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 ~~June~~September 30, 2013

[ ] 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 ~~July~~October 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 ~~June~~September 30, 2013

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...............................................................................................................	4446
	Item 3. Quantitative and Qualitative Disclosures About Market Risk..............................................................................	6971
	Item 4. Controls and Procedures.......................................................................................................................................	6971

PART II .................................................................................................................................................................................		7072

	Item 1. Legal Proceedings.................................................................................................................................................	7072
	Item 1A. Risk Factors...........................................................................................................................................................	7072
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..............................................................................	7072
	Item 3. Defaults Upon Senior Securities...........................................................................................................................	7072
	Item 4. Mine Safety Disclosures.......................................................................................................................................	7072
	Item 5. Other Information.................................................................................................................................................	7173
	Item 6. Exhibits.................................................................................................................................................................	7173
	Signatures..............................................................................................................................................................................	7274
	Exhibit Index.........................................................................................................................................................................	7375

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TOYOTA MOTOR CREDIT CORPORATION															CONSOLIDATED STATEMENT OF INCOME	(Unaudited)

		Three Months Ended						Three Months Ended				Six Months Ended
		June 30,						September 30,				September 30,
(Dollars in millions)	(Dollars in millions)	2013		2012		(Dollars in millions)		2013		20121		2013		20121
Financing revenues:	Financing revenues:					Financing revenues:
	Operating lease	$	1,209	$	1,157	Operating lease	$	1,255	$	1,187	$	2,464	$	2,344
	Retail		478		532	Retail		483		525		961		1,057
	Dealer		108		108	Dealer		107		110		215		218
Total financing revenues	Total financing revenues		1,795		1,797	Total financing revenues		1,845		1,822		3,640		3,619

	Depreciation on operating leases		951		855	Depreciation on operating leases		966		891		1,917		1,746
	Interest expense		536		58	Interest expense		314		283		850		341
Net financing revenues	Net financing revenues		308		884	Net financing revenues		565		648		873		1,532

Insurance earned premiums and contract revenues	Insurance earned premiums and contract revenues		139		150	Insurance earned premiums and contract revenues		143		145		282		295
Investment and other income, net	Investment and other income, net		6		35	Investment and other income, net		14		38		20		73
Net financing revenues and other revenues	Net financing revenues and other revenues		453		1,069	Net financing revenues and other revenues		722		831		1,175		1,900

Expenses:	Expenses:					Expenses:
	Provision for credit losses		11		16	Provision for credit losses		28		3		39		19
	Operating and administrative		227		216	Operating and administrative		233		229		460		445
	Insurance losses and loss adjustment expenses		71		81	Insurance losses and loss adjustment expenses		68		73		139		154
Total expenses	Total expenses		309		313	Total expenses		329		305		638		618

Income before income taxes	Income before income taxes		144		756	Income before income taxes		393		526		537		1,282
Provision for income taxes	Provision for income taxes		53		279	Provision for income taxes		149		200		202		479

Net income	Net income	$	91	$	477	Net income	$	244	$	326	$	335	$	803
1 Certain prior period amounts have been reclassified to conform to the current period presentation.						1 Certain prior period amounts have been reclassified to conform to the current period presentation.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)						(Unaudited)

		Three Months Ended						Three Months Ended				Six Months Ended
		June 30,						September 30,				September 30,
(Dollars in millions)	(Dollars in millions)	2013		2012		(Dollars in millions)		2013		2012		2013		2012
Net income	Net income	$	91	$	477	Net income	$	244	$	326	$	335	$	803
Other comprehensive income, net of tax:	Other comprehensive income, net of tax:					Other comprehensive income, net of tax:
Net unrealized (losses) gains on available-for-sale
Net unrealized gains (losses) on available-for-sale						Net unrealized gains (losses) on available-for-sale
	marketable securities [net of tax benefit (provision) of					marketable securities [net of tax (provision) benefit
	$31 and ($9), respectively]		(54)		11	of ($10), ($26), $21 and ($35), respectively]		16		42		(38)		53
Reclassification adjustment for net losses (gains) on	Reclassification adjustment for net losses (gains) on					Reclassification adjustment for net losses (gains) on
	available-for-sale marketable securities					available-for-sale marketable securities included
	included in investment and other income, net [net of					in net income [net of tax (benefit) provision of
	tax (benefit) provision of ($10) and $1, respectively]		16		(2)	($5), $1, ($15) and $2, respectively]		9		(3)		25		(5)
Other comprehensive (loss) income			(38)		9
Other comprehensive income (loss)						Other comprehensive income (loss)		25		39		(13)		48
Comprehensive income	Comprehensive income	$	53	$	486	Comprehensive income	$	269	$	365	$	322	$	851
See accompanying Notes to Consolidated Financial Statements.

