rate was 26 percent and 29 percent for the first half and second quarter of
fiscal 2023, compared to 23 percent and 24 percent for the same periods in
fiscal 2022. The decrease in the provision for income taxes for the first half
and second quarter of fiscal 2023, compared to the same periods in fiscal 2022,
was primarily due to the decrease in income before income taxes. The higher
effective tax rate for the first half and second quarter of fiscal 2023,
compared to the same periods in fiscal 2022, was primarily attributable to the
decrease in federal plug-in vehicle credits and the increase in unrecognized
state tax benefits in the current period.


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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):      2022             2021          change        2022           2021          Change
Vehicle financing
volume 1:
New retail contracts           185              173         7%              360            365        (1)%
Used retail contracts          101              123       (18)%             225            249       (10)%
Lease contracts                 61              123       (50)%             124            277       (55)%
Total                          347              419       (17)%             709            891       (20)%

TMNA subvened vehicle financing volume 2:
New retail contracts           125               57        119%             218            111        96%
Used retail contracts            8                7        14%               16             13        23%
Lease contracts                 34               64       (47)%              70            165       (58)%
Total                          167              128        30%              304            289         5%

Market share of TMNA
sales 3:                      55.0 %           55.0 %                      54.2 %         55.4 %




1
Total financing volume was comprised of approximately 68 percent Toyota, 14
percent Lexus, 10 percent Mazda, and 8 percent non-Toyota/Lexus/Mazda for the
first half of fiscal 2023. Total financing volume was comprised of approximately
70 percent Toyota, 14 percent Lexus, 9 percent Mazda, and 7 percent
non-Toyota/Lexus/Mazda for the second quarter of fiscal 2023. Total financing
volume was comprised of approximately 63 percent Toyota, 15 percent Mazda, 15
percent Lexus, and 7 percent non-Toyota/Lexus/Mazda for the first half and
second quarter of fiscal 2022.
2
TMNA subvened volume units are included in the total vehicle financing. Units
exclude third-party subvened units.
3 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 decreased 20 percent and 17 percent for the first half and
second quarter of fiscal 2023, respectively, compared to the same periods in
fiscal 2022, primarily due to lower new vehicles inventory levels and increased
competition from other financial institutions, partially offset by incentives
and subvention on new retail contracts. The ongoing challenging economic
conditions, including production halts and supply shortages affecting the
automotive industry and additional delays affecting the supply chain and
logistics networks, have resulted in a decrease in the availability of new
vehicles from pre-pandemic levels.

Our market share of TMNA sales for the first half and second quarter of fiscal
2023, respectively, compared to the same periods in fiscal 2022, was relatively
consistent.

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The composition of our net earning assets is summarized below:

                                                 September 30,       March 31,      Percentage
(Dollars in millions)                                2022              2022           change
Net Earning Assets
Finance receivables, net
Retail finance receivables, net                 $        75,870     $    72,185         5%
Dealer financing, net 1                                  11,020          10,247         8%
Total finance receivables, net                           86,890          82,432         5%
Investments in operating leases, net                     32,114          35,455        (9)%
Net earning assets                              $       119,004     $   117,887         1%


Dealer Financing
(Number of dealers serviced)
Toyota, Lexus, and private label dealers1                 1,238             966        28%
Dealers outside of the Toyota/Lexus/private
label dealer network                                        385             399        (4)%
Total number of dealers receiving wholesale
financing                                                 1,623           

1,365 19%

Dealer inventory outstanding (units in
thousands)                                                   84              64        31%

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

Retail Contract Volume and Earning Assets

Despite higher levels of incentives and subvention, our new retail contract
volume was relatively consistent for the first half of fiscal 2023 compared to
the same period in fiscal 2022, due to lower new vehicles inventory levels and
increased competition from other financial institutions. Our new retail contract
volume increased 7 percent for the second quarter of fiscal 2023, compared to
the same period in fiscal 2022, primarily due to higher levels of incentives and
subvention.

