UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2012

OR

[ ]  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 (State or other jurisdiction of incorporation or organization)	95-3775816 (I.R.S. Employer Identification No.)
19001 S. Western Avenue Torrance, California (Address of principal executive offices)	90501 (Zip Code)

Registrant's telephone number, including area code:       (310) 468-1310

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   x   No                                  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes   x   No                                  

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

Large accelerated filer   __                                                                                                           Accelerated filer   __

Non-accelerated filer    x                                                                                                           Smaller reporting company  __

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes __    No  x

As of January 31, 2013, 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 Americas 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.

TOYOTA MOTOR CREDIT CORPORATION

FORM 10-Q

For the quarter ended December 31, 2012

INDEX

PART I ........................................................................................................................................................................  3

Item 1.     Financial Statements..............................................................................................................................................	3
Consolidated Statement of Income.....................................................................................................................................	3
Consolidated Statement of Comprehensive Income...........................................................................................................	3
Consolidated Balance Sheet................................................................................................................................................	4
Consolidated Statement of Shareholder’s Equity...............................................................................................................	5
Consolidated Statement of Cash Flows..............................................................................................................................	6
Notes to Consolidated Financial Statements.........................................................................................................................	7
Item 2.     Management’s Discussion and Analysis...............................................................................................................	48
Item 3.     Quantitative and Qualitative Disclosures About Market Risk..............................................................................	75
Item 4.     Controls and Procedures.......................................................................................................................................	75

PART II ....................................................................................................................................................................  76

Item 1.     Legal Proceedings.................................................................................................................................................	76
Item 1A.  Risk Factors...........................................................................................................................................................	77
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds..............................................................................	77
Item 3.     Defaults Upon Senior Securities...........................................................................................................................	77
Item 4.     Mine Safety Disclosures.......................................................................................................................................	77
Item 5.     Other Information.................................................................................................................................................	77
Item 6.     Exhibits.................................................................................................................................................................	78
Signatures..............................................................................................................................................................................	79
Exhibit Index.........................................................................................................................................................................	80

2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
			Three Months Ended				Nine Months Ended
			December 31,				December 31,
(Dollars in millions)			2012		2011		2012		2011
Financing revenues:
	Operating lease	$	1,191	$	1,160	$	3,524	$	3,542
	Retail		514		582		1,571		1,818
	Dealer		110		93		328		265
Total financing revenues			1,815		1,835		5,423		5,625
	Depreciation on operating leases		901		844		2,636		2,498
	Interest expense		284		163		625		769
Net financing revenues			630		828		2,162		2,358
Insurance earned premiums and contract revenues			140		150		435		453
Investment and other income, net			63		62		136		93
Net financing revenues and other revenues			833		1,040		2,733		2,904
Expenses:
	Provision for credit losses		88		56		107		(136)
	Operating and administrative		229		208		674		617
	Insurance losses and loss adjustment expenses		77		78		231		247
Total expenses			394		342		1,012		728
Income before income taxes			439		698		1,721		2,176
Provision for income taxes			156		266		635		828
Net income		$	283	$	432	$	1,086	$	1,348
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
			Three Months Ended				Nine Months Ended
			December 31,				December 31,
(Dollars in millions)			2012		2011		2012		2011
Net income		$	283	$	432	$	1,086	$	1,348
Other comprehensive income, net of tax:
Net unrealized (losses) gains on available-for-sale
	marketable securities [net of tax benefit
	(provision) of $13, ($9), ($22) and $7, respectively]		(22)		13		31		(8)
Reclassification adjustment for net losses (gains) on
	available-for-sale marketable securities included
	in net income [net of tax (benefit) provision of
	$0, ($2), $2 and ($10), respectively]		-		2		(5)		17
Other comprehensive (loss) income			(22)		15		26		9
Comprehensive income		$	261	$	447	$	1,112	$	1,357
See accompanying Notes to Consolidated Financial Statements.

3

TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions)		December 31, 2012		March 31, 2012
ASSETS
Cash and cash equivalents		$	2,728	$	5,060
Restricted cash			582		682
Investments in marketable securities			5,109		4,659
Finance receivables, net			62,550		58,042
Investments in operating leases, net			19,793		18,743
Other assets			2,413		1,727
Total assets		$	93,175	$	88,913
LIABILITIES AND SHAREHOLDER'S EQUITY
Debt		$	76,359	$	73,234
Deferred income taxes			6,060		5,412
Other liabilities			2,726		2,605
Total liabilities			85,145		81,251
Commitments and contingencies (See Note 12)
Shareholder's equity:
Capital stock, no par value (100,000 shares authorized; 91,500 issued
	and outstanding) at December 31, 2012 and March 31, 2012		915		915
Additional paid-in-capital			2		2
Accumulated other comprehensive income			186		160
Retained earnings			6,927		6,585
Total shareholder's equity			8,030		7,662
Total liabilities and shareholder's equity		$	93,175	$	88,913

The following table presents the assets and liabilities of our consolidated variable interest entities.  The assets of any variable interest entity can only be used to settle obligations of that respective variable interest entity, and the creditors (or beneficial interest holders) do not have recourse to us or to our other assets. These assets and liabilities are included in the consolidated balance sheet above.

(Dollars in millions)	December 31, 2012		March 31, 20121
ASSETS
Finance receivables, net	$	8,589	$	10,527
Investments in operating leases, net		518		-
Other assets		11		3
Total assets	$	9,118	$	10,530
LIABILITIES
Debt	$	7,919	$	9,789
Other liabilities		2		2
Total liabilities	$	7,921	$	9,791
1  Certain prior period amounts have been reclassified to conform to the current period presentation.
See accompanying Notes to Consolidated Financial Statements.

4

TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY
(Unaudited)
						Accumulated
						other
		Capital		Additional		comprehensive		Retained
(Dollars in millions)		stock		paid-in capital		income		earnings		Total
BALANCE AT MARCH 31, 2011		$	915	$	1	$	100	$	5,840	$	6,856
Net income for the nine months ended
	December 31, 2011		-		-		-		1,348		1,348
Other comprehensive income, net
	of tax		-		-		9		-		9
Stock-based compensation			-		1		-		-		1
Dividend			-		-		-		(741)		(741)
BALANCE AT DECEMBER 31, 2011		$	915	$	2	$	109	$	6,447	$	7,473
BALANCE AT MARCH 31, 2012		$	915	$	2	$	160	$	6,585	$	7,662
Net income for the nine months ended
	December 31, 2012		-		-		-		1,086		1,086
Other comprehensive income, net
	of tax		-		-		26		-		26
Dividend			-		-		-		(744)		(744)
BALANCE AT DECEMBER 31, 2012		$	915	$	2	$	186	$	6,927	$	8,030
See accompanying Notes to Consolidated Financial Statements.

5

TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
			Nine Months Ended December 31,
(Dollars in millions)			2012		2011
Cash flows from operating activities:
	Net income		$	1,086	$	1,348
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		2,665		2,552
		Recognition of deferred income		(886)		(896)
		Provision for credit losses		107		(136)
		Amortization of deferred costs		404		434
		Foreign currency and other adjustments to the carrying value of debt, net		(628)		(1,056)
	Net (gain) loss from sale of investments in marketable securities			(7)		27
	Net change in:
		Restricted cash		100		107
		Derivative assets		19		237
		Other assets (Note 8) and accrued income		14		87
		Deferred income taxes		629		812
		Derivative liabilities		(49)		(122)
		Other liabilities		190		25
Net cash provided by operating activities				3,644		3,419
Cash flows from investing activities:
	Purchase of investments in marketable securities			(3,932)		(6,275)
	Proceeds from sales of investments in marketable securities			242		1,475
	Proceeds from maturities of investments in marketable securities			3,291		4,396
	Acquisition of finance receivables			(19,841)		(16,557)
	Collection of finance receivables			17,074		16,665
	Net change in wholesale and certain working capital receivables			(1,819)		657
	Acquisition of investments in operating leases			(7,386)		(5,572)
	Disposals of investments in operating leases			4,066		4,070
	Advances to affiliates			(4,035)		(2,386)
	Repayments from affiliates			3,407		2,066
	Other, net			(14)		(12)
Net cash used in investing activities				(8,947)		(1,473)
Cash flows from financing activities:
	Proceeds from issuance of debt			12,723		11,272
	Payments on debt			(10,670)		(13,026)
	Net change in commercial paper			3,672		1,246
	Advances from affiliates			49		6
	Repayments to affiliates			(2,059)		(7)
	Dividend paid to TFSA			(744)		(741)
Net cash provided by (used in) financing activities				2,971		(1,250)
Net (decrease) increase in cash and cash equivalents				(2,332)		696
Cash and cash equivalents at the beginning of the period				5,060		6,830
Cash and cash equivalents at the end of the period			$	2,728	$	7,526
Supplemental disclosures:
	Interest paid		$	985	$	1,219
	Income taxes received, net		$	(3)	$	(114)
Non-cash financing:
	Capital contribution for stock-based compensation		$	-	$	1
See accompanying Notes to Consolidated Financial Statements.

6

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Interim Financial Data

Basis of Presentation

The information furnished in these unaudited interim financial statements for the three and nine months ended December 31, 2012 and 2011 has been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).  In the opinion of management, the unaudited 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 nine months ended December 31, 2012 do not necessarily indicate the results which may be expected for the full fiscal year ended March 31, 2013 (“fiscal 2013”).

These financial statements should be read in conjunction with the Consolidated Financial Statements, significant accounting policies, and other notes to the 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, 2012 (“fiscal 2012”), which was filed with the Securities and Exchange Commission (“SEC”) on June 6, 2012.  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.

Certain prior period amounts have been reclassified to conform to the current period presentation.  Related party transactions presented in the Consolidated Financial Statements are disclosed in Note 14 – Related Party Transactions of the Notes to Consolidated Financial Statements.

New Accounting Guidance

In December 2011, the Financial Accounting Standards Board (“FASB”) issued accounting guidance on the disclosure about offsetting assets and liabilities.  The disclosure requirements of this guidance are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company’s financial position.  Offsetting, otherwise known as netting, is the presentation of assets and liabilities as a single net amount in the balance sheet.  The guidance retains the current U.S. GAAP model that allows companies the option to present net in their balance sheets derivatives that are subject to a legally enforceable netting arrangement with the same party, where rights of set-off are available, including in the event of default or bankruptcy.  However, the guidance adds new disclosure requirements to improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received.  In January 2013, the FASB further clarified that the scope of this guidance applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions.  The accounting guidance is effective for us on April 1, 2013.  The adoption of this guidance will not have a material impact on our consolidated financial statements.

In February 2013, the FASB issued additional guidance on the presentation of items reclassified out of accumulated other comprehensive income.  The standard would not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the guidance would require an entity to provide enhanced disclosures to present separately by component reclassifications out of accumulated other comprehensive income.  The accounting guidance is effective for us on April 1, 2013.  The adoption of this guidance will not have a material impact on our consolidated financial statements.

7

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Interim Financial Data (Continued)

Recently Adopted Accounting Guidance

In April 2012, we adopted new FASB accounting guidance which requires entities to report components of comprehensive income in either a single continuous statement of comprehensive income or two separate but consecutive statements.  We have elected to present comprehensive income in two separate but consecutive statements.  The application of this guidance primarily affected the presentation of our consolidated financial statements.

8

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements

The following tables summarize our financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2012 and March 31, 2012, by level within the fair value hierarchy.  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.

In instances where we meet the accounting guidance for set-off criteria, we elect to net derivative assets and derivative liabilities and the related cash collateral received and paid when legally enforceable master netting agreements exist.

Derivative assets were reduced by a counterparty credit valuation adjustment of $1 million and $3 million as of December 31, 2012 and March 31, 2012, respectively.  Derivative liabilities were reduced by a non-performance credit valuation adjustment of less than $1 million as of December 31, 2012 and March 31, 2012.

As of December 31, 2012
					Fair value measurements on a recurring basis
										Counterparty
										netting &		Fair
(Dollars in millions)				Level 1		Level 2		Level 3		collateral		value
Cash equivalents:
	Money market instruments			$	234	$	593	$	-	$	-	$	827
	Certificates of deposit				-		1,038		-		-		1,038
	Commercial paper				-		306		-		-		306
	Cash equivalents total				234		1,937		-		-		2,171
Available-for-sale securities:
	Debt instruments:
		U.S. government and agency obligations			82		70		-		-		152
		Municipal debt securities			-		22		-		-		22
		Certificates of deposit			-		2,082		-		-		2,082
		Commercial paper			-		209		-		-		209
		Foreign government debt securities			-		3		-		-		3
		Corporate debt securities			-		89		4		-		93
		Mortgage-backed securities:
			U.S. government agency		-		96		-		-		96
			Non-agency residential		-		-		7		-		7
			Non-agency commercial		-		-		23		-		23
		Asset-backed securities			-		-		8		-		8
	Equity instruments:
		Fixed income mutual funds:
			Short-term sector fund		-		42		-		-		42
			U.S. government sector fund		-		310		-		-		310
			Municipal sector fund		-		22		-		-		22
			Investment grade corporate sector fund		-		322		-		-		322
			High-yield sector fund		-		40		-		-		40
			Real return sector fund		-		293		-		-		293
			Mortgage sector fund		-		645		-		-		645
			Asset-backed securities sector fund		-		46		-		-		46
			Emerging market sector fund		-		67		-		-		67
			International sector fund		-		168		-		-		168
		Equity mutual fund			459		-		-		-		459
	Available-for-sale securities total				541		4,526		42		-		5,109
	Derivative assets:
		Foreign currency swaps			-		1,565		80		-		1,645
		Interest rate swaps			-		671		11		-		682
		Counterparty netting and collateral			-		-		-		(2,276)		(2,276)
	Derivative assets total				-		2,236		91		(2,276)		51
Assets at fair value					775		8,699		133		(2,276)		7,331
	Derivative liabilities:
		Foreign currency swaps			-		(20)		(12)		-		(32)
		Interest rate swaps			-		(877)		-		-		(877)
		Counterparty netting and collateral			-		-		-		904		904
	Derivative liabilities total				-		(897)		(12)		904		(5)
	Embedded derivative liabilities				-		-		(13)		-		(13)
Liabilities at fair value					-		(897)		(25)		904		(18)
Net assets at fair value				$	775	$	7,802	$	108	$	(1,372)	$	7,313

9

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)
As of March 31, 2012
					Fair value measurements on a recurring basis
										Counterparty
										netting &		Fair
(Dollars in millions)				Level 1		Level 2		Level 3		collateral		value
Cash equivalents:
	Money market instruments			$	2,591	$	256	$	-	$	-	$	2,847
	Certificates of deposit				-		495		-		-		495
	Commercial paper				-		1,537		-		-		1,537
	Cash equivalents total				2,591		2,288		-		-		4,879
Available-for-sale securities:
	Debt instruments:
		U.S. government and agency obligations			-		108		-		-		108
		Municipal debt securities			-		20		-		-		20
		Certificates of deposit			-		1,341		-		-		1,341
		Commercial paper			-		633		-		-		633
		Foreign government debt securities			-		3		-		-		3
		Corporate debt securities			-		106		1		-		107
		Mortgage-backed securities:
			U.S. government agency		-		105		-		-		105
			Non-agency residential		-		4		4		-		8
			Non-agency commercial		-		11		15		-		26
		Asset-backed securities			-		12		1		-		13
	Equity instruments:
		Fixed income mutual funds:
			Short-term sector fund		-		40		-		-		40
			U.S. government sector fund		-		313		-		-		313
			Municipal sector fund		-		21		-		-		21
			Investment grade corporate sector fund		-		298		-		-		298
			High-yield sector fund		-		37		-		-		37
			Real return sector fund		-		231		-		-		231
			Mortgage sector fund		-		639		-		-		639
			Asset-backed securities sector fund		-		41		-		-		41
			Emerging market sector fund		-		62		-		-		62
			International sector fund		-		162		-		-		162
		Equity mutual fund			451		-		-		-		451
	Available-for-sale securities total				451		4,187		21		-		4,659
	Derivative assets:
		Foreign currency swaps			-		2,142		79		-		2,221
		Interest rate swaps			-		426		13		-		439
		Counterparty netting and collateral			-		-		-		(2,590)		(2,590)
	Derivative assets total				-		2,568		92		(2,590)		70
Assets at fair value					3,042		9,043		113		(2,590)		9,608
	Derivative liabilities:
		Foreign currency swaps			-		(63)		(10)		-		(73)
		Interest rate swaps			-		(1,008)		-		-		(1,008)
		Counterparty netting and collateral			-		-		-		1,038		1,038
	Derivative liabilities total				-		(1,071)		(10)		1,038		(43)
	Embedded derivative liabilities				-		-		(24)		-		(24)
Liabilities at fair value					-		(1,071)		(34)		1,038		(67)
Net assets at fair value				$	3,042	$	7,972	$	79	$	(1,552)	$	9,541

10

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Transfers between levels of the fair value hierarchy are recognized at the end of their respective reporting periods.  During the nine months ended December 31, 2012, $53 million of U.S. government and agency obligations were valued using quoted prices for identical securities traded in an active market and were transferred from Level 2 to Level 1.  Additionally, during the nine months ended December 31, 2012, certain available-for-sale debt instruments were transferred from Level 2 to Level 3 due to reduced transparency of market price quotations for these and/or comparable instruments.  There were no transfers during the three months ended December 31, 2012.