TOYOTA MOTOR CREDIT CORPORATION											CONSOLIDATED BALANCE SHEET	(Unaudited)

(Dollars in millions)	(Dollars in millions)	June 30, 2013		March 31, 2013		(Dollars in millions)	September 30, 2013		March 31, 2013
ASSETS	ASSETS					ASSETS

Cash and cash equivalents	Cash and cash equivalents	$	2,818	$	4,723	Cash and cash equivalents	$	4,448	$	4,723
Restricted cash	Restricted cash		504		491	Restricted cash		501		491
Investments in marketable securities	Investments in marketable securities		4,957		5,397	Investments in marketable securities		4,364		5,397
Finance receivables, net	Finance receivables, net		63,911		62,567	Finance receivables, net		64,212		62,567
Investments in operating leases, net	Investments in operating leases, net		21,186		20,384	Investments in operating leases, net		22,424		20,384
Other assets	Other assets		1,979		1,740	Other assets		2,134		1,740
Total assets	Total assets	$	95,355	$	95,302	Total assets	$	98,083	$	95,302

LIABILITIES AND SHAREHOLDER'S EQUITY	LIABILITIES AND SHAREHOLDER'S EQUITY					LIABILITIES AND SHAREHOLDER'S EQUITY

Debt	Debt	$	78,619	$	78,832	Debt	$	81,529	$	78,832
Deferred income taxes	Deferred income taxes		6,290		6,236	Deferred income taxes		6,461		6,236
Other liabilities	Other liabilities		2,836		2,677	Other liabilities		2,879		2,677
Total liabilities	Total liabilities		87,745		87,745	Total liabilities		90,869		87,745

Commitments and contingencies (See Note 12)	Commitments and contingencies (See Note 12)					Commitments and contingencies (See Note 12)

Shareholder's equity:	Shareholder's equity:					Shareholder's equity:
Capital stock, no par value (100,000 shares authorized; 91,500 issued	Capital stock, no par value (100,000 shares authorized; 91,500 issued					Capital stock, no par value (100,000 shares authorized; 91,500 issued
	and outstanding) at June 30, 2013 and March 31, 2013		915		915	and outstanding) at September 30, 2013 and March 31, 2013		915		915
Additional paid-in-capital	Additional paid-in-capital		2		2	Additional paid-in-capital		2		2
Accumulated other comprehensive income	Accumulated other comprehensive income		173		211	Accumulated other comprehensive income		198		211
Retained earnings	Retained earnings		6,520		6,429	Retained earnings		6,099		6,429
Total shareholder's equity	Total shareholder's equity		7,610		7,557	Total shareholder's equity		7,214		7,557
Total liabilities and shareholder's equity	Total liabilities and shareholder's equity	$	95,355	$	95,302	Total liabilities and shareholder's equity	$	98,083	$	95,302

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)	June 30, 2013		March 31, 2013		September 30, 2013		March 31, 2013
ASSETS
Finance receivables, net	$	8,605	$	7,556	$	8,209	$	7,556
Investments in operating leases, net		353		434		272		434
Other assets		9		12		11		12
Total assets	$	8,967	$	8,002	$	8,492	$	8,002

LIABILITIES
Debt	$	7,628	$	7,009	$	7,118	$	7,009
Other liabilities		1		1		2		1
Total liabilities	$	7,629	$	7,010	$	7,120	$	7,010

See accompanying Notes to Consolidated Financial Statements.