Our used retail contracts decreased 10 percent and 18 percent for the first half
and second quarter of fiscal 2023, respectively, compared to the same periods in
fiscal 2022, due to increased competition in the used vehicle marketplace caused
by the reduction in new vehicle inventory levels.

Our retail finance receivables, net increased 5 percent at September 30, 2022 as
compared to March 31, 2022 due to higher retail contracts outstanding and higher
average amount financed.

Lease Contract Volume and Earning Assets

Our lease contract volume decreased 55 percent and 50 percent for the first half
and second quarter of fiscal 2023, respectively, compared to the same periods in
fiscal 2022, primarily due to the decrease in the availability of new vehicles
and lower levels of incentive and subvention programs. Our investments in
operating leases, net, decreased 9 percent at September 30, 2022, as compared to
March 31, 2022 due to lower average operating lease units outstanding, partially
offset by higher vehicle values.

Dealer Financing and Earning Assets

Dealer financing, net increased 8 percent at September 30, 2022, as compared to
March 31, 2022, primarily due to an increase in revolving credit financing as
well as the new inventory financing volume we gained from the launch of our
private label financial services to Bass Pro Shops in fiscal 2023.

The ongoing challenging economic conditions, including production halts and
supply shortages affecting the automotive industry and additional delays
affecting the supply chain and logistics networks, have resulted in lower dealer
new vehicle inventory levels.

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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 maturities, a higher
supply of used vehicles, as well as 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
                             2022           2021          change        2022          2021          change
Depreciation on
operating leases
  (dollars in millions)   $    1,305      $   1,499       (13)%      $    2,714     $   2,940        (8)%
Average operating lease
units
  outstanding
  (in thousands)               1,161          1,341       (13)%           1,190         1,341       (11)%




Depreciation expense on operating leases decreased 8 percent and 13 percent for
the first half and second quarter of fiscal 2023, respectively, compared to the
same periods in fiscal 2022, primarily due to lower average operating lease
units outstanding.

The ongoing challenging economic conditions have resulted in a decrease in the
availability of new vehicles from pre-pandemic levels. The lower levels of new
vehicle inventory and higher off-lease vehicle purchases by dealers have led to
historically high levels of average used vehicle values. 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.

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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,
                                             2022                 2022                2021
Average consumer portfolio
origination FICO score                              743                 742                  740
Average retail loan origination term
(months) 1                                           69                  69                   69

1 Retail loan origination greater than or equal to 78 months was 10% as of
September 30, 2022, 10% as of March 31, 2022, and 9% as of September 30, 2021.

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 2022 Form 10-K for further discussion of the
proprietary manner in which we evaluate risk.

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

                                           September 30,        March 31,        September 30,
                                               2022               2022               2021
Net charge-offs as a percentage of
average
  finance receivables 1, 5                     0.36%              0.22%     

0.17%

Default frequency as a percentage of
outstanding
  finance receivables contracts 1              0.79%              0.72%     

0.79%

Average finance receivables loss
severity per unit 2                       $        11,087     $       9,012     $         8,083
Aggregate balances for accounts 60 or
more days
  past due as a percentage of earning
assets 3, 4, 5
Finance receivables                            0.57%              0.43%              0.39%
Operating leases                               0.38%              0.26%              0.23%


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, 2022 and
2021. 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 2023
increased to 0.36 percent from 0.17 percent for the same period in fiscal 2022.
Our average finance receivables loss severity per unit for the first half of
fiscal 2023 increased to $11,087 from $8,083 in the first half of fiscal 2022.
The increase in net charge-offs and loss severity per unit were due to higher
average amounts financed, a higher percentage of used vehicles financed, and
higher delinquencies. Our default frequency as a percentage of outstanding
finance receivable contracts was relatively consistent at 0.79 percent for the
first half of fiscal 2023 and 2022, respectively.