The following tables summarize the reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs for the three and nine months ended December 31, 2012 and 2011:

Three Months Ended December 31, 2012

			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
																						Total net
																						assets
			Available-for-sale securities											Derivative instruments, net								(liabilities)
					Non-agency			Non-agency
					residential			commercial				Total								Total
			Corporate		mortgage-			mortgage-		Asset-		available-		Interest		Foreign				derivative
			debt		backed			backed		backed		for-sale		rate		currency		Embedded		assets
(Dollars in millions)			securities		securities			securities		securities		securities		swaps		swaps		derivatives		(liabilities)
Fair value, October 1, 2012			$	4		$	7	$	24	$	9	$	44	$	12	$	74	$	(23)	$	63	$	107
Total gains
		Included in earnings		-			-		-		-		-		-		6		10		16		16
		Included in other comprehensive income		-			-		-		-		-		-		-		-		-		-
Purchases, issuances, sales, and
	settlements
		Purchases		-			2		-		-		2		-		-		-		-		2
		Issuances		-			-		-		-		-		-		-		-		-		-
		Sales		-			-		-		-		-		-		-		-		-		-
		Settlements		-			(2)		(1)		(1)		(4)		(1)		(12)		-		(13)		(17)
Transfers in to Level 3				-			-		-		-		-		-		-		-		-		-
Transfers out of Level 3				-			-		-		-		-		-		-		-		-		-
Fair value, December 31, 2012			$	4		$	7	$	23	$	8	$	42	$	11	$	68	$	(13)	$	66	$	108
The amount of total gains
for the period included in
earnings attributable to the
change in unrealized gains or
losses related to assets still held
at the reporting date														$	-	$	6	$	4	$	10	$	10

11

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)
Three Months Ended December 31, 2011
		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Derivative instruments, net
									Total
		Interest		Foreign					derivative
		rate		currency		Embedded			assets
(Dollars in millions)		swaps		swaps		derivatives			(liabilities)
Fair value, October 1, 2011		$	11	$	180		$	(46)	$	145
Total gains
	Included in earnings		1		13			3		17
	Included in other comprehensive income		-		-			-		-
Purchases, issuances, sales, and settlements
	Purchases		-		-			-		-
	Issuances		-		-			-		-
	Sales		-		-			-		-
	Settlements		(1)		(12)			-		(13)
Transfers in to Level 3			-		-			-		-
Transfers out of Level 3			-		-			-		-
Fair value, December 31, 2011		$	11	$	181		$	(43)	$	149
The amount of total gains/
(losses) for the period included
in earnings attributable to the
change in unrealized gains or
losses related to assets still held
at the reporting date		$	1	$	13		$	(5)	$	9

12

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)
Nine Months Ended December 31, 2012
		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
																					Total net
																					assets
		Available-for-sale securities											Derivative instruments, net								(liabilities)
				Non-agency			Non-agency
				residential			commercial				Total								Total
		Corporate		mortgage-			mortgage-		Asset-		available-		Interest		Foreign				derivative
		debt		backed			backed		backed		for-sale		rate		currency		Embedded		assets
(Dollars in millions)		securities		securities			securities		securities		securities		swaps		swaps		derivatives		(liabilities)
Fair value, April 1, 2012		$	1		$	4	$	15	$	1	$	21	$	13	$	69	$	(24)	$	58	$	79
Total gains
	Included in earnings		-			-		-		-		-		1		23		11		35		35
	Included in other comprehensive income		-			-		1		-		1		-		-		-		-		1
Purchases, issuances, sales, and     settlements
	Purchases		-			2		3		1		6		-		-		-		-		6
	Issuances		-			-		-		-		-		-		-		-		-		-
	Sales		-			-		(3)		(1)		(4)		-		-		-		-		(4)
	Settlements		-			(2)		(3)		(4)		(9)		(3)		(24)		-		(27)		(36)
Transfers in to Level 3			3			3		10		11		27		-		-		-		-		27
Transfers out of Level 3			-			-		-		-		-		-		-		-		-		-
Fair value, December 31, 2012		$	4		$	7	$	23	$	8	$	42	$	11	$	68	$	(13)	$	66	$	108
The amount of total gains
for the period included in
earnings attributable to the
change in unrealized gains or
losses related to assets still held
at the reporting date													$	1	$	21	$	1	$	23	$	23

13

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)
Nine Months Ended December 31, 2011
		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Derivative instruments, net
								Total
		Interest		Foreign				derivative
		rate		currency		Embedded		assets
(Dollars in millions)		swaps		swaps		derivatives		(liabilities)
Fair value, April 1,  2011		$	17	$	109	$	(51)	$	75
Total gains
	Included in earnings		8		89		9		106
	Included in other
	comprehensive income		-		-		-		-
Purchases, issuances, sales, and settlements
	Purchases		-		-		-		-
	Issuances		-		-		-		-
	Sales		-		-		-		-
	Settlements		(15)		(17)		-		(32)
Transfers in to Level 3			-		-		-		-
Transfers out of Level 3			1		-		(1)		-
Fair value, December 31, 2011		$	11	$	181	$	(43)	$	149
The amount of total gains/
(losses) for the period included
in earnings attributable to the
change in unrealized gains or
losses related to assets still held
at the reporting date		$	5	$	88	$	(13)	$	80

Nonrecurring Fair Value Measurements

Nonrecurring fair value measurements consist of Level 3 net finance receivables that are individually evaluated for impairment.  These assets are not measured at fair value on a recurring basis but are subject to fair value adjustments when there is evidence of impairment.  For these assets, we record the fair value on a nonrecurring basis and disclose changes in fair value during the reporting period.  Total nonrecurring fair value measurements of $216 million and $166 million were recorded as of December 31, 2012 and March 31, 2012, respectively.

The total change in fair value of financial instruments subject to nonrecurring fair value measurements for which a fair value adjustment has been included in the Consolidated Statement of Income consisted of net gains on net finance receivables within the dealer products portfolio segment of $2 million for both the three and nine months ended December 31, 2012 and $4 million and $19 million for the three and nine months ended December 31, 2011, respectively.

14

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Level 3 Fair Value Measurements at December 31, 2012 and March 31, 2012

At December 31, 2012, our Level 3 financial instruments subject to recurring fair value measurement consisted of available-for-sale securities of $42 million, derivative assets of $91 million and derivative liabilities of $25 million.  At March 31, 2012, our Level 3 financial instruments subject to recurring fair value measurement consisted of available-for-sale securities of $21 million, derivative assets of $92 million and derivative liabilities of $34 million.  The fair value measurements of Level 3 financial assets and liabilities subject to recurring and nonrecurring fair value measurement, and the corresponding change in the fair value measurements of these assets and liabilities, were not significant to our Consolidated Balance Sheet or Consolidated Statement of Income as of and for the three and nine months ended December 31, 2012 and as of and for the year ended March 31, 2012.

Financial Instruments

The following tables provide information about assets and liabilities not carried at fair value in our Consolidated Balance Sheet:

					Fair value measurement hierarchy
			Carrying								Total Fair
(Dollars in millions)			value		Level 1		Level 2		Level 3		Value
As of December 31, 2012
Financial assets
	Finance receivables, net
		Retail loan	$	47,379	$	-	$	-	$	48,457	$	48,457
		Commercial		133		-		-		137		137
		Wholesale		8,467		-		-		8,481		8,481
		Real estate		4,528		-		-		4,522		4,522
		Working capital		1,780		-		-		1,769		1,769
Financial liabilities
	Commercial paper		$	24,921	$	-	$	24,921	$	-	$	24,921
	Unsecured notes and loans payable			43,519		-		44,150		883		45,033
	Secured notes and loans payable			7,919		-		-		7,928		7,928

15

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 - Fair Value Measurements (Continued)
					Fair value measurement hierarchy
			Carrying								Total Fair
(Dollars in million)			value		Level 1		Level 2		Level 3		Value
As of March 31, 2012
Financial assets
	Finance receivables, net
		Retail loan	$	44,941	$	-	$	-	$	46,609	$	46,609
		Commercial		141		-		-		148		148
		Wholesale		6,951		-		-		6,950		6,950
		Real estate		4,280		-		-		4,204		4,204
		Working capital		1,480		-		-		1,458		1,458
Financial liabilities
	Commercial paper		$	21,247	$	-	$	21,247	$	-	$	21,247
	Unsecured notes and loans payable			42,198		-		36,764		6,538		43,302
	Secured notes and loans payable			9,789		-		-		9,810		9,810

The carrying value of each class of finance receivables is presented net of deferred fees and costs, deferred income and the allowance for credit losses; the amount excludes related party transactions of $43 million and $36 million at December 31, 2012 and March 31, 2012 and direct finance leases of $220 million and $213 million at December 31, 2012 and March 31, 2012, respectively.

The carrying value of unsecured notes and loans payable represents the sum of unsecured notes and loans payable and carrying value adjustment as described in Note 9 - Debt.  At March 31, 2012, there were loans payable to affiliates of $2.2 billion included in unsecured notes and loans payable carried at amounts that approximate fair value.  There were no loans payable to affiliates that were included in unsecured notes and loans payable at December 31, 2012.

16

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 – Investments in Marketable Securities

We classify all of our investments in marketable securities as available-for-sale.  The amortized cost and estimated fair value of investments in marketable securities and related unrealized gains and losses were as follows:

				December 31, 2012
				Amortized		Unrealized		Unrealized		Fair
(Dollars in millions)				cost		gains		losses		value
Available-for-sale securities:
	Debt instruments:
		U.S. government and agency obligations		$	148	$	4	$	-	$	152
		Municipal debt securities			19		3		-		22
		Certificates of deposit			2,081		1		-		2,082
		Commercial paper			209		-		-		209
		Foreign government debt securities			3		-		-		3
		Corporate debt securities			86		7		-		93
		Mortgage-backed securities:
			U.S. government agency		91		5		-		96
			Non-agency residential		6		1		-		7
			Non-agency commercial		22		1		-		23
		Asset-backed securities			8		-		-		8
	Equity instruments:
		Fixed income mutual funds:
			Short-term sector fund		39		3		-		42
			U.S. government sector fund		295		15		-		310
			Municipal sector fund		19		3		-		22
			Investment grade corporate sector fund		272		50		-		322
			High-yield sector fund		33		7		-		40
			Real return sector fund		284		9		-		293
			Mortgage sector fund		659		-		(14)		645
			Asset-backed securities sector fund		38		8		-		46
			Emerging market sector fund		64		3		-		67
			International sector fund		162		6		-		168
		Equity mutual fund			270		189		-		459
Total investments in marketable securities				$	4,808	$	315	$	(14)	$	5,109

17

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 – Investments in Marketable Securities (Continued)
					March 31, 2012
				Amortized		Unrealized		Unrealized		Fair
(Dollars in millions)				cost		gains		losses		value
Available-for-sale securities:
	Debt instruments:
		U.S. government and agency obligations		$	108	$	1	$	(1)	$	108
		Municipal debt securities			17		3		-		20
		Certificates of deposit			1,341		-		-		1,341
		Commercial paper			633		-		-		633
		Foreign government debt securities			3		-		-		3
		Corporate debt securities			100		7		-		107
		Mortgage-backed securities:
			U.S. government agency		100		5		-		105
			Non-agency residential		7		1		-		8
			Non-agency commercial		25		1		-		26
		Asset-backed securities			13		-		-		13
	Equity instruments:
		Fixed income mutual funds:
			Short-term sector fund		39		1		-		40
			U.S. government sector fund		319		-		(6)		313
			Municipal sector fund		19		2		-		21
			Investment grade corporate sector fund		261		37		-		298
			High-yield sector fund		31		6		-		37
			Real return sector fund		228		3		-		231
			Mortgage sector fund		651		-		(12)		639
			Asset-backed securities sector fund		37		4		-		41
			Emerging market sector fund		60		2		-		62
			International sector fund		143		19		-		162
		Equity mutual fund			268		183		-		451
Total investments in marketable securities				$	4,403	$	275	$	(19)	$	4,659

The fixed income mutual funds include investments in funds that are privately placed.  The total fair value of private placement fixed income mutual funds was $2.0 billion and $1.8 billion at December 31, 2012 and March 31, 2012, respectively.  For each fund, cash redemption limits may apply to each 90 day period.

18

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 – Investments in Marketable Securities (Continued)

OTTI Securities

There were no available-for-sale debt or equity securities deemed to be other-than-temporarily impaired for the three and nine months ended December 31, 2012.  For the three and nine months ended  December 31, 2011, unrealized losses for available-for-sale debt securities deemed to be other-than-temporarily impaired were recognized in investment and other income, net and were not material to our Consolidated Statement of Income.

Unrealized Losses on Securities

The following table presents the fair value and gross unrealized losses of investments in marketable securities that had been in a continuous unrealized loss position for less than twelve consecutive months.  These unrealized losses are recorded in Accumulated Other Comprehensive Income, net of applicable taxes in our Consolidated Statement of Shareholder's Equity:

			Less than 12 months as of
			December 31, 2012				March 31, 2012
			Fair		Unrealized		Fair		Unrealized
(Dollars in millions)			value		losses		value		losses
Available-for-sale securities:
Debt instruments:
	U.S. government and agency
		obligations	$	-	$	-	$	68	$	(1)
Equity instruments:
	U.S. government sector fund			-		-		237		(2)
	Mortgage sector fund			529		(12)		639		(12)
Total investments in marketable
	securities		$	529	$	(12)	$	944	$	(15)

At December 31, 2012, total gross unrealized loss and fair value of investments that had been in a continuous unrealized loss position for 12 consecutive months or more were $2 million and $116 million, respectively.  At March 31, 2012, total gross unrealized loss and fair value of investments that had been in a continuous unrealized loss position for 12 consecutive months or more were not material to our Consolidated Balance Sheet.

Realized Gains and Losses on Sales of Available-For-Sale Securities

Realized gains and losses from the sale of available-for-sale securities recorded in Investment and other income, net in the Consolidated Statement of Income are as follows:

			Three Months Ended						Nine Months Ended
			December 31,						December 31,
(Dollars in millions)		2012			2011			2012			2011
Available-for-sale securities:
	Realized gains on sales		$	-		$	2		$	9		$	14
	Realized losses on sales		$	-		$	6		$	2		$	41

19

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 – Investments in Marketable Securities (Continued)

Contractual Maturities and Yields

The contractual maturities of investments in marketable securities at December 31, 2012 are summarized in the following table.  Prepayments may cause actual maturities to differ from scheduled maturities.