TOYOTA MOTOR CREDIT CORPORATION																							CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY	(Unaudited)

						Accumulated											Accumulated
						other											other
		Capital		Additional		comprehensive		Retained					Capital		Additional		comprehensive		Retained
(Dollars in millions)	(Dollars in millions)	stock		paid-in capital		income		earnings		Total		(Dollars in millions)	stock		paid-in capital		income		earnings		Total

Balance at March 31, 2012	Balance at March 31, 2012	$	915	$	2	$	160	$	6,585	$	7,662	Balance at March 31, 2012	$	915	$	2	$	160	$	6,585	$	7,662

Net income for the three months ended
Net income for the six months ended												Net income for the six months ended
	June 30, 2012		-		-		-		477		477	September 30, 2012		-		-		-		803		803
Other comprehensive income, net	Other comprehensive income, net											Other comprehensive income, net
	of tax		-		-		9		-		9	of tax		-		-		48		-		48
Balance at June 30, 2012		$	915	$	2	$	169	$	7,062	$	8,148
Dividend												Dividend		-		-		-		(744)		(744)
Balance at September 30, 2012												Balance at September 30, 2012	$	915	$	2	$	208	$	6,644	$	7,769

Balance at March 31, 2013	Balance at March 31, 2013	$	915	$	2	$	211	$	6,429	$	7,557	Balance at March 31, 2013	$	915	$	2	$	211	$	6,429	$	7,557

Net income for the three months ended
Net income for the six months ended												Net income for the six months ended
	June 30, 2013		-		-		-		91		91	September 30, 2013		-		-		-		335		335
Other comprehensive income, net
Other comprehensive loss, net												Other comprehensive loss, net
	of tax		-		-		(38)		-		(38)	of tax		-		-		(13)		-		(13)
Balance at June 30, 2013		$	915	$	2	$	173	$	6,520	$	7,610
Dividend												Dividend		-		-		-		(665)		(665)
Balance at September 30, 2013												Balance at September 30, 2013	$	915	$	2	$	198	$	6,099	$	7,214

See accompanying Notes to Consolidated Financial Statements.	See accompanying Notes to Consolidated Financial Statements.											See accompanying Notes to Consolidated Financial Statements.