Our aggregate balances for accounts 60 or more days past due as a percentage of
finance receivables was 0.57 percent at September 30, 2022, compared to 0.39
percent at September 30, 2021, and 0.43 percent at March 31, 2022. Our aggregate
balances for accounts 60 or more days past due as a percentage of operating
leases was 0.38 percent at September 30, 2022, compared to 0.23 percent at
September 30, 2021, and 0.26 percent at March 31, 2022. Our delinquencies
increased at September 30, 2022, compared to September 30, 2021 and March 31,
2022 due to the ongoing challenging 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 consumer 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, 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 (new or
used, Lexus, Toyota, or private label), 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,
including macroeconomic outlooks, to ensure they reflect the risk of the
portfolio.

If management does not believe the models 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,
                                              2022           2021           2022          2021
Allowance for credit losses at beginning
of period                                  $    1,274      $   1,196     $    1,272     $   1,215
Charge-offs                                      (106 )          (55 )         (197 )         (88 )
Recoveries                                         14             15             29            32
Provision for credit losses                       213             68            291            65
Allowance for credit losses at end of
period 1                                   $    1,395      $   1,224     $  

1,395 $ 1,224

1 Ending balance as of September 30, 2022 and 2021 includes allowance for credit
losses related to off-balance-sheet commitments of $29 million and $34 million,
respectively, which is included in Other liabilities on the Consolidated Balance
Sheet.

Our allowance for credit losses increased by $171 million from $1,224 million at
September 30, 2021 to $1,395 million at September 30, 2022, due to the increase
in size of our retail loan portfolio and an increase in delinquencies, partially
offset by the continued improved dealer financial performance in fiscal 2023.

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,
Off-Balance Sheet Arrangements" and Note 12 - Related Party Transactions of the
Notes to Consolidated Financial Statements in our fiscal 2022 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 as
well as certain available-for-sale debt securities, 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 $5.8 billion to $11.3 billion
with an average balance of $8.5 billion during the quarter ended September 30,
2022. The amount of excess funds we hold may fluctuate, depending on market
conditions and other factors. We also have access to liquidity under the $5.0
billion credit facility with Toyota Motor Sales U.S.A., Inc. ("TMS"), which as
of September 30, 2022, 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.

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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 2022 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, 2022, 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 2022 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, 2022                              March 31, 2022
                                                            Weighted                                      Weighted
                                                             average                                       average
                                                           contractual                                   contractual
                                             Carrying       interest                       Carrying       interest
(Dollars in millions)       Face value        value           rates       Face value        value           rates
Unsecured notes and
loans payable
Commercial paper           $     17,494     $   17,395        2.72%      $     16,896     $   16,876        0.43%
U.S. medium term note
 ("MTN") program                 45,677         45,524        2.37%            46,387         46,235        1.55%
Euro medium term note
 ("EMTN") program                11,289         11,217        1.84%            13,891         13,813        1.54%
Other debt                        4,792          4,790        3.11%             5,368          5,364        1.28%
Total Unsecured notes
and loans
 payable                         79,252         78,926        2.42%            82,542         82,288        1.30%
Secured notes and loans
payable                          29,996         29,947        2.36%            26,907         26,864        1.01%
Total debt                 $    109,248     $  108,873        2.40%      $    109,449     $  109,152        1.23%

Unsecured notes and loans payable

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

                                                                                                 Total
                                                                                               Unsecured
                                                                                               notes and
                                       Commercial                                                loans
(Dollars in millions)                    paper 1          MTNs        EMTNs        Other        payable
Balance at March 31, 2022             $      16,896     $ 46,387     $ 13,891     $  5,368     $   82,542
Issuances                                       598        7,500        1,089          149          9,336
Maturities and terminations                       -       (8,210 )     (2,827 )       (725 )      (11,762 )
Non-cash changes in foreign
currency rates                                    -            -         (864 )          -           (864 )

Balance at September 30, 2022 $ 17,494 $ 45,677 $ 11,289 $ 4,792 $ 79,252

1 Changes in Commercial paper are shown net due to its 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 $17.0 billion to $18.0 billion during the quarter ended
September 30, 2022, 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 2024. 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 2022, 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, of which €29.6 billion
was available for issuance at September 30, 2022. 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.