		Due in 1 Year or				Due after 1 Year				Due after 5 Years
			Less			through 5 Years				through 10 Years				Due after 10 Years					Total
(Dollars in millions)		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Fair Value of Available-for-Sale Securities:
Debt instruments:
U.S. government and
	agency obligations	$	12	0.08	%	$	55	1.43	%	$	74	1.71	%	$	11	2.34	%	$	152	1.56	%
Municipal debt securities			-	-			3	3.86			1	5.54			18	5.83			22	5.53
Certificates of deposit			2,082	0.64			-	-			-	-			-	-			2,082	0.64
Commercial paper			209	0.19			-	-			-	-			-	-			209	0.19
Foreign government debt
	securities		-	-			3	2.93			-	-			-	-			3	2.93
Corporate debt
	securities		5	5.80			48	4.38			37	5.15			3	6.71			93	4.76
Mortgage-backed securities:
	U.S. government agency		-	-			-	-			5	4.17			91	3.53			96	3.58
	Non-agency residential		-	-			-	-			-	-			7	7.63			7	7.63
	Non-agency commercial		-	-			4	3.51			2	1.24			17	3.97			23	3.72
Asset-backed securities			-	-			1	3.11			3	1.04			4	1.62			8	1.67
Debt instruments total			2,308	0.61			114	2.87			122	2.91			151	3.97			2,695	1.00
Equity instruments:
Fixed income mutual funds																			1,955	6.49
Equity mutual fund																			459	3.95
Equity instruments total			-				-				-				-				2,414	6.01
Total fair value		$	2,308	0.61	%	$	114	2.87	%	$	122	2.91	%	$	151	3.97	%	$	5,109	3.36	%
Total amortized cost		$	2,307			$	109			$	115			$	142			$	4,808

Yields are based on the amortized cost balances of securities held at December 31, 2012.  Yields are derived by aggregating the monthly result of interest and dividend income (including the effect of related amortization of premiums and accretion of discounts) divided by amortized cost.  Equity instruments do not have a stated maturity date.

Securities on Deposit

In accordance with statutory requirements, we had on deposit with state insurance authorities U.S. debt securities with amortized cost and fair value of $6 million at both December 31, 2012 and March 31, 2012.

20

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4 – Finance Receivables, Net

Finance receivables, net consist of retail and dealer accounts including accrued interest and deferred fees and costs, net of deferred income and the allowance for credit losses.  Pledged receivables represent retail loan receivables that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements.  Cash flows from these pledged 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.  

(Dollars in millions)			December 31, 2012		March 31, 2012
Retail receivables			$	39,499	$	35,020
Pledged retail receivables				8,743		10,726
Dealer financing				14,937		12,865
				63,179		58,611
Deferred origination (fees) and costs, net				629		639
Deferred income				(779)		(684)
Allowance for credit losses
	Retail and pledged retail receivables			(361)		(405)
	Dealer financing			(118)		(119)
		Total allowance for credit losses		(479)		(524)
Finance receivables, net			$	62,550	$	58,042

Finance receivables, net and retail receivables presented in the previous table includes direct finance leases, net of $220 million and $213 million at December 31, 2012 and March 31, 2012, respectively.

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 and Commercial Portfolio Segments

While we use various credit quality metrics to develop our allowance for credit losses on the retail loan and commercial portfolio segments, 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 for each class of finance receivables within the retail loan and commercial portfolio segments are segregated into one of four aging categories based on the number of days outstanding.  The aging for each class of finance receivables is updated quarterly.

21

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4 – Finance Receivables, Net (Continued)

Dealer Products Portfolio Segment

For the three classes of finance receivables within the dealer products portfolio segment (wholesale, real estate and working capital), all loans outstanding for an individual dealer or dealership group, and affiliated entities, are aggregated and evaluated collectively by dealer or dealership 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 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 a probability that default exists based on qualitative and quantitative factors

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

The tables below present each credit quality indicator by class of finance receivables as of December 31, 2012 and March 31, 2012:

		Retail Loan				Commercial
(Dollars in millions)		December 31, 2012		March 31, 2012		December 31, 2012		March 31, 2012
Aging of finance receivables:
	Current	$	47,138	$	44,842	$	352	$	352
	30-59 days past due		572		433		8		8
	60-89 days past due		119		80		2		2
	90 days past due		51		28		-		1
Total		$	47,880	$	45,383	$	362	$	363
		Wholesale				Real Estate				Working Capital
(Dollars in millions)		December 31, 2012		March 31, 2012		December 31, 2012		March 31, 2012		December 31, 2012		March 31, 2012
Credit quality indicators:
	Performing	$	7,906	$	6,249	$	4,114	$	3,746	$	1,722	$	1,422
	Credit Watch		593		675		433		467		64		61
	At Risk		39		78		33		148		29		8
	Default		1		6		1		-		2		5
Total		$	8,539	$	7,008	$	4,581	$	4,361	$	1,817	$	1,496

22

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4 – Finance Receivables, Net (Continued)
Impaired Finance Receivables
The following table summarizes the information related to our impaired loans by class of finance receivables as of December 31, 2012 and March 31, 2012:
	Impaired								Individually Evaluated
	Finance Receivables				Unpaid Principal Balance				Allowance
	December 31,		March 31,		December 31,		March 31,		December 31,		March 31,
(Dollars in millions)	2012		2012		2012		2012		2012		2012
Impaired account balances individually evaluated for impairment with an allowance:
Wholesale	$	29	$	7	$	29	$	7	$	4	$	1
Real estate		33		136		33		136		11		37
Working capital		29		7		29		7		28		7
Total	$	91	$	150	$	91	$	150	$	43	$	45
Impaired account balances individually evaluated for impairment without an allowance:
Wholesale	$	68	$	60	$	68	$	60
Real estate		99		-		99		-
Working capital		1		1		1		1
Total	$	168	$	61	$	168	$	61
Impaired account balances aggregated and evaluated for impairment:
Retail loan	$	444	$	502	$	439	$	496
Commercial		1		1		1		1
Total	$	445	$	503	$	440	$	497
Total impaired account balances:
Retail loan	$	444	$	502	$	439	$	496
Commercial		1		1		1		1
Wholesale		97		67		97		67
Real estate		132		136		132		136
Working capital		30		8		30		8
Total	$	704	$	714	$	699	$	708

As of December 31, 2012 and March 31, 2012, the impaired finance receivables balance for accounts in the dealer products portfolio segment that were on nonaccrual status was $86 million and $211 million, respectively.

23

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4 – Finance Receivables, Net (Continued)

The following table summarizes the average balance of finance receivables determined to be impaired as of the balance sheet date and the interest income recognized on impaired finance receivables for the three and nine months ended December 31, 2012 and 2011:

	Average Impaired Finance Receivables								Interest Income Recognized
	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended December 31,				Nine Months Ended December 31,
(Dollars in millions)	2012		2011		2012		2011		2012		2011		2012		2011
Impaired account balances individually evaluated for impairment with an allowance:
Wholesale	$	32	$	11	$	24	$	11	$	-	$	-	$	-	$	-
Real estate		34		142		85		143		-		1		1		4
Working capital		29		8		24		8		-		-		1		-
Total	$	95	$	161	$	133	$	162	$	-	$	1	$	2	$	4
Impaired account balances individually evaluated for impairment without an allowance:
Wholesale	$	63	$	37	$	63	$	39	$	-	$	-	$	1	$	1
Real estate		99		2		50		2		-		-		2		-
Working capital		1		1		1		1		-		-		-		-
Total	$	163	$	40	$	114	$	42	$	-	$	-	$	3	$	1
Impaired account balances aggregated and evaluated for impairment:
Retail loan	$	458	$	554	$	473	$	566	$	10	$	12	$	29	$	36
Commercial		1		1		1		1		-		-		-		-
Total	$	459	$	555	$	474	$	567	$	10	$	12	$	29	$	36
Total impaired account balances:
Retail loan	$	458	$	554	$	473	$	566	$	10	$	12	$	29	$	36
Commercial		1		1		1		1		-		-		-		-
Wholesale		95		48		87		50		-		-		1		1
Real estate		133		144		135		145		-		1		3		4
Working capital		30		9		25		9		-		-		1		-
Total	$	717	$	756	$	721	$	771	$	10	$	13	$	34	$	41

24

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4 – Finance Receivables, Net (Continued)

Troubled Debt Restructuring

For accounts not under bankruptcy protection, the amount of finance receivables modified as a troubled debt restructuring during the three and nine months ended December 31, 2012 and December 31, 2011 is not significant for each class of finance receivables.  Troubled debt restructurings for these accounts within the retail loan class of finance receivables are comprised exclusively of contract term extensions that reduce the monthly payment due from the customer, while accounts within the commercial class of finance receivables consist of contract term extensions, interest rate adjustments, or a combination of the two.  For the three classes of finance receivables within the dealer products portfolio segment, troubled debt restructurings include contract term extensions, interest rate adjustments, waivers of loan covenants, or any combination of the three.  Troubled debt restructurings of accounts not under bankruptcy protection did not include forgiveness of principal during the three and nine months ended December 31, 2012 and December 31, 2011.

We recognize finance receivables under bankruptcy protection within the retail loan and commercial classes as troubled debt restructurings as of the date we receive notice of a customer filing for bankruptcy protection regardless of the ultimate outcome of the bankruptcy proceedings.  The bankruptcy court may impose modifications as part of the proceedings, including interest rate adjustments and forgiveness of principal.  For the three and nine months ended December 31, 2012 and December 31, 2011, the financial impact of troubled debt restructurings related to accounts under bankruptcy protection was not significant to our Consolidated Statement of Income and Consolidated Balance Sheet.

Payment Defaults

Finance receivables modified as troubled debt restructurings for which there was a subsequent payment default during the nine months ended December 31, 2012 and December 31, 2011, and for which the modification occurred within twelve months of the payment default, were not significant for all classes of such receivables.

25

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5 – Investments in Operating Leases, Net

Investments in operating leases, net consist of vehicle and equipment leases, net of deferred fees and costs, deferred income, accumulated depreciation and the allowance for credit losses.  Pledged 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.  Cash flows from these pledged 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:
(Dollars in millions)	December 31, 2012		March 31, 2012
Investments in operating leases	$	25,335	$	24,911
Pledged investments in operating leases		737		-
		26,072		24,911
Deferred origination (fees) and costs, net		(130)		(133)
Deferred income		(596)		(594)
Accumulated depreciation		(5,472)		(5,346)
Allowance for credit losses		(81)		(95)
Investments in operating leases, net	$	19,793	$	18,743

26

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6 – Allowance for Credit Losses

The following table provides information related to our allowance for credit losses on finance receivables and investments in operating leases:

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
(Dollars in millions)		2012		2011		2012		2011
Allowance for credit losses at beginning of period	$	549	$	623	$	619	$	879
Provision for credit losses		88		56		107		(136)
Charge-offs, net of recoveries		(77)		(59)		(166)		(123)
Allowance for credit losses at end of period	$	560	$	620	$	560	$	620

Charge-offs are shown net of recoveries of $18 million and $59 million for the three and nine months ended December 31, 2012, respectively, and recoveries of $21 million and $99 million for the three and nine months ended December 31, 2011, respectively.

27

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6 – Allowance for Credit Losses (Continued)

Allowance for Credit Losses and Finance Receivables by Portfolio Segment

The following tables provide information related to our allowance for credit losses and finance receivables by portfolio segment for the three and nine months ended December 31, 2012 and 2011:

For the Three and Nine Months Ended December 31, 2012

(Dollars in millions)	Retail Loan		Commercial		Dealer Products		Total
Allowance for Credit Losses for Finance Receivables:
Beginning balance, October 1, 2012	$	333	$	5	$	122	$	460
Charge-offs		(79)		-		-		(79)
Recoveries		13		1		-		14
Provisions		89		(1)		(4)		84
Ending balance, December 31, 2012	$	356	$	5	$	118	$	479
Beginning balance, April 1, 2012	$	395	$	10	$	119	$	524
Charge-offs		(188)		(1)		-	$	(189)
Recoveries		46		1		-		47
Provisions		103		(5)		(1)		97
Ending balance, December 31, 2012	$	356	$	5	$	118	$	479
Ending balance: Individually evaluated for      impairment	$	-	$	-	$	43	$	43
Ending balance: Collectively evaluated for      impairment	$	356	$	5	$	75	$	436
Gross Finance Receivables:
Ending balance, December 31, 2012	$	47,880	$	362	$	14,937	$	63,179
Ending balance: Individually evaluated for      impairment	$	-	$	-	$	259	$	259
Ending balance: Collectively evaluated for      impairment	$	47,880	$	362	$	14,678	$	62,920

The ending balance of gross finance receivables collectively evaluated for impairment includes approximately $444 million and $1 million of finance receivables within the retail loan and commercial portfolio segments, respectively, that are specifically identified as impaired.  These amounts are aggregated with their respective portfolio segments when determining the allowance for credit losses as of December 31, 2012, as they are deemed to be insignificant for individual evaluation and we have determined that the allowance for credit losses would not be materially different if the amounts had been individually evaluated for impairment.

28

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6 – Allowance for Credit Losses (Continued)

For the Three and Nine Months Ended December 31, 2011

(Dollars in millions)	Retail Loan		Commercial		Dealer Products		Total
Allowance for Credit Losses for Finance Receivables:
Beginning balance, October 1, 2011	$	375	$	11	$	124	$	510
Charge-offs		(68)		(1)		-		(69)
Recoveries		17		2		-		19
Provisions		53		(3)		(2)		48
Ending balance, December 31, 2011	$	377	$	9	$	122	$	508
Beginning balance, April 1, 2011	$	595	$	18	$	141	$	754
Charge-offs		(188)		(2)		-	$	(190)
Recoveries		80		4		-		84
Provisions		(110)		(11)		(19)		(140)
Ending balance, December 31, 2011	$	377	$	9	$	122	$	508
Ending balance: Individually evaluated for
impairment	$	-	$	-	$	48	$	48
Ending balance: Collectively evaluated for
impairment	$	377	$	9	$	74	$	460
Gross Finance Receivables:
Ending balance, December 31, 2011	$	45,651	$	376	$	11,778	$	57,805
Ending balance: Individually evaluated for
impairment	$	-	$	-	$	203	$	203
Ending balance: Collectively evaluated for
impairment	$	45,651	$	376	$	11,575	$	57,602

The ending balance of gross finance receivables collectively evaluated for impairment includes approximately $537 million and $1 million of finance receivables within the retail loan and commercial portfolio segments, respectively, that are specifically identified as impaired.  These amounts are aggregated with their respective portfolio segments when determining the allowance for credit losses as of December 31, 2011, as they are deemed to be insignificant for individual evaluation and we have determined that the allowance for credit losses would not be materially different if the amounts had been individually evaluated for impairment.

29

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6 – Allowance for Credit Losses (Continued)

Past Due Finance Receivables and Investments in Operating Leases

(Dollars in millions)		December 31, 2012			March 31, 2012
Aggregate balances 60 or more days past due
	Finance receivables		$	172		$	111
	Operating leases			46			31
Total			$	218		$	142

Substantially all retail, direct finance lease, and operating lease receivables do not involve recourse to the dealer in the event of customer default.  Finance and operating lease receivables 60 or more days past due include accounts in bankruptcy and exclude accounts for which vehicles have been repossessed.

Past Due Finance Receivables by Class

The following tables summarize the aging of finance receivables by class as of December 31, 2012 and March 31, 2012:

(Dollars in millions)	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days Past Due		Total Past Due		Current		Total Finance Receivables		Carrying Amount 90 Days Past Due and Accruing
As of December 31, 2012
Retail loan	$	572	$	119	$	51	$	742	$	47,138	$	47,880	$	51
Commercial		8		2		-		10		352		362		-
Wholesale		-		-		-		-		8,539		8,539		-
Real estate		-		-		-		-		4,581		4,581		-
Working capital		-		-		-		-		1,817		1,817		-
Total	$	580	$	121	$	51	$	752	$	62,427	$	63,179	$	51
(Dollars in millions)	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days Past Due		Total Past Due		Current		Total Finance Receivables		Carrying Amount 90 Days Past due and Accruing
As of March 31, 2012
Retail loan	$	433	$	80	$	28	$	541	$	44,842	$	45,383	$	28
Commercial		8		2		1		11		352		363		1
Wholesale		-		-		-		-		7,008		7,008		-
Real estate		-		-		-		-		4,361		4,361		-
Working capital		1		-		-		1		1,495		1,496		-
Total	$	442	$	82	$	29	$	553	$	58,058	$	58,611	$	29

30

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 7 – Derivatives, Hedging Activities and Interest Expense

Derivative Instruments

We use derivatives as part of our risk management strategy to hedge against changes in interest rate and foreign currency risks.  We manage these risks by entering into derivative transactions with the intent to minimize fluctuations in earnings, cash flows and fair value adjustments of assets and liabilities caused by market volatility.  We enter into derivatives for risk management purposes only, and our use of derivatives is limited to the management of interest rate and foreign currency risks.