TOYOTA MOTOR CREDIT CORPORATION													CONSOLIDATED STATEMENT OF CASH FLOWS	(Unaudited)
			Three Months Ended June 30,						Six Months Ended September 30,
(Dollars in millions)	(Dollars in millions)		2013		2012		(Dollars in millions)		2013		2012
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
	Net income		$	91	$	477	Net income		$	335	$	803
	Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		960		866		Depreciation and amortization		1,933		1,760
		Recognition of deferred income		(300)		(288)		Recognition of deferred income		(621)		(587)
		Provision for credit losses		11		16		Provision for credit losses		39		19
		Amortization of deferred costs		140		135		Amortization of deferred costs		280		272
		Foreign currency and other adjustments to the carrying value of debt, net		(494)		(346)		Foreign currency and other adjustments to the carrying value of debt, net		(122)		(366)
	Net realized loss (gain) from sales and other-than-temporary impairment on securities			26		(3)	Net realized loss (gain) from sales and other-than-temporary impairment on securities			40		(7)
	Net change in:						Net change in:
		Restricted cash		(13)		19		Restricted cash		(10)		66
		Derivative assets		11		(129)		Derivative assets		(4)		21
		Other assets (Note 8) and accrued income		27		(23)		Other assets (Note 8) and accrued income		12		39
		Deferred income taxes		76		282		Deferred income taxes		231		482
		Derivative liabilities		48		(17)		Derivative liabilities		(7)		(25)
		Other liabilities		114		40		Other liabilities		203		188
Net cash provided by operating activities	Net cash provided by operating activities			697		1,029	Net cash provided by operating activities			2,309		2,665
Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:
	Purchase of investments in marketable securities			(1,055)		(1,912)	Purchase of investments in marketable securities			(1,539)		(3,021)
	Proceeds from sales of investments in marketable securities			155		89	Proceeds from sales of investments in marketable securities			286		227
	Proceeds from maturities of investments in marketable securities			1,255		1,666	Proceeds from maturities of investments in marketable securities			2,227		2,379
	Acquisition of finance receivables			(6,505)		(6,436)	Acquisition of finance receivables			(13,847)		(13,418)
	Collection of finance receivables			5,957		5,744	Collection of finance receivables			12,019		11,402
	Net change in wholesale and certain working capital receivables			(800)		(1,183)	Net change in wholesale and certain working capital receivables			179		(1,042)
	Acquisition of investments in operating leases			(3,370)		(2,455)	Acquisition of investments in operating leases			(7,297)		(4,874)
	Disposals of investments in operating leases			1,817		1,366	Disposals of investments in operating leases			3,617		2,588
	Advances to affiliates			(1,152)		(1,080)	Advances to affiliates			(2,111)		(2,635)
	Repayments from affiliates			832		1,520	Repayments from affiliates			1,755		2,801
	Other, net			(9)		(2)	Other, net			(15)		(9)
Net cash used in investing activities	Net cash used in investing activities			(2,875)		(2,683)	Net cash used in investing activities			(4,726)		(5,602)
Cash flows from financing activities:	Cash flows from financing activities:						Cash flows from financing activities:
	Proceeds from issuance of debt			5,336		3,900	Proceeds from issuance of debt			9,644		9,636
	Payments on debt			(4,350)		(2,954)	Payments on debt			(9,772)		(6,772)
	Net change in commercial paper			(713)		3,388	Net change in commercial paper			2,930		2,923
	Repayments to affiliates			-		(2,014)	Advances from affiliates			37		48
							Repayments to affiliates			(32)		(2,048)
							Dividend paid to TFSA			(665)		(744)
Net cash provided by financing activities	Net cash provided by financing activities			273		2,320	Net cash provided by financing activities			2,142		3,043
Net (decrease) increase in cash and cash equivalents	Net (decrease) increase in cash and cash equivalents			(1,905)		666	Net (decrease) increase in cash and cash equivalents			(275)		106
Cash and cash equivalents at the beginning of the period	Cash and cash equivalents at the beginning of the period			4,723		5,060	Cash and cash equivalents at the beginning of the period			4,723		5,060
Cash and cash equivalents at the end of the period	Cash and cash equivalents at the end of the period		$	2,818	$	5,726	Cash and cash equivalents at the end of the period		$	4,448	$	5,166
Supplemental disclosures:	Supplemental disclosures:						Supplemental disclosures:
	Interest paid		$	325	$	346	Interest paid		$	572	$	639
	Income taxes received, net		$	(24)	$	(1)	Income taxes received, net		$	(35)	$	(2)

See accompanying Notes to Consolidated Financial Statements.

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 six months ended ~~June~~September 30, 2013 and 2012 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 six months ended ~~June~~September 30, 2013 do not necessarily indicate the results which may be expected for the full fiscal year ending March 31, 2014 (“fiscal 2014”).

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, 2013 (“fiscal 2013”), which was filed with the Securities and Exchange Commission (“SEC”) on June 14, 2013. 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.

Derivatives

Offsetting of Derivatives

The accounting guidance permits the net presentation on the Consolidated Balance Sheet of derivative receivables and derivative payables with the same counterparty and the related cash collateral when a legally enforceable master netting agreement exists. When we meet this condition, we elect to present such balances on a net basis. We use master netting agreements to mitigate counterparty credit risk in derivative transactions. A master netting agreement is a contract with a counterparty that permits multiple transactions governed by that contract to be cancelled and settled with a single net balance paid to either party in the event of default or other termination event outside the normal course of business, such as a ratings downgrade of either party to the contract.

Our reciprocal collateral agreements typically require the transfer of cash collateral to the party in a net asset position across all transactions governed by the master netting agreement. Upon default, the collateral agreement grants the party in a net asset position the right to set-off amounts receivable against any posted collateral.

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Interim