We may issue other debt securities through the global capital markets or enter
into other unsecured financing arrangements, including those in which we agree
to use the proceeds solely to acquire retail or lease contracts financing new
Toyota and Lexus vehicles of specified "green" models. The terms of these
"green" bond transactions have been consistent with the terms of other similar
transactions except that the proceeds we receive are included in Restricted cash
and cash equivalents on our Consolidated Balance Sheets, when applicable.

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:
                                  Secured
                                 notes and
                                   loans
(Dollars in millions)             payable
Balance at March 31, 2022       $    26,907
Issuances                            10,019
Maturities and terminations          (6,930 )
Balance at September 30, 2022   $    29,996


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.

We periodically enter into term securitization transactions whereby we agree to
use the proceeds solely to acquire retail and lease contracts financing new
Toyota and Lexus vehicles of certain specified "green" models. The terms of
these "green" securitization transactions have been consistent with the terms of
our other similar transactions except that the proceeds we receive are included
in Restricted cash and cash equivalents on our Consolidated Balance Sheets, when
applicable.

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, 2022 and March 31, 2022, 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 2023, 2025 and 2027,
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, 2022 and March 31, 2022. 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 2024. 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 $8.0 billion backed by eligible retail finance receivables
transferred by us to a special-purpose entity acting as borrower. We utilized
$2.4 billion and $3.2 billion of this facility as of September 30, 2022 and
March 31, 2022, respectively.

Other Unsecured Credit Agreements

TMCC is party to additional unsecured credit facilities with various banks. As
of September 30, 2022, TMCC had committed bank credit facilities totaling $4.6
billion of which $1.9 billion, $425 million, $1.9 billion, and $375 million
mature in fiscal 2023, 2024, 2025, and 2026, 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, 2022 and March 31, 2022. 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 TMS
expiring in fiscal 2025. This credit facility was not drawn upon and had no
outstanding balance as of September 30, 2022 and March 31, 2022.

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 2022 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
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.

LIBOR TRANSITION

The publication of non-U.S. dollar LIBOR rates on a representative basis, as
well as the publication of the lesser used 1-week and 2-month U.S. dollar LIBOR
tenors, ceased as of the end of December 2021. While the most commonly used U.S.
dollar LIBOR tenors are expected to continue to be published until June 30,
2023, U.S. banking agencies issued guidance that financial institutions should
cease using U.S. dollar LIBOR as a reference rate in new contracts after
December 31, 2021. We are exposed to LIBOR-based financial instruments,
including through our dealer financing activities, derivative contracts, secured
and unsecured debt, and investment securities. To facilitate an orderly
transition from LIBOR to alternative reference rates ("ARRs"), we have
established an initiative led by senior management, with Board and committee
oversight, to assess, monitor and mitigate risks associated with the expected
discontinuation of LIBOR, to achieve operational readiness and engage impacted
borrowers and counterparties in connection with the transition to ARRs. Our
efforts under this initiative include monitoring developments and the usage of
ARRs, monitoring the regulatory and financial reporting guidance, as well as
reviewing and updating current legal contracts, internal systems and processes
to accommodate the use of ARRs. For example, we have committed to using Secured
Overnight Financing Rate ("SOFR") linked rates in connection with various
borrowing arrangements and Prime in connection with various lending arrangements
and we continue to evaluate other alternatives as potential ARRs to LIBOR. SOFR
is a measure of the cost of borrowing cash overnight, collateralized by U.S.
Treasury securities, and is based on directly observable U.S. Treasury-backed
repurchase transactions.

We are also continuously assessing how the expected discontinuation of LIBOR
will impact accounting and financial reporting. Refer to Part I, Item 1A. Risk
Factors - "Uncertainty about the transition away from the London Interbank
Offered Rate ("LIBOR") and the adoption of alternative reference rates could
adversely impact our business and results of operations" in our fiscal 2022 Form
10-K for further discussion.


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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 2022 Form 10-K.




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