Our derivative activities are authorized and monitored by our Asset-Liability Committee, which provides a framework for financial controls and governance to manage market risks.  We use internal models for analyzing and incorporating data from internal and external sources in developing various hedging strategies.  We incorporate the resulting hedging strategies into our overall risk management strategies.

Our approach to asset-liability management involves hedging our risk exposures so that changes in interest rates have a limited effect on our net interest margin and cash flows.  Our liabilities consist mainly of fixed and floating rate debt, denominated in various 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 hedge the interest rate and foreign currency risks that result from the different characteristics of our assets and liabilities.  Our resulting asset liability profile is consistent with the overall risk management strategy directed by the Asset-Liability Committee.  Gains and losses on these derivatives are recorded in interest expense.

Credit Risk Related Contingent Features

Certain of our derivative contracts are governed by International Swaps and Derivatives Association (“ISDA”) Master Agreements.  Substantially all of these ISDA Master Agreements contain reciprocal ratings triggers providing either party with an option to terminate the agreement at market value in the event of a ratings downgrade of the other party below a specified threshold.  As of December 31, 2012, we had implemented daily valuation and collateral exchange arrangements with all of our counterparties.  Our collateral arrangements with all but one counterparty include a zero threshold, full collateralization requirement.

The aggregate fair value of derivative instruments that contain credit risk related contingent features that were in a net liability position at December 31, 2012 was $5 million, excluding embedded derivatives and adjustments made for our own non-performance risk.  If our credit ratings declined by one notch, we would not be required to post additional collateral.  If our ratings were to decline by two notches or more, we would not be required to post additional collateral to the counterparties with which we were in a net liability position at December 31, 2012.  In order to settle all derivative instruments that were in a net liability position at December 31, 2012, excluding embedded derivatives and adjustments made for our own non-performance risk, we would be required to pay $5 million.

31

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 7 - Derivatives, Hedging Activities and Interest Expense (Continued)
Derivative Activity Impact on Financial Statements
The table below shows the location and amount of derivatives at December 31, 2012 as reported in the
Consolidated Balance Sheet:
		Hedge accounting				Non-hedge				Total
		derivatives				accounting derivatives
		Notional		Fair		Notional		Fair		Notional		Fair
(Dollars in millions)				value				value				value
Other assets
Interest rate swaps		$	465	$	50	$	19,628	$	632	$	20,093	$	682
Foreign currency swaps			1,259		605		8,277		1,040		9,536		1,645
	Total	$	1,724	$	655	$	27,905	$	1,672	$	29,629	$	2,327
Counterparty netting and collateral													(2,276)
	Carrying value of derivative contracts – Other assets											$	51
Other liabilities
Interest rate swaps		$	-	$	-	$	49,803	$	877	$	49,803	$	877
Interest rate caps			-		-		50		-		50		-
Foreign currency swaps			900		20		91		12		991		32
Embedded derivatives			-		-		65		13		65		13
	Total	$	900	$	20	$	50,009	$	902	$	50,909	$	922
Counterparty netting and collateral													(904)
	Carrying value of derivative contracts – Other liabilities											$	18

Collateral represents cash received or deposited under reciprocal arrangements that we have entered into with our derivative counterparties.  As of December 31, 2012, we held collateral of $1,442 million which offset derivative assets and posted collateral of $70 million which offset derivative liabilities.  We also held collateral of $24 million which we did not use to offset derivative assets and we posted collateral of $5 million which we did not use to offset derivative liabilities. 

32

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 7 – Derivatives, Hedging Activities and Interest Expense (Continued)
Derivative Activity Impact on Financial Statements
The table below shows the location and amount of derivatives at March 31, 2012 as reported in the
Consolidated Balance Sheet:
		Hedge accounting				Non-hedge				Total
		derivatives				accounting derivatives
		Notional		Fair		Notional		Fair		Notional		Fair
(Dollars in millions)				value				value				value
Other Assets
Interest rate swaps		$	465	$	59	$	15,804	$	380	$	16,269	$	439
Foreign currency swaps			3,291		772		9,866		1,449		13,157		2,221
	Total	$	3,756	$	831	$	25,670	$	1,829	$	29,426	$	2,660
Counterparty netting and collateral held													(2,590)
	Carrying value of derivative contracts – Other assets											$	70
Other liabilities
Interest rate swaps		$	-	$	-	$	51,175	$	1,008	$	51,175	$	1,008
Interest rate caps			-		-		50		-		50		-
Foreign currency swaps			437		29		987		44		1,424		73
Embedded derivatives			-		-		92		24		92		24
	Total	$	437	$	29	$	52,304	$	1,076	$	52,741	$	1,105
Counterparty netting and collateral held													(1,038)
	Carrying value of derivative contracts – Other liabilities											$	67

Collateral represents cash received or deposited under reciprocal arrangements that we have entered into with our derivative counterparties.  As of March 31, 2012, we held collateral of $1,748 million which offset derivative assets and posted collateral of $196 million which offset derivative liabilities.

33

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 7 – Derivatives, Hedging Activities and Interest Expense (Continued)

The following table summarizes the components of interest expense, including the location and amount of gains or losses on derivative instruments and related hedged items, for the three and nine months ended December 31, 2012 and 2011 as reported in our Consolidated Statement of Income:

			Three Months Ended					Nine Months Ended
			December 31,				December 31,
(Dollars in millions)				2012		2011		2012		2011
Interest expense on debt			$	330	$	409	$	1,014	$	1,295
Interest expense on hedge accounting derivatives				(25)		(44)		(79)		(179)
Interest expense on non-hedge accounting foreign currency
	swaps			(64)		(87)		(198)		(306)
Interest expense on non-hedge accounting interest rate swaps				85		139		283		492
		Interest expense on debt and derivatives		326		417		1,020		1,302
Loss (gain) on hedge accounting derivatives:
	Interest rate swaps			5		5		10		(9)
	Foreign currency swaps			37		134		148		40
		Loss on hedge accounting derivatives		42		139		158		31
Less hedged item:  change in fair value of fixed rate debt				(44)		(139)		(166)		(38)
		Ineffectiveness related to hedge accounting derivatives		(2)		-		(8)		(7)
(Gain) loss from foreign currency transactions and non-hedge
accounting derivatives:
		(Gain) loss on foreign currency transactions		(189)		113		(37)		(182)
		Loss (gain) on foreign currency swaps		224		(157)		(14)		(186)
		Gain on interest rate swaps		(75)		(210)		(336)		(158)
Total interest expense			$	284	$	163	$	625	$	769

Interest expense on debt and derivatives represents net interest settlements and changes in accruals.  Gains and losses from hedge accounting derivatives and foreign currency transactions exclude net interest settlements and changes in accruals.

The following table summarizes the relative fair value allocation of derivative credit valuation adjustments within interest expense.

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
(Dollars in millions)		2012		2011		2012		2011
(Gain) loss related to hedge accounting derivatives	$	(1)	$	4	$	(2)	$	9
(Gain) loss on non-hedge accounting  foreign currency swaps		-		(4)		-		3
(Gain) loss on non-hedge accounting interest rate swaps		-		1		-		3
Total credit valuation adjustment allocated to interest expense	$	(1)	$	1	$	(2)	$	15

34

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 8 – Other Assets and Other Liabilities
Other assets and other liabilities consisted of the following:
(Dollars in millions)	December 31, 2012		March 31, 2012
Other assets:
Notes receivable from affiliates	$	1,681	$	1,052
Used vehicles held for sale		162		82
Deferred charges		113		131
Income taxes receivable		15		23
Derivative assets		51		70
Other assets		391		369
Total other assets	$	2,413	$	1,727
Other liabilities:
Unearned insurance premiums and contract revenues	$	1,509	$	1,467
Derivative liabilities		18		67
Accounts payable and accrued expenses		822		716
Deferred income		240		229
Other liabilities		137		126
Total other liabilities	$	2,726	$	2,605

The change in used vehicles held for sale includes non-cash activities of $80 million and $60 million for the nine months ended December 31, 2012 and December 31, 2011, respectively.

35

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 9 – Debt
Debt and the related weighted average contractual interest rates are summarized as follows:
					Weighted average
					contractual interest rates
	December 31,		March 31,			December 31,		March 31,
(Dollars in millions)		2012		2012		2012		2012
Commercial paper	$	24,921	$	21,247		0.29	%	0.38	%
Unsecured notes and loans payable		42,867		41,415		2.28	%	2.63	%
Secured notes and loans payable		7,919		9,789		0.66	%	0.67	%
Carrying value adjustment		652		783
Total debt	$	76,359	$	73,234		1.45	%	1.70	%

The commercial paper balance includes unamortized premiums and discounts.  Included in unsecured notes and loans payable are notes and loans denominated in various foreign currencies, unamortized premiums and discounts and the effects of foreign currency transaction gains and losses on non-hedged or de-designated foreign currency denominated notes and loans payable.  At December 31, 2012 and March 31, 2012, the carrying values of these foreign currency denominated notes payable were $11.5 billion and $15.8 billion, respectively.  Concurrent with the issuance of these foreign currency unsecured notes, we entered into currency swaps in the same notional amount to convert non-U.S. currency payments to U.S. dollar denominated payments.

The carrying value of our unsecured notes and loans payable represents unsecured notes and loans payable and carrying value adjustment.  The carrying value adjustment on debt represents the effects of fair value adjustments to debt in hedging relationships, accrued redemption premiums, and the unamortized fair value adjustments on the hedged item for terminated fair value hedge accounting relationships.  At December 31, 2012 and March 31, 2012, the carrying value of unsecured notes and loan payable included unsecured floating rate debt of $16.8 billion and $16.7 billion, respectively, with contractual interest rates ranging from 0 percent to 6.0 percent and unsecured fixed rate debt of $26.7 billion and $25.5 billion, respectively, with contractual interest rates ranging from 0.5 percent to 9.4 percent.

Our secured notes and loans payable are denominated in U.S. dollars and consist of both fixed and variable rate debt with interest rates ranging from 0.4 percent to 1.9 percent at both December 31, 2012 and March 31, 2012.  Secured notes and loans are issued by on-balance sheet securitization trusts, as further discussed in Note 10 – Variable Interest Entities.  These notes are repayable only from collections on the underlying pledged retail finance receivables and the beneficial interests in investments in operating leases and from related credit enhancements.

As of December 31, 2012, our commercial paper had a weighted average remaining maturity of 68 days, while our notes and loans payable mature on various dates through fiscal 2047.  Weighted average contractual interest rates are calculated based on original notional or par value before consideration of premium or discount.

36

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 10 – 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 were included in our financial statements as of December 31, 2012 and March 31, 2012.

	December 31, 2012
			VIE Assets							VIE Liabilities
			Gross		Net
(Dollars in millions)	Restricted Cash		Securitized Assets			Securitized Assets		Other Assets		Debt		Other Liabilities
Retail finance receivables	$	553	$	8,743		$	8,589	$	4	$	7,578	$	2
Investments in operating leases		29		737			518		7		341		-
Total	$	582	$	9,480		$	9,107	$	11	$	7,919	$	2

	March 31, 2012
			VIE Assets							VIE Liabilities
			Gross		Net
(Dollars in millions)	Restricted Cash		Securitized Assets1			Securitized Assets1		Other Assets1		Debt		Other Liabilities
Retail finance receivables	$	682	$	10,726		$	10,527	$	3	$	9,789	$	2
Total	$	682	$	10,726		$	10,527	$	3	$	9,789	$	2

1 Prior period amounts have been reclassified to conform to the current period presentation.

37

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 10 – Variable Interest Entities (Continued)

Restricted cash represents collections from the underlying Securitized Assets and certain reserve deposits held by TMCC for the VIEs.  Gross Securitized Assets represent finance receivables and beneficial interests in investments in operating leases securitized for the asset-backed securities issued.  Net Securitized Assets are presented net of deferred fees and costs, deferred income, accumulated depreciation and the allowance for credit losses.  Other Assets represent 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 $592 million and $381 million of securities retained by TMCC at December 31, 2012 and March 31, 2012, respectively.

The assets of the VIEs and the restricted cash 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 on 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.

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 Sheet.  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 Assets to cover estimated probable 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.

38

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 11 – Liquidity Facilities and Letters of Credit

For additional liquidity purposes, we maintain syndicated bank credit facilities with certain banks.

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

In February 2012, TMCC, its subsidiary Toyota Credit de Puerto Rico Corp. (“TCPR”), and other Toyota affiliates renewed a $5.0 billion 364 day syndicated bank credit facility.  In March 2011, TMCC, TCPR and other Toyota affiliates entered into a $5.0 billion three year syndicated bank credit facility expiring in fiscal 2014, and a $3.0 billion five year syndicated bank credit facility expiring in fiscal 2016.  In March 2012, $4.3 billion of the original $5.0 billion under the three year facility was extended for one additional year through fiscal 2015, and $2.6 billion of the original $3.0 billion under the five year facility was extended for one additional year through fiscal 2017.

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 consolidations, mergers and sales of assets.  These agreements may be used for general corporate purposes and none were drawn upon as of December 31, 2012 and March 31, 2012.

Other Unsecured Credit Agreements

TMCC has entered into additional unsecured credit facilities with various banks.  As of January 31, 2013, TMCC had committed bank credit facilities totaling $4.2 billion of which $0.2 billion, $2.2 billion, $0.7 billion and $1.1 billion mature in fiscal 2013, 2014, 2015 and 2016, respectively.

As of January 31, 2013, TMCC had entered into committed bank facilities of $0.8 billion and $0.3 billion, which mature in fiscal 2014 and 2016, respectively.  The commitments under these agreements become available to us only upon the termination of certain of our syndicated credit facilities.

TMCC also has an uncommitted bank credit facility in the amount of $0.5 billion which matures in fiscal 2014.

These credit agreements contain covenants, and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on consolidations, mergers and sales of assets.  These credit facilities were not drawn upon as of December 31, 2012 and March 31, 2012. We are in compliance with the covenants and conditions of the credit agreements described above.

Committed Revolving Asset-backed Commercial Paper Facility

In January 2012, we renewed a 364 day revolving securitization facility with certain bank-sponsored asset-backed commercial paper conduits and other financial institutions (“funding agents”).  Under the terms of this facility, the funding agents were contractually committed, at our option, to purchase eligible retail finance receivables from us and make advances up to a facility limit of $3.0 billion.  As of December 31, 2012 and March 31, 2012, approximately $1.7 billion and $2.4 billion of this facility were utilized, respectively.  This facility expired in January 2013 and was not renewed and the remaining outstanding balance was fully repaid as of January 31, 2013.

39

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 12 – Commitments and Contingencies

Commitments and Guarantees

We have entered into certain commitments and guarantees described below.  The maximum amounts under these commitments and guarantees are summarized in the table below:

			Maximum commitment amount as of
(Dollars in millions)			December 31, 2012		March 31, 2012
Commitments:
	Credit facilities with vehicle and industrial equipment dealers		$	7,332	$	6,804
	Minimum lease commitments			79		81
Total commitments				7,411		6,885
Guarantees and other contingencies:
	Guarantees of affiliate pollution control and solid waste
		disposal  bonds		100		100
Total commitments and guarantees			$	7,511	$	6,985
Wholesale financing demand note facilities			$	11,076	$	10,258

At December 31, 2012 and March 31, 2012, amounts outstanding under credit facilities with vehicle and industrial equipment dealers were $6.2 billion and $5.8 billion, respectively, and were recorded in Finance receivables, net in the Consolidated Balance Sheet.  Minimum lease commitments include $39 million and $44 million in facilities lease commitments with affiliates at December 31, 2012 and March 31, 2012, respectively.  Wholesale financing demand note facilities are not considered to be contractual commitments as they are not binding arrangements under which TMCC is required to perform.  At December 31, 2012 and March 31, 2012, amounts outstanding under wholesale financing demand note facilities were $8.2 billion and $6.6 billion, respectively, and were recorded in Finance receivables, net in the Consolidated Balance Sheet.

We are party to a 15-year lease agreement, which expires in 2018, with Toyota Motor Sales, USA, Inc. (“TMS”) for our headquarters location in the TMS headquarters complex in Torrance, California.  At December 31, 2012, minimum future commitments under lease agreements to which we are a lessee, including those under the TMS lease, are as follows (dollars in millions):

	Future minimum
Years ending March 31,	lease payments
2013	$	5
2014		19
2015		18
2016		16
2017		11
Thereafter		10
Total	$	79

40

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 12 – Commitments and Contingencies (Continued)

Commitments

We provide fixed and variable rate credit facilities to vehicle and industrial equipment dealers.  These credit facilities are typically used for facilities refurbishment, real estate purchases, and working capital requirements.  These loans are generally collateralized with liens on real estate, vehicle inventory, and/or other dealership assets, as appropriate.  We obtain a personal guarantee from the vehicle or industrial equipment dealer or a corporate guarantee from the dealership when deemed prudent.  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.  We price the credit facilities to reflect the credit risks assumed in entering into the credit facility.  Amounts drawn under these facilities are reviewed for collectability on a quarterly basis, in conjunction with our evaluation of the allowance for credit losses.  We also provide financing to various multi-franchise dealer organizations, often as part of a lending consortium, for wholesale, working capital, real estate, and business acquisitions.

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 affiliates for any amounts paid.  TMCC receives an annual fee of $78 thousand for guaranteeing such payments.  TMCC has not been required to perform under any of these affiliate bond guarantees as of December 31, 2012 and March 31, 2012.

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 and supplier agreements.  Performance under these indemnities would occur upon a breach of the representations, warranties or covenants made or given, or 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 would 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 December 31, 2012, we determined that it is not probable that we will be required to make any material payments in the future.  As of December 31, 2012 and March 31, 2012, no amounts have been recorded under these indemnification provisions.

41

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 12 – Commitments and Contingencies (Continued)

Litigation

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.  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 reasonably possible 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 possible that the results of these proceedings, in the aggregate, will have a material adverse effect on our consolidated financial condition or results of operations.

42

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 13 – Income Taxes

Our effective tax rate was 36 percent and 37 percent for the three and nine months ended December 31, 2012, respectively, and 38 percent for both the three and nine months ended December 31, 2011.  Our provision for income taxes for the first nine months of fiscal 2013 was $635 million compared to $828 million for the same period in fiscal 2012.  The decrease in the provision is consistent with the decrease in our income before tax for the first nine months of fiscal 2013 compared to the same period in fiscal 2012.

Tax-related Contingencies

As of December 31, 2012, we remain under IRS examination for the fiscal years ended March 31, 2011 and March 31, 2012, as well as for the current fiscal year.

We periodically review our uncertain tax positions.  Our assessment is based on many factors including the ongoing IRS audits.  For the quarter ended December 31, 2012, our assessment did not result in a material change in unrecognized tax benefits.

Our deferred tax assets at December 31, 2012 were $1.3 billion compared to $1.7 billion at March 31, 2012, and were primarily due to the deferred deduction of allowance for credit losses and cumulative federal tax loss carryforwards that expire in varying amounts through fiscal 2032.  The total deferred tax liability at December 31, 2012, net of these deferred tax assets, was $6.1 billion compared with $5.4 billion at March 31, 2012.  Realization with respect to the federal tax loss carryforwards is dependent on generating sufficient income prior to expiration of the loss carryforwards.  Although realization 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.

43

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 14 – Related Party Transactions

As of December 31, 2012, there were no material changes to our related party agreements or relationships as described in our fiscal 2012 Form 10-K, except as described below.  The following tables summarize amounts included in our Consolidated Statement of Income and Consolidated Balance Sheet under various related party agreements or relationships:

		Three Months Ended				Nine Months Ended
		December 31,				December 31,
(Dollars in millions)			2012		2011		2012		2011
Net financing revenues:
	Manufacturers’ subvention support and other revenues	$	238	$	233	$	700	$	719
	Credit support fees incurred	$	(18)	$	(9)	$	(53)	$	(25)
	Foreign exchange loss on loans payable to affiliates	$	-	$	(3)	$	(39)	$	(97)
	Interest expense on loans payable to affiliates	$	(1)	$	(14)	$	(5)	$	(37)
Insurance earned premiums and contract revenues:
	Affiliate insurance premiums and contract revenues	$	36	$	54	$	128	$	163
Investments and other income, net:
	Interest earned on notes receivable from affiliates	$	1	$	-	$	4	$	1
Expenses:
	Shared services charges and other expenses	$	16	$	16	$	48	$	50
	Employee benefits expense	$	7	$	-	$	22	$	20

Credit Support Agreements and Fees Incurred

During the second quarter of fiscal 2013, the credit support fee agreement with TFSC was amended to increase the fixed rate that is applied to the weighted average outstanding amount of bonds and other securities entitled to credit support in order to calculate the credit support fee owed to TFSC.

44

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 14 – Related Party Transactions (Continued)

(Dollars in millions)		December 31, 2012		March 31, 2012
Assets:
Investments in marketable securities
	Investments in affiliates commercial paper	$	6	$	-
Finance receivables, net
	Accounts receivable from affiliates	$	24	$	17
	Direct finance receivables from affiliates	$	5	$	4
	Notes receivable under home loan programs	$	19	$	19
	Deferred retail subvention income from affiliates	$	(686)	$	(598)
Investments in operating leases, net
	Leases to affiliates	$	5	$	4
	Deferred lease subvention income from affiliates	$	(592)	$	(592)
Other assets
	Notes receivable from affiliates	$	1,681	$	1,052
	Other receivables from affiliates	$	1	$	8
	Subvention support receivable from affiliates	$	94	$	65
Liabilities:
Debt
	Loans payable to affiliates	$	-	$	2,201
Other liabilities
	Unearned affiliate insurance premiums and contract revenues	$	237	$	273
	Accounts payable to affiliates	$	120	$	58
	Notes payable to affiliate	$	51	$	61
Shareholder’s Equity:
	Dividends paid	$	744	$	741
	Stock-based compensation	$	2	$	2

45

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 15 – Segment Information

Financial information for our reportable operating segments for the three and nine months ended December 31, 2012 is summarized as follows (dollars in millions):

		Finance		Insurance		Intercompany
Fiscal 2013:		operations		operations		eliminations		Total
Three Months Ended December 31, 2012
Total financing revenues		$	1,809	$	-	$	6	$	1,815
Insurance earned premiums and contract revenues			-		146		(6)		140
Investment and other income, net			12		51		-		63
Total gross revenues			1,821		197		-		2,018
Less:
	Depreciation on operating leases		901		-		-		901
	Interest expense		284		-		-		284
	Provision for credit losses		88		-		-		88
	Operating and administrative expenses		182		47		-		229
	Insurance losses and loss adjustment expenses		-		77		-		77
	Provision for income taxes		126		30		-		156
Net income		$	240	$	43	$	-	$	283
Nine Months Ended December 31, 2012
Total financing revenues		$	5,405	$	-	$	18	$	5,423
Insurance earned premiums and contract revenues			-		453		(18)		435
Investment and other income, net			33		103		-		136
Total gross revenues			5,438		556		-		5,994
Less:
	Depreciation on operating leases		2,636		-		-		2,636
	Interest expense		625		-		-		625
	Provision for credit losses		107		-		-		107
	Operating and administrative expenses		542		132		-		674
	Insurance losses and loss adjustment expenses		-		231		-		231
	Provision for income taxes		560		75		-		635
Net income		$	968	$	118	$	-	$	1,086
Total assets at December 31, 2012		$	90,184	$	3,454	$	(463)	$	93,175

46

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 15 – Segment Information (Continued)

Financial information for our reportable operating segments for the three and nine months ended December 31, 2011 is summarized as follows (dollars in millions):

		Finance		Insurance		Intercompany
Fiscal 2012:		operations		operations		eliminations		Total
Three Months Ended December 31, 2011
Total financing revenues		$	1,831	$	-	$	4	$	1,835
Insurance earned premiums and contract revenues			-		154		(4)		150
Investment and other income			12		50		-		62
Total gross revenues			1,843		204		-		2,047
Less:
	Depreciation on operating leases		844		-		-		844
	Interest expense		163		-		-		163
	Provision for credit losses		56		-		-		56
	Operating and administrative expenses		170		38		-		208
	Insurance losses and loss adjustment expenses		-		78		-		78
	Provision for income taxes		232		34		-		266
Net income		$	378	$	54	$	-	$	432
Nine Months Ended December 31, 2011
Total financing revenues		$	5,614	$	-	$	11	$	5,625
Insurance earned premiums and contract revenues			-		464		(11)		453
Investment and other income			34		62		(3)		93
Total gross revenues			5,648		526		(3)		6,171
Less:
	Depreciation on operating leases		2,498		-		-		2,498
	Interest expense		772		-		(3)		769
	Provision for credit losses		(136)		-		-		(136)
	Operating and administrative expenses		503		114		-		617
	Insurance losses and loss adjustment expenses		-		247		-		247
	Provision for income taxes		768		60		-		828
Net income		$	1,243	$	105	$	-	$	1,348
Total assets at December 31, 2011		$	88,688	$	3,201	$	(375)	$	91,514

47

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 or incorporated by reference herein 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 “Item 1A. Risk Factors” of our Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, 2012 (“fiscal 2012”), including the following:

·    Changes in general business and economic conditions, as well as in consumer demand and the competitive environment in the automotive markets in the United States;

·    A decline in TMS sales volume and the level of TMS sponsored subvention programs;

·     Increased competition from other financial institutions seeking to increase their share of financing Toyota vehicles;

·    Fluctuations in interest rates and currency exchange rates;

·    Changes or disruptions in our funding environment or access to the global capital markets;

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

·    Changes in our credit ratings and those of TMC;

·    Changes in the laws and regulatory requirements, including as a result of recent financial services legislation, and related costs;

·    Natural disasters, changes in fuel prices, security (including cybersecurity) breaches, manufacturing disruptions and production suspensions of Toyota and Lexus vehicles models and related parts supply;

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

·    The failure of a customer or dealer to meet the terms of any contract with us, or otherwise fail to perform as agreed; and

·    Recalls announced by TMS and the perceived quality of Toyota and Lexus vehicles.

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.

48

OVERVIEW

Key Performance Indicators and Factors Affecting Our Business

In our finance operations, we generate revenue, income, and cash flows by providing retail financing, leasing, and dealer financing to vehicle and industrial equipment dealers and their customers.  We measure the performance of our financing operations using the following metrics: financing volume, market share, financial leverage, financing margins, operating expense, and loss metrics.

In our insurance operations, we generate revenue through marketing, underwriting, and claims administration related to covering certain risks of vehicle dealers and their customers.  We measure the performance of our insurance operations using the following metrics:  investment income, issued agreement volume, number of agreements in force, and loss metrics.

Our financial results are affected by a variety of economic and industry factors, including but not limited to, new and used vehicle markets, Toyota and Lexus sales volume, new vehicle incentives, 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 and Lexus vehicles, the financial health of the dealers we finance, and competitive pressure.  Changes in these factors can influence financing and lease contract volume, the number of financing and lease contracts 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 insurance operations, and our gross margins on financing and leasing volume.  Additionally, our funding programs and related costs are influenced by changes in the global capital markets, prevailing interest rates, and our credit ratings, which may affect our ability to obtain cost effective funding to support earning asset growth.

49

Fiscal 2013 First Nine Months Operating Environment

During the first nine months of the fiscal year ending March 31, 2013 (“fiscal 2013”), economic growth in the United States (“U.S.”) continued at a slow pace.  The rate of employment growth was slow, the unemployment rate continues to be elevated, and consumer spending remained constrained.  However, home prices rose modestly in some parts of the U.S. during the first nine months of fiscal 2013, and sales of motor vehicles improved compared to the same period in fiscal 2012.

Conditions in the global capital markets remained challenging due to concerns over volatile European financial conditions during the first nine months of fiscal 2013.  Europe’s financial situation continued to pose downside risks to the economic outlook.  Economic activity in Europe continued to contract and the growth of emerging European economies and the Asian region slowed.  Fiscal concerns in the U.S. contributed to market volatility and are expected to continue to pose downside risks to the U.S. economic outlook.  Despite the challenging fixed income market conditions, we continue to maintain broad global access to both domestic and international markets.

Industry-wide vehicle sales in the United States and sales incentives throughout the auto industry increased during the first nine months of fiscal 2013 as compared to the same period in the prior year.  Vehicle sales by Toyota Motor Sales, USA, Inc. (“TMS”) increased 29 percent in the first nine months of fiscal 2013 compared to the same period in fiscal 2012.  The increase in TMS sales was attributable to the increase in vehicle and related parts supply, which was disrupted following the natural disasters that occurred in Japan and Thailand in 2011.  TMS sales were also positively impacted by new product launches.  While the production of Toyota and Lexus vehicles returned to pre-disaster levels during the third quarter of fiscal 2012, due to strong vehicle sales our vehicle inventory had not consistently returned to pre-disaster levels as of December 31, 2012.

Prices of used vehicles remained near historically high levels during the first nine months of fiscal 2013 despite slight declines compared to the same period in the prior year.  Natural disasters in Japan and Thailand in 2011 had the effect of reducing the availability of new Toyota and Lexus vehicles which in turn increased the demand for certain used Toyota and Lexus vehicles.  The combination of new Toyota and Lexus vehicle inventory being below historic levels during most of the first nine months of fiscal 2013 and low used vehicle supply contributed to lower per unit loss severity, favorably impacting our credit losses.

In October 2012, Hurricane Sandy caused wide-spread flooding and power outages across large portions of the Northeastern United States.  As a result, we experienced an increase in insurance losses and loss adjustment expenses during the last two months of the third quarter of fiscal 2013 and an increase in credit losses, but these increases were not material to our operating results for the first nine months and third quarter of fiscal 2013.  In addition, we did not experience a significant impact to our financial condition or to our finance and insurance volume.  Refer to “Results of Operations” and “Financial Condition” within “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion.

50

RESULTS OF OPERATIONS
Fiscal 2013 Summary
	Three Months Ended				Nine Months Ended
	December 31,				December 31,
(Dollars in millions)	2012		2011		2012		2011
Net income:
Finance operations1	$	240	$	378	$	968	$	1,243
Insurance operations1		43		54		118		105
Total net income	$	283	$	432	$	1,086	$	1,348

1 Refer to Note 15 - Segment Information of the Notes to Consolidated Financial Statement for the total asset balances of our finance and insurance operations.

Our consolidated net income was $1,086 million and $283 million for the first nine months and third quarter of fiscal 2013, compared to $1,348 million and $432 million for the same periods in fiscal 2012.  Our consolidated results for the first nine months of fiscal 2013 decreased as compared to the same period in fiscal 2012 primarily due to increases in our provision for credit losses and depreciation on operating leases and a decrease in total financing revenues, partially offset by a decrease in interest expense.  The decrease in our consolidated results for the third quarter of fiscal 2013 as compared to the same period in fiscal 2012 was primarily due to increases in interest expense, depreciation on operating leases and provision for credit losses and a decrease in total financing revenue.

Our overall capital position, taking into account the payment of a $744 million dividend in September 2012 to Toyota Financial Services Americas Corporation (“TFSA”), increased by $0.3 billion, bringing total shareholder’s equity to $8.0 billion at December 31, 2012, as compared to $7.7 billion at March 31, 2012.  Our debt increased to $76.4 billion at December 31, 2012 from $73.2 billion at March 31, 2012.  Our debt-to-equity ratio of 9.5 at December 31, 2012 remained relatively consistent with a ratio of 9.6 at March 31, 2012.

51

Finance Operations
		Three Months Ended						Nine Months Ended
		December 31,				Percentage		December 31,				Percentage
(Dollars in millions)			2012	2011		Change		2012		2011		Change
Financing revenues:
Operating lease		$	1,191	$	1,160	3	%	$	3,524	$	3,542	(1)	%
Retail1			514		582	(12)	%		1,571		1,818	(14)	%
Dealer			104		89	17	%		310		254	22	%
Total financing revenues			1,809		1,831	(1)	%		5,405		5,614	(4)	%
Investment and other income			12		12	-	%		33		34	(3)	%
Gross revenues from finance operations			1,821		1,843	(1)	%		5,438		5,648	(4)	%
Less:
	Depreciation on operating      leases		901		844	7	%		2,636		2,498	6	%
	Interest expense		284		163	74	%		625		772	(19)	%
	Provision for credit losses		88		56	57	%		107		(136)	179	%
	Operating and administrative      expenses		182		170	7	%		542		503	8	%
	Provision for income taxes		126		232	(46)	%		560		768	(27)	%
Net income from finance
	operations	$	240	$	378	(37)	%	$	968	$	1,243	(22)	%
1   Includes direct finance lease revenues.

Our finance operations reported net income of $968 million and $240 million for the first nine months and third quarter of fiscal 2013, compared to $1,243 million and $378 million for the same periods in fiscal 2012.  Finance operations results for the first nine months of fiscal 2013 decreased as compared to the same period in fiscal 2012 primarily due to increases in our provision for credit losses and depreciation on operating leases and a decrease in total financing revenues, partially offset by a decrease in interest expense.  Finance operations results for the third quarter of fiscal 2013 decreased as compared to the same period in fiscal 2012 primarily due to increases in interest expense, depreciation on operating leases and provision for credit losses and a slight decrease in total financing revenues.

Financing Revenues

Total financing revenues decreased 4 percent and 1 percent during the first nine months and third quarter of fiscal 2013 as compared to the same periods in fiscal 2012 due to the following factors:

·   Operating lease revenues decreased 1 percent in the first nine months of fiscal 2013, as compared to the same period in fiscal 2012, primarily due to a decrease in portfolio yield.  In the third quarter of fiscal 2013, operating lease revenues increased by 3 percent compared to the same period in fiscal 2012 primarily due to higher average outstanding earning asset balances, partially offset by a decrease in portfolio yield.

·   Retail contract revenues decreased 14 percent and 12 percent in the first nine months and third quarter of fiscal 2013, respectively, as compared to the same periods in fiscal 2012, primarily due to a decrease in portfolio yield.

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·   Dealer financing revenues increased 22 percent and 17 percent in the first nine months and third quarter of fiscal 2013, respectively, as compared to the same periods in fiscal 2012, primarily due to higher average outstanding earning asset balances.

Our total portfolio, which includes operating lease, retail and dealer financing, had a yield of 4.6 percent and 4.5 percent during the first nine months and third quarter of fiscal 2013 compared to 5.5 percent and 5.3 percent for the same periods in fiscal 2012 due primarily to decreases in both our retail and operating lease portfolio yields.  Lower yields were the result of the maturity of higher yielding earning assets being replaced by lower yielding earning assets during the first nine months and third quarter of fiscal 2013.

Depreciation on Operating Leases

Depreciation on operating leases increased 6 percent and 7 percent during the first nine months and third quarter of fiscal 2013, respectively, as compared to the same periods in fiscal 2012.  The increase in depreciation was attributable to an increase in operating lease units outstanding and a slight decline in used vehicle values from historically high levels during the first nine months of fiscal 2013 as compared to the same period in fiscal 2012.

Interest Expense

Our liabilities consist mainly of fixed and floating rate debt, denominated in various 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 hedge the interest rate and foreign currency risks that result from the different characteristics of our assets and liabilities.  The following table summarizes the consolidated components of interest expense:

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
(Dollars in millions)	2012		2011		2012		2011
Interest expense on debt	$	330	$	409	$	1,014	$	1,295
Interest expense on derivatives		(4)		8		6		7
Interest expense on debt and derivatives		326		417		1,020		1,302
Ineffectiveness related to hedge accounting derivatives		(2)		-		(8)		(7)
(Gain) loss on foreign currency transactions		(189)		113		(37)		(182)
Loss (gain) on foreign currency swaps		224		(157)		(14)		(186)
Gain on interest rate swaps		(75)		(210)		(336)		(158)
Total interest expense	$	284	$	163	$	625	$	769

During the first nine months of fiscal 2013, total interest expense decreased from $769 million during the first nine months of fiscal 2012 to $625 million during the same period of fiscal 2013. This decrease was primarily due to lower weighted average interest rates on debt and higher gains on interest rate swaps partially offset by lower gains on foreign currency transactions net of the associated foreign currency swaps.

Total interest expense increased from $163 million during the third quarter of fiscal 2012 to $284 million during the same period of fiscal 2013. This increase was primarily due to lower gains on interest rate swaps and losses on foreign currency transactions net of the associated foreign currency swaps partially offset by lower weighted average interest rates on debt.

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Interest expense on debt primarily represents net interest settlements and changes in accruals on secured and unsecured notes and loans payable and commercial paper, and includes amortization of discount and premium, debt issuance costs, and basis adjustments.  Interest expense on debt decreased to $1,014 million and $330 million during the first nine months and third quarter of fiscal 2013 from $1,295 million and $409 million in the same periods in fiscal 2012 primarily as a result of lower weighted average interest rates on debt.

Interest expense on derivatives represents net interest settlements and changes in accruals on both hedge and non-hedge accounting interest rate and foreign currency derivatives.  During the first nine months and third quarter of fiscal 2013, we recorded net interest expense of $6 million and net interest income of $4 million, respectively, compared to net interest expense of $7 million and $8 million during the same periods of fiscal 2012.

Gain or loss on foreign currency transactions represents the revaluation of foreign currency denominated debt transactions for which hedge accounting has not been elected.  We use foreign currency swaps to economically hedge these foreign currency transactions.  During the first nine months of fiscal 2013, we recorded gains of $51 million on foreign currency transactions net of the associated foreign currency swaps. These gains resulted from decreases in swap rates in certain foreign currencies in which our currency swaps are denominated.

During the third quarter of fiscal 2013, we recorded a loss of $35 million on foreign currency transactions net of the associated foreign currency swaps. These losses resulted from increases in swap rates in certain foreign currencies in which our currency swaps are denominated.

During the first nine months and third quarter of fiscal 2012, we recorded combined gains of $368 million and $44 million on foreign currency transactions net of the associated foreign currency swaps. These gains resulted from declines in foreign currency swap rates during fiscal 2012.

We recorded gains of $336 million and $75 million on non-hedge accounting interest rate swaps during the first nine months and third quarter of fiscal 2013 compared to gains of $158 million and $210 million during the same periods of fiscal 2012.  The gains were primarily due to a decrease in U.S. dollar swap rates.  The net gains on these swaps exclude net interest settlements and changes in accruals.  Future changes in interest and foreign exchange rates could continue to result in significant volatility in our interest expense.

Provision for Credit Losses

We recorded a provision for credit losses of $107 million and $88 million for the first nine months and third quarter of fiscal 2013, compared to a benefit from credit losses of $136 million and a provision for credit losses of $56 million for the same periods in fiscal 2012.  The benefit from credit losses for the first nine months of fiscal 2012 was attributable to significant improvements in per unit loss severity, default frequency and net charge-offs in our consumer portfolio.  In contrast, despite improvements in per unit loss severity and default frequency during the first nine months of fiscal 2013, net charge-offs increased resulting in a provision for credit losses that did not offset the level of charge-offs, net of recoveries.

Operating and Administrative Expenses

Operating expenses increased during the first nine months of fiscal 2013 compared to the same period in fiscal 2012 primarily due to increases in employee expenses, general operating expenses and insurance dealer back-end program expenses.

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Insurance Operations
The following table summarizes key results of our Insurance Operations:
		Three Months Ended						Nine Months Ended
		December 31,				Percentage		December 31,				Percentage
(Dollars in millions)		2012		2011		Change		2012		2011		Change
Agreements (units in thousands)
	Issued		379		319	19	%		1,161		1,001	16	%
	In force		5,751		6,357	(10)	%		5,751		6,357	(10)	%
Insurance earned premiums
	and contract revenues	$	146	$	154	(5)	%	$	453	$	464	(2)	%
Investment and other income			51		50	2	%		103		62	66	%
Gross revenues from insurance
	operations		197		204	(3)	%		556		526	6	%
Less:
Insurance losses and loss
	adjustment expenses		77		78	(1)	%		231		247	(6)	%
Operating and administrative
	expenses		47		38	24	%		132		114	16	%
Provision for income taxes			30		34	(12)	%		75		60	25	%
Net income from insurance
	operations	$	43	$	54	(20)	%	$	118	$	105	12	%

Our insurance operations reported net income of $118 million and $43 million for the first nine months and third quarter of fiscal 2013, compared to $105 million and $54 million for the same periods in fiscal 2012.  The increase in net income for the first nine months of fiscal 2013 was attributable to an increase in investment and other income and a decrease in insurance losses and loss adjustment expenses, partially offset by a decrease in insurance earned premiums and contract revenues, and an increase in operating and administrative expenses.  The decrease in net income for the third quarter of fiscal 2013 compared to the same period in fiscal 2012 was attributable to a decrease in insurance earned premiums and contract revenues and an increase in operating and administrative expenses.  Our net income from insurance operations for the first nine months and third quarter of fiscal 2013 was also affected by Hurricane Sandy.  Despite an increase in insurance losses and loss adjustment expenses, this effect was offset by a decrease in prepaid maintenance losses.

Agreements issued increased by 16 percent and 19 percent during the first nine months and third quarter of fiscal 2013 compared to the same periods in fiscal 2012.  The increase was primarily due to the overall increase in TMS vehicle sales.  Agreements in force decreased by 10 percent during the first nine months of fiscal 2013 compared to the same period in fiscal 2012.  The decrease was attributable to the expiration of affiliate agreements issued during fiscal 2011 in support of special TMS sales and customer loyalty programs.

Our insurance operations reported insurance earned premiums and contract revenues of $453 million and $146 million for the first nine months and third quarter of fiscal 2013, compared to $464 million and $154 million for the same periods in fiscal 2012.  Insurance earned premiums and contract revenues are affected by sales volume as well as the level, age, and mix of agreements in force.  Agreements in force represent active insurance policies written and contracts issued.  Insurance earned premiums and contract revenues represent revenues from the agreements in force and decreased for the first nine months and third quarter of fiscal 2013, compared to the same periods in fiscal 2012.  The decrease was primarily due to the expiration during fiscal 2013 of affiliate agreements issued during fiscal 2011 in support of special TMS sales and customer loyalty programs.

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Our insurance operations reported investment and other income of $103 million and $51 million for the first nine months and third quarter of fiscal 2013, compared to $62 million and $50 million for the same periods in fiscal 2012.  Investment and other income consists primarily of interest and dividend income and realized gains and losses on available-for-sale securities.  The increase in investment and other income for the first nine months of fiscal 2013 was primarily due to a decrease in realized losses and an increase in dividend income.

Our insurance operations reported insurance losses and loss adjustment expenses of $231 million and $77 million for the first nine months and third quarter of fiscal 2013, compared to $247 million and $78 million for the same periods in fiscal 2012.  Insurance losses and loss adjustment expenses incurred are a function of the amount of covered risks, the frequency and severity of claims associated with the agreements in force, and the level of risk retained by our insurance operations.  Insurance losses and loss adjustment expenses include amounts paid and accrued for reported losses, estimates of losses incurred but not reported, and any related claim adjustment expenses.

The decrease in insurance losses and loss adjustment expenses for the first nine months and third quarter of fiscal 2013 was primarily attributable to a decrease in prepaid maintenance losses of $37 million and $14 million, respectively, offset by an increase in inventory insurance losses of $10 million and $12 million, respectively.  The decrease in prepaid maintenance losses was due to lower claim frequency as a result of the expiration during fiscal 2013 of affiliate agreements issued in fiscal 2011 in support of special TMS sales and customer loyalty programs.  The increase in inventory insurance losses was due to the occurrence of Hurricane Sandy in October 2012, which caused wide-spread flooding and power outages across large portions of the Northeastern United States.

Our insurance operations reported operating and administrative expenses of $132 million and $47 million for the first nine months and third quarter of fiscal 2013, compared to $114 million and $38 million for the same periods in fiscal 2012.  The increase was attributable to an increase in insurance dealer back-end program expenses, various product expenses, and general operating expenses.  Insurance dealer back-end program expenses are incentives or expense reduction programs we provide to dealers based on their sales volume or underwriting performance.

Provision for Income Taxes

Our total provision for income taxes for the first nine months and third quarter of fiscal 2013 was $635 million and $156 million compared to $828 million and $266 million for the same periods in fiscal 2012.  Our effective tax rate was 37 percent and 36 percent for the first nine months and third quarter of fiscal 2013 compared to 38 percent for the first nine months and third quarter of fiscal 2012.  The change in our provision for income taxes is consistent with the change in our income before tax in the first nine months and third quarter of fiscal 2013 compared to the same periods in fiscal 2012.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law.  We anticipate that this Act will favorably impact our taxable income through the extension of the 50 percent bonus depreciation deduction.

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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						Nine Months Ended
	December 31,				Percentage		December 31,				Percentage
(units in thousands):	2012		2011		Change		2012		2011		Change
TMS new sales volume1	401		349		15	%	1,244		961		29	%
Vehicle financing volume2
New retail contracts	160		133		20	%	536		414		29	%
Used retail contracts	74		70		6	%	217		249		(13)	%
Lease contracts	79		54		46	%	238		177		34	%
Total	313		257		22	%	991		840		18	%
TMS subvened vehicle financing volume (units included in the above table):
New retail contracts	94		62		52	%	305		202		51	%
Used retail contracts	28		21		33	%	68		56		21	%
Lease contracts	62		46		35	%	193		151		28	%
Total	184		129		43	%	566		409		38	%
TMS subvened vehicle financing volume as a percent of vehicle financing volume:
New retail contracts	58.8	%	46.6	%			56.9	%	48.8	%
Used retail contracts	37.8	%	30.0	%			31.3	%	22.5	%
Lease contracts	78.5	%	85.2	%			81.1	%	85.3	%
Overall subvened contracts	58.8	%	50.2	%			57.1	%	48.7	%
Market share:3
Retail contracts	39.9	%	37.8	%			43.0	%	42.9	%
Lease contracts	19.7	%	15.6	%			19.1	%	18.3	%
Total	59.6	%	53.4	%			62.1	%	61.2	%

1 Represents total domestic TMS sales of new Toyota and Lexus vehicles excluding sales under dealer rental car and commercial fleet programs and sales of a private Toyota distributor.  TMS new sales volume is comprised of approximately 85% Toyota and 15% Lexus vehicles for the first nine months of fiscal 2013 and 83% Toyota, and 17% Lexus for the third quarter of fiscal 2013. TMS new sales volume is comprised of approximately 85% Toyota and 15% Lexus vehicles for the first nine months of fiscal 2012 and 83% Toyota, and 17% Lexus for the third quarter of fiscal 2012.

2 Total financing volume is comprised of approximately 82% Toyota, 15% Lexus, and 3% non-Toyota/Lexus vehicles for the first nine months of fiscal 2013 and approximately 81% Toyota, 16% Lexus, and 3% non-Toyota/Lexus vehicles for the third quarter of fiscal 2013.  Total financing volume is comprised of approximately 79% Toyota, 16% Lexus, and 5% non-Toyota/Lexus vehicles for the first nine months of fiscal 2012 and 78% Toyota, 17% Lexus, and 5% non-Toyota/Lexus vehicles for third quarter of fiscal 2012.

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

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Vehicle Financing Volume

The volume of our retail and lease contracts, which are acquired primarily from Toyota and Lexus vehicle dealers, is dependent upon TMS sales volume and subvention.  Natural disasters that occurred in Japan and Thailand in 2011 caused manufacturing disruptions and production suspensions of certain Toyota and Lexus vehicle models and parts during the first and second quarters of fiscal 2012.  As a result of increased availability of vehicle and related parts supplies, vehicle sales by TMS increased 29 percent for the first nine months of fiscal 2013 compared to the same period in fiscal 2012.  In addition, TMS sales were positively affected by new product and model launches.

Our financing volume increased while our market share remained consistent in the first nine months of fiscal 2013 compared to the same period in fiscal 2012.  The increase in volume was driven primarily by the increased supply of new Toyota and Lexus vehicles and an increase in TMS subvention.  TMS subvention volume increased as the supply of new vehicles grew in the first nine months and third quarter of fiscal 2013 compared to the same periods in fiscal 2012.  The foregoing factors were sufficient to offset an initial decrease in market share during the first half of fiscal 2013.

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The composition of our net earning assets is summarized below:
						Percentage
(Dollars in millions)		December 31, 2012		March 31, 2012		Change
Net Earning Assets
Finance receivables, net
	Retail finance receivables, net1	$	47,732	$	45,296	5	%
	Dealer financing, net		14,818		12,746	16	%
Total finance receivables, net			62,550		58,042	8	%
Investments in operating leases, net			19,793		18,743	6	%
Net earning assets		$	82,343	$	76,785	7	%
Dealer Financing
(Number of dealers serviced)
Toyota and Lexus dealers2			993		986	1	%
Vehicle dealers outside of the
	Toyota/Lexus dealer network		479		492	(3)	%
Industrial equipment dealers			142		142	-	%
Total number of dealers receiving
	wholesale financing		1,614		1,620	-	%
Dealer inventory financed (units in thousands)			296		245	21	%

1  Includes direct finance leases.

2  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 during the first nine months and third quarter of fiscal 2013 as compared to the same periods in fiscal 2012.  The increase was mainly due to an increase in overall TMS vehicle sales and subvention.  The natural disasters in Japan and Thailand in 2011 caused a shortage of new Toyota and Lexus vehicles in fiscal 2012 and a corresponding dealer focus on used vehicle sales.  This resulted in higher used retail contract volume for the first nine months of fiscal 2012 compared to the same period in fiscal 2013.  The increase in vehicle financing volume during the first nine months of fiscal 2013 contributed to the increase in retail finance receivables, net at December 31, 2012.

Lease Contract Volume and Earning Assets

Our vehicle lease contract volume during the first nine months and third quarter of fiscal 2013 increased as compared to the same periods in fiscal 2012.  Much of the increase during the first nine months and third quarter of fiscal 2013 was attributable to an increase in TMS sales resulting in an increase in subvened vehicle financing volume and investments in operating leases, net at December 31, 2012 as compared to the balance at March 31, 2012.

Dealer Financing and Earning Assets

Dealer financing, net increased 16 percent from March 31, 2012, primarily due to increases in dealer inventory financed.  The higher level of dealer inventory was attributable to the return of vehicle production to pre-disaster levels during the third quarter of fiscal 2012.  The total number of dealers receiving financing was relatively consistent with March 31, 2012.

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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 vehicle lease return rates and loss severity.

We periodically review the estimated end-of-term residual values of leased vehicles to assess the appropriateness of our carrying values.  To the extent the estimated end-of-term value of a leased vehicle is lower than the residual value established at lease inception, the estimated 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.  These adjustments are made over time for operating leases by recording depreciation expense in the Consolidated Statement of Income.  Gains or losses on vehicles sold at lease termination are also recorded in depreciation expense in the Consolidated Statement of Income.

Depreciation on Operating Leases
		Three Months Ended						Nine Months Ended
		December 31,				Percentage		December 31,				Percentage
		2012		2011		Change		2012		2011		Change
Depreciation on operating
	leases (dollars in millions)	$	901	$	844	7	%	$	2,636	$	2,498	6	%
Average operating lease units
	outstanding (in thousands)		810		775	5	%		798		784	2	%

Depreciation expense on operating leases increased 6 percent and 7 percent during the first nine months and third quarter of fiscal 2013 as compared to the same periods in fiscal 2012, due primarily to an increase in the average operating lease units outstanding over the same periods and a slight decline in used vehicle values during the first nine months of fiscal 2013.  Despite this decline, used vehicle values remained near historically high levels during the first nine months of fiscal 2013.  The level of lease maturities during the third quarter of fiscal 2013 increased as compared to the same period in fiscal 2012 and is expected to continue to increase through the remainder of fiscal 2013 and over the next few years.  This increase could affect return rates, used vehicle values and depreciation expense.

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Credit Risk

Credit Loss Experience

The overall credit quality of our consumer portfolio in the first nine months and third quarter of fiscal 2013 continued to benefit from our continued focus on purchasing practices and collection efforts.  In addition, subvention contributes to our overall portfolio quality, as subvened contracts typically have better credit quality than non-subvened contracts.  These factors, combined with strong used vehicle values, contributed to decreased levels of default frequency and delinquency during the first nine months of fiscal 2013 as compared to the same period in fiscal 2012.

			December 31,			March 31,			December 31,
			2012			2012			2011
Net charge-offs as a percentage of average gross earning assets 1
		Finance receivables		0.31	%		0.24	%		0.24	%
		Operating leases		0.17	%		0.11	%		0.11	%
		Total		0.28	%		0.21	%		0.21	%
Default frequency as a percentage of outstanding contracts				1.27	%		1.43	%		1.40	%
Average loss severity per unit			$	5,508		$	5,869		$	5,841
Aggregate balances for accounts 60 or more days past due as a
	percentage of gross earning assets 2
		Finance receivables 3		0.27	%		0.19	%		0.33	%
		Operating leases 3		0.23	%		0.16	%		0.27	%
		Total		0.26	%		0.18	%		0.31	%

1     Net charge-off ratios have been annualized using nine month results for the periods ended December 31, 2012 and December 31, 2011.

2     Substantially all retail, direct finance lease and operating lease receivables do not involve recourse to the dealer in the event of customer default.

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

The level of credit losses primarily reflects two factors: default frequency and loss severity.  Default frequency as a percentage of average outstanding contracts decreased to 1.27 percent during the first nine months of fiscal 2013 compared to 1.40 percent during the same period in fiscal 2012.  Despite slight declines in the first nine months of fiscal 2013, used vehicle values remained near historically high levels.  Strong used vehicle values positively affected default frequency and net charge-offs.  Some customers, who otherwise may have defaulted, were able to sell their vehicles in order to pay off their finance contracts.  The positive impact of strong used vehicle values on default frequency was partially offset by the increase in the number of vehicles charged off in the third quarter of fiscal 2013 due to damage from Hurricane Sandy.  The low level of default frequency of 1.27 percent may not be indicative of future levels of default frequency as accounts 60 or more days past due increased from 0.18 percent as of March 31, 2012 to 0.26 percent as of December 31, 2012.  Average loss severity per unit decreased to $5,508 at December 31, 2012 from $5,841 at December 31, 2011.  The decrease was primarily due to losses incurred as a result of Hurricane Sandy.  Loss severity for vehicles damaged by Hurricane Sandy was mitigated to a large extent by the receipt of vehicle insurance proceeds.  As a result, Hurricane Sandy’s net impact to credit losses for the first nine months and third quarter of fiscal 2013 were not material as its favorable impact on loss severity offset the unfavorable impact on default frequency.

Net charge-offs as a percentage of average gross earning assets increased from 0.21 percent at December 31, 2011 to 0.28 percent at December 31, 2012 due primarily to lower recoveries.

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Allowance for Credit Losses

We maintain an allowance for credit losses to cover probable and estimable losses as of the balance sheet date resulting from the non-performance of our customers and dealers under their contractual obligations.  The determination of the allowance involves significant assumptions, complex analyses, and management judgment.

The allowance for credit losses for our consumer portfolio is established through a process that estimates probable losses incurred as of the balance sheet date based upon consistently applied statistical analyses of portfolio data.  This process utilizes delinquency migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, and incorporates current and expected trends and other relevant factors, including used vehicle market conditions, economic conditions, unemployment rates, purchase quality mix, and operational factors.  This process, along with management judgment, is used to establish the allowance to cover probable and estimable losses incurred as of the balance sheet date.  Movement in any of these factors would cause changes in estimated probable losses.

The allowance for credit losses for our dealer portfolio is established by first aggregating dealer financing receivables into loan-risk pools, which are determined based on the risk characteristics of the loan (e.g. secured by either vehicles and industrial equipment, real estate or dealership assets, or unsecured).  We then analyze dealer pools using an internally developed risk rating system.  In addition, we have established procedures that focus on managing high risk loans in our dealer portfolio.  Our field operations management and special assets group are consulted each quarter to determine if any specific dealer loan is considered impaired.  If impaired loans are identified, specific reserves are established, as appropriate, and the loan is removed from the loan-risk pool for separate monitoring.

The following table provides information related to our allowance for credit losses for the three and nine months ended December 31, 2012 and 2011:

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
(Dollars in millions)	2012		2011		2012		2011
Allowance for credit losses at beginning of period	$	549	$	623	$	619	$	879
Provision for credit losses		88		56		107		(136)
Charge-offs, net of recoveries1		(77)		(59)		(166)		(123)
Allowance for credit losses at end of period	$	560	$	620	$	560	$	620

1   Charge-offs are shown net of recoveries of $18 million and $59 million for the three and nine months ended

    December 31, 2012, respectively, and recoveries of $21 million and $99 million for the three and nine months ended

    December 31, 2011, respectively.

During the first nine months of fiscal 2013, our allowance for credit losses decreased $59 million from $619 million at March 31, 2012 to $560 million at December 31, 2012.  The decline in our allowance for credit losses was primarily driven by improvements in default frequency from March 31, 2012.  Used vehicle values remained near historically high levels during the first nine months of fiscal 2013, although values declined compared to the first nine months of fiscal 2012.  Strong used vehicle prices positively affected default frequency as some customers, who otherwise may have defaulted, were able to sell their vehicles in order to pay off their finance contracts.

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The favorable levels in our actual per unit loss severity and default frequency reflect patterns of credit behavior different from our historical patterns and levels.  An unusual combination of factors including the low supply of new and used vehicles, the impact of the natural disasters occurring in Japan and Thailand, and an extended period of economic uncertainty have contributed to these trends.  We considered these factors as well as our historical seasonal patterns, and the increased level of lease maturities in establishing our allowance for credit losses at December 31, 2012.

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LIQUIDITY AND CAPITAL RESOURCES

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 balance sheet.  This strategy has led us to develop a borrowing base that is diversified by market and geographic distribution, investor type, and financing structure, among other factors.

The following table summarizes the components of our outstanding funding sources at carrying value:

(Dollars in millions)	December 31, 2012		March 31, 2012
Commercial paper1	$	24,921	$	21,247
Unsecured notes and loans payable2		42,867		41,415
Secured notes and loans payable		7,919		9,789
Carrying value adjustment3		652		783
Total Debt	$	76,359	$	73,234

1 Includes unamortized premium/discount.

2 Includes unamortized premium/discount and the effects of foreign currency transaction gains and losses on non-hedged or de-designated notes and loans payable which are denominated in foreign currencies.

3 Represents the effects of fair value adjustments to debt in hedging relationships, accrued redemption premiums, and the unamortized fair value adjustments on the hedged item for terminated fair value hedge accounting relationships.

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. Our funding volume is primarily based on expected net change in earning assets and debt maturities.

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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 $4.5 billion to $7.7 billion with an average balance of $6.1 billion for the third quarter of fiscal 2013.

We may lend to or 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.

Credit support is provided to us by our indirect parent Toyota Financial Services Corporation (“TFSC”), and, in turn to TFSC by Toyota Motor Corporation (“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 guarantees by TMC of any securities or obligations of TFSC or TMCC.

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 Annual Report on Form 10-K for the fiscal year ended March 31, 2012 for further discussion.

We routinely monitor global financial conditions and our financial exposure to our global counterparties.  Specifically, we focus on those countries experiencing significant economic, fiscal or political strain and the corresponding likelihood of default.  During the reporting period, we identified five countries for which these conditions exist; Portugal, Ireland, Italy, Greece and Spain.  We do not currently have exposure to these or other European sovereign counterparties.  As of December 31, 2012, our gross non-sovereign exposures to investments in marketable securities and derivatives counterparty positions in the countries identified were not material, either individually or collectively.  We also maintained a total of $21 billion in committed and uncommitted syndicated and bilateral credit facilities for our liquidity purposes as of December 31, 2012.  As of December 31, 2012, less than 8 percent of such commitments were from counterparties in the countries identified.  Refer to the “Liquidity and Capital Resources - Liquidity Facilities and Letters of Credit” section and“Item 1A. Risk Factors - The failure or commercial soundness of our counterparties and other financial institutions may have an effect on our liquidity, operating results or financial condition” for further discussion.

Commercial Paper

Short-term funding needs are met through the issuance of commercial paper in the United States.  Commercial paper outstanding under our commercial paper programs ranged from approximately $21.4 billion to $26.4 billion during the quarter ended December 31, 2012, with an average outstanding balance of $24.1 billion.  Our commercial paper programs are supported by the liquidity facilities discussed under the heading “Liquidity Facilities and Letters of Credit”.  We believe we have ample capacity to meet our short-term funding requirements and manage our liquidity.

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Unsecured Notes and Loans Payable

The following table summarizes the components of our unsecured notes and loans payable:

(Dollars in millions)	U.S. medium term notes ("MTNs") and domestic bonds		Euro MTNs ("EMTNs")		Eurobonds		Other		Total unsecured notes and loans payable5
Balance at March 31, 20121	$	18,461	$	13,274	$	1,180	$	7,969	$	40,884
Issuances during the nine months
ended December 31, 2012		8,586 2		231 3		-		623 4		9,440
Maturities and terminations
during the nine months
ended December 31, 2012		(2,644)		(2,198)		(377)		(2,465)		(7,684)
Balance at December 31, 20121	$	24,403	$	11,307	$	803	$	6,127	$	42,640

1     Amounts represent par values and as such exclude unamortized premium/discount, foreign currency transaction gains and losses on debt denominated in foreign currencies, fair value adjustments to debt in hedge accounting relationships, accrued redemption premiums, and the unamortized fair value adjustments on the hedged item for terminated hedge accounting relationships.  Par values of non-U.S. currency denominated notes are determined using foreign exchange rates applicable as of the issuance dates.

2   MTNs and domestic bonds issued during the first nine months of fiscal 2013 had terms to maturity ranging from approximately 1 year to 25 years, and had interest rates at the time of issuance ranging from 0.3 percent to 3.3 percent.

3    EMTNs issued during the first nine months of fiscal 2013 had terms to maturity ranging from approximately 3 years to 5 years, and had interest rates at the time of issuance ranging from 4.4 percent to 4.6 percent.

4   Consists of long-term borrowings, with terms to maturity ranging from approximately 1 year to 6 years, and had interest rates at the time of issuance ranging from 0.1 percent to 1.1 percent.

5 Consists of fixed and floating rate debt.  Upon the issuance of fixed rate debt, we generally elect to enter into pay float interest rate swaps.  Refer to “Derivative Instruments” for further discussion.

We maintain a shelf registration statement with the SEC to provide for the issuance of debt securities in the U.S. capital markets to retail and institutional investors. We 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 March 2015.  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 provisions.  We are in compliance with these covenants.

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 2012, 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 €50 billion or the equivalent in other currencies, of which €36 billion was available for issuance at December 31, 2012.  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.  Debt securities issued under our EMTN program prior to October 2007 are also subject to cross-default provisions.  We are in compliance with these covenants.

In addition, we may issue other debt securities or enter into other unsecured financing arrangements through the global capital markets.

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Secured Notes and Loans Payable

Overview

Asset-backed securitization of our earning asset portfolio provides us with an alternative source of funding.  We securitize finance receivables and beneficial interests in investments in operating leases (“Securitized Assets”) using a variety of structures.  All of 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.

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 holds any equity interests in or receives 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.

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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 pledged 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.

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 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.

Securitized Assets and the related debt remain on our Consolidated Balance Sheet.  We recognize financing revenue on the Securitized Assets.  We also recognize interest expense on the secured debt issued by the special purpose entities and maintain an allowance for credit losses on the Securitized Assets to cover estimated probable 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.

Public Term Securitization

We maintain shelf registration statements with the SEC to provide for the issuance of securities backed by Securitized Assets in the U.S. capital markets.  Funding obtained from our public term securitization transactions is repaid as the underlying Securitized Assets amortize.  We have retained certain securities from these transactions and may sell them at any time.  None of the asset-backed securities we have issued have defaulted, experienced any events of default or failed to pay principal in full at maturity.

Amortizing Asset-backed Commercial Paper Conduits

We have executed private securitization transactions of Securitized Assets with bank-sponsored multi-seller asset-backed conduits.  The related debt will be repaid as the underlying Securitized Assets amortize.

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Liquidity Facilities and Letters of Credit

For additional liquidity purposes, we maintain syndicated credit facilities with certain banks.

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

In February 2012, TMCC, its subsidiary Toyota Credit de Puerto Rico Corp. (“TCPR”), and other Toyota affiliates renewed a $5.0 billion 364 day syndicated bank credit facility.  In March 2011, TMCC, TCPR and other Toyota affiliates entered into a $5.0 billion three year syndicated bank credit facility expiring in fiscal 2014, and a $3.0 billion five year syndicated bank credit facility expiring in fiscal 2016.  In March 2012, $4.3 billion of the original $5.0 billion under the three year facility was extended for one additional year through fiscal 2015, and $2.6 billion of the original $3.0 billion under the five year facility was extended for one additional year through fiscal 2017.

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 consolidations, mergers and sales of assets.  These agreements may be used for general corporate purposes and none were drawn upon as of December 31, 2012 and March 31, 2012.

Other Unsecured Credit Agreements

TMCC has entered into additional unsecured credit facilities with various banks.  As of January 31, 2013, TMCC had committed bank credit facilities totaling $4.2 billion of which $0.2 billion, $2.2 billion, $0.7 billion and $1.1 billion mature in fiscal 2013, 2014, 2015 and 2016, respectively.

As of January 31, 2013, TMCC had entered into committed bank facilities of $0.8 billion and $0.3 billion, which mature in fiscal 2014 and 2016, respectively.  The commitments under these agreements become available to us only upon the termination of certain of our syndicated credit facilities.

TMCC also has an uncommitted bank credit facility in the amount of $0.5 billion which matures in fiscal 2014.

These credit agreements contain covenants, and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on consolidations, mergers and sales of assets.  These credit facilities were not drawn upon as of December 31, 2012 and March 31, 2012. We are in compliance with the covenants and conditions of the credit agreements described above.

Committed Revolving Asset-backed Commercial Paper Facility

In January 2012, we renewed a 364 day revolving securitization facility with certain bank-sponsored asset-backed commercial paper conduits and other financial institutions (“funding agents”).  Under the terms of this facility, the funding agents were contractually committed, at our option, to purchase eligible retail finance receivables from us and make advances up to a facility limit of $3.0 billion.  As of December 31, 2012 and March 31, 2012, approximately $1.7 billion and $2.4 billion of this facility were utilized, respectively.  This facility expired in January 2013 and was not renewed and the remaining outstanding balance was fully repaid as of January 31, 2012.

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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.  See “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 2012 Form 10-K.

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DERIVATIVE INSTRUMENTS

Risk Management Strategy

We use derivatives as part of our risk management strategy to hedge against changes in interest rate and foreign currency risks.  We manage these risks by entering into derivative transactions with the intent to minimize fluctuations in earnings, cash flows and fair value adjustments of assets and liabilities caused by market volatility.  We enter into derivatives for risk management purposes only and, accordingly, limit our use of derivatives to the management of interest rate and foreign currency risks.

Our derivative activities are authorized and monitored by our Asset-Liability Committee, which provides a framework for financial controls and governance to manage market risks.  We use internal models for analyzing and incorporating data from internal and external sources in developing various hedging strategies.  We incorporate the resulting hedging strategies into our overall risk management strategies.

Our approach to asset-liability management involves hedging our risk exposures so that changes in interest rates have a limited effect on our net interest margin and cash flows.  Our liabilities consist mainly of fixed and floating rate debt, denominated in various 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 hedge the interest rate and foreign currency risks that result from the different characteristics of our assets and liabilities.  Our resulting asset liability profile is consistent with the overall risk management strategy directed by the Asset-Liability Committee.  Gains and losses on these derivatives are recorded in interest expense.

Accounting for Derivative Instruments

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 positive and negative positions and offset cash collateral held with the same counterparty on a net basis. Changes in the fair value of derivatives are recorded in interest expense in the Consolidated Statement of Income.

We categorize derivatives as those designated for hedge accounting (“hedge accounting derivatives”) and those that are not designated for hedge accounting (“non-hedge accounting derivatives”).  At the inception of a derivative contract, we may elect to designate a derivative as a hedge accounting derivative.

We may also, from time-to-time, issue debt which can be characterized as hybrid financial instruments. These obligations often contain an embedded derivative which may require bifurcation.  Changes in the fair value of the bifurcated embedded derivative are reported in interest expense in the Consolidated Statement of Income.  Refer to Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in our fiscal 2012 Form 10-K, and Note 7 – Derivatives, Hedging Activities and Interest Expense in this Form 10-Q for additional information.

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Derivative Assets and Liabilities

The following table summarizes our derivative assets and liabilities, which are included in other assets and other liabilities in the Consolidated Balance Sheet:

(Dollars in millions)	December 31, 2012		March 31, 2012
Gross derivatives assets, net of credit valuation adjustment	$	2,327	$	2,660
Less: Counterparty netting and collateral		(2,276)		(2,590)
Derivative assets, net	$	51	$	70
Gross derivative liabilities, net of credit valuation adjustment	$	909	$	1,081
Less: Counterparty netting and collateral		(904)		(1,038)
Derivative liabilities, net	$	5	$	43
Embedded derivative liabilities	$	13	$	24

Collateral represents cash received or deposited under reciprocal arrangements that we have entered into with our derivative counterparties.  As of December 31, 2012, we held collateral of $1,442 million which offset derivative assets and posted collateral of $70 million which offset derivative liabilities.  We held collateral of $24 million which we did not use to offset derivative assets and we posted collateral of $5 million which we did not use to offset derivative liabilities.  As of March 31, 2012, we held collateral of $1,748 million which offset derivative assets and posted collateral of $196 million which offset derivative liabilities.  Refer to the “Interest Expense” section for discussion on changes in derivatives.

Derivative Counterparty Credit Risk

We manage derivative counterparty credit risk by maintaining policies for entering into derivative contracts, exercising our rights under our derivative contracts, requiring the posting of collateral and actively monitoring our exposure to counterparties.

All of our derivative counterparties to which we had credit exposure at December 31, 2012 were assigned investment grade ratings by a credit rating organization.  In addition, we require counterparties that are or become rated BBB+ or lower to fully collateralize their net derivative exposures with us.  Our counterparty credit risk could be adversely affected by deterioration of the global economy and financial distress in the banking industry.

Our International Swaps and Derivatives Association (“ISDA”) Master Agreements contain reciprocal collateral arrangements which help mitigate our exposure to the credit risk associated with our counterparties.  As of December 31, 2012 we had implemented daily valuation and collateral exchange arrangements with all of our counterparties.  Our collateral arrangements with all but one counterparty include a zero threshold, full collateralization requirement, which significantly reduces counterparty credit risk exposure.  Under our ISDA Master Agreements, cash is the only permissible form of collateral.  Neither we nor our counterparties are required to hold collateral in a segregated account.  Our collateral arrangements include legal right of offset provisions, pursuant to which collateral amounts are netted against derivative assets or derivative liabilities, which are included in other assets or other liabilities in our Consolidated Balance Sheet.

In addition, many of our ISDA Master Agreements contain reciprocal ratings triggers providing either party with an option to terminate the agreement and related transactions at market value in the event of a ratings downgrade below a specified threshold.  Refer to “Part I. Item 1A. Risk Factors” in our fiscal 2012 Form 10-K for further discussion.

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A summary of our net counterparty credit exposure by credit rating (net of collateral held) is presented below:

(Dollars in millions)	December 31, 2012		March 31, 2012
Credit Rating
AA	$	-	$	5
A		46		68
BBB		6		-
Total net counterparty credit exposure1	$	52	$	73

1   Amounts exclude counterparty credit valuation adjustments of $1 million and $3 million at December 31, 2012 and

    March 31, 2012, respectively.

We exclude credit valuation adjustments related to non-performance risk of our counterparties from the total net counterparty credit exposure.  All derivative credit valuation adjustments are recorded in interest expense in our Consolidated Statement of Income.  Refer to “Note 2 – Fair Value Measurements” of the Notes to the Consolidated Financial Statements for further discussion.

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NEW ACCOUNTING STANDARDS

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

OFF-BALANCE-SHEET ARRANGEMENTS

Guarantees

TMCC has guaranteed the payments of principal and interest on bonds relating to manufacturing facilities of certain affiliates.  Refer to Note 12 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for further discussion.

Lending 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 15 - Related Party Transactions of the Notes to Consolidated Financial Statements in our fiscal 2012 Form 10-K, as well as above in Note 12 - Commitments and Contingencies of the Notes to Consolidated Financial Statements.

Indemnification

Refer to Note 12 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for a description of agreements containing indemnification provisions.

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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

Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) evaluated 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”) as of the end of the period covered by this report.  Based on this evaluation, the CEO and CFO concluded that the disclosure controls and procedures were effective as of December 31, 2012, 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 Securities and Exchange Commission’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 months ended December 31, 2012 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

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.  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 reasonably possible 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 possible that the results of these proceedings, in the aggregate, will have a material adverse effect on our consolidated financial condition or results of operations.

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ITEM 1A.   RISK FACTORS

There are no material changes from the risk factors set forth under “Item 1A. Risk Factors” in our fiscal 2012 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

Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13 (r) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction.  Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S. by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.

We are disclosing the following information pursuant to Section 13(r).  TMCC is indirectly wholly-owned by Toyota Motor Corporation (“TMC”), a Japanese corporation.  TMC has provided us with the following information:

During the quarter ended December 31, 2012, P.T. Toyota-Astra Motor (“TAM”), an Indonesian company, sold two Toyota vehicles to the Iranian embassy in Indonesia in compliance with applicable law.  P.T. Toyota Motor Manufacturing Indonesia (“TMMIN”), an Indonesian company and subsidiary of TMC, manufactured and sold the vehicles to TAM.  TAM is the sole distributor of Toyota vehicles in Indonesia.  As of December 31, 2012, TMC held 49 percent of the common stock of TAM, and PT Astra International Tbk, an Indonesian company, held the remaining 51 percent of the common stock of TAM.  The vehicle sales contributed an equivalent in foreign currency of approximately $37,000 in gross revenues to TMC, and net profit to TMC is substantially less.  TMC has informed us that no determination has been made as to whether TAM will, in the future, cease or continue vehicle sales to the Iranian embassy in Indonesia.  We understand this transaction would not subject TMC or its affiliates to U.S. sanctions.

As of the date of this report, we are not aware of any other activity, transaction or dealing by us or any of our affiliates during the quarter ended December 31, 2012 that requires disclosure in this report under Section 13(r) of the Exchange Act.  For affiliates that we do not control and that are our affiliates solely due to their common control by our parent TMC, we have relied upon TMC for information regarding their activities, transactions and dealings.  TMC is subject to Section 13(r) for disclosures in its Form 20-F for the year ending March 31, 2013, and continues its own review of the activities, transactions and dealings of its affiliates that we do not control, and, to the extent necessary, we will update our disclosure as TMC completes its review.

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ITEM 6.   EXHIBITS

See Exhibit Index on page 80.

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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:   February 14, 2013	By     /S/ GEORGE E. BORST
	George E. Borst
	President and
	Chief Executive Officer
	(Principal Executive Officer)

Date:   February 14, 2013	By   /S/ CHRIS BALLINGER
	Chris Ballinger
	Senior Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Description	Method of Filing
3.1	Restated Articles of Incorporation filed with the California Secretary of State on April 1, 2010	(1)
3.2	Bylaws as amended through December 8, 2000	(2)
4.1(a)	Indenture dated as of August 1, 1991 between TMCC and The Chase Manhattan Bank, N.A	(3)
4.1(b)	First Supplemental Indenture dated as of October 1, 1991 among TMCC, Bankers Trust Company and The Chase Manhattan Bank, N.A	(4)
4.1(c)	Second Supplemental Indenture, dated as of March 31, 2004, among TMCC, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank, N.A.) and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company)	(5)
4.1(d)	Third Supplemental Indenture, dated as of March 8, 2011 among TMCC, The Bank of New York Mellon Trust Company, N.A., as trustee, and Deutsche Bank Trust Company Americas, as trustee.	(6)
4.1(e)	Agreement of Resignation and Acceptance dated as of April 26, 2010 between Toyota Motor Credit Corporation, The Bank of New York Mellon and The Bank of New York Trust Company, N.A.	(1)
4.2(a)	Amended and Restated Agency Agreement, dated September 14, 2012, 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.	(7)

______________

(1) Incorporated herein by reference to the same numbered Exhibit 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 the same numbered Exhibit 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(a), filed with our Registration Statement on Form S-3, File Number 33-52359.

(4) Incorporated herein by reference to Exhibit 4.1 filed with our Current Report on Form 8-K dated October 16, 1991, Commission File Number 1-9961.

(5) Incorporated herein by reference to Exhibit 4.1(c) filed with our Registration Statement on Form S-3, Commission File No. 333-113680.

(6) Incorporated herein by reference to Exhibit 4.2 filed with our Current Report on Form 8-K dated March 9, 2011, Commission File Number 1-9961.

(7) Incorporated herein by reference to Exhibit 4.1 filed with our Current Report on Form 8-K dated September 14, 2012, Commission File Number 1-9961.

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EXHIBIT INDEX

Exhibit Number	Description	Method of Filing
4.2(b)	Amended and Restated Note Agency Agreement, dated September 14, 2012, among Toyota Motor Credit Corporation, The Bank of New York Mellon (Luxembourg) S.A. and The Bank of New York Mellon, acting through its London branch.	(8)
4.3(a)	Sixth Amended and Restated Agency Agreement dated September 28, 2006, among TMCC, JP Morgan Chase Bank, N.A. and J.P. Morgan Bank Luxembourg S.A.	(9)
4.3(b)	Amendment No.1, dated as of March 4, 2011, to the Sixth Amended and Restated Agency Agreement among TMCC, The Bank of New York Mellon, acting through its London branch, as agent, and The Bank of New York Luxembourg S.A., as paying agent.	(10)
4.4	TMCC has outstanding certain long-term debt as set forth in Note 9 - Debt of the Notes to Consolidated Financial Statements.  Not filed herein as an exhibit, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934, is any instrument which defines the rights of holders of such long-term debt, where the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of TMCC and its subsidiaries on a consolidated basis.  TMCC agrees to furnish copies of all such instruments to the Securities and Exchange Commission upon request.
10.1	Amendment No. 2 dated as of September 7, 2012 to the Credit Support Fee Agreement dated as of March 30, 2001, as amended on June 17, 2005 in respect of the Credit Support Agreement dated October 1, 2000 made by and between TMCC and TFSC.	(11)
12.1	Calculation of ratio of earnings to fixed charges	Filed Herewith
31.1	Certification of Chief Executive Officer	Filed Herewith

______________

(8) Incorporated herein by reference to Exhibit 4.2 filed with our Current Report on Form 8-K dated September 14, 2012, Commission File No. 1-9961.

(9) Incorporated herein by reference to Exhibit 4.1 filed with our Current Report on Form 8-K dated September 28, 2006, Commission File No. 1-9961.

(10) Incorporated herein by reference to Exhibit 4.1 filed with our Current Report on Form 8-K dated March 4, 2011, Commission File No. 1-9961.

(11) Incorporated herein by reference to Exhibit Exhibit 10.1 filed with our Current Report on Form 8-K dated September 7, 2012, Commission File No. 1-9961.

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EXHIBIT INDEX

Exhibit Number	Description	Method of Filing
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	XBRL instance document	Filed Herewith
101.CAL	XBRL taxonomy extension calculation linkbase document	Filed Herewith
101.DEF	XBRL taxonomy extension definition linkbase document	Filed Herewith
101.LAB	XBRL taxonomy extension labels linkbase document	Filed Herewith
101.PRE	XBRL taxonomy extension presentation linkbase document	Filed Herewith
101.SCH	XBRL taxonomy extension schema document	Filed Herewith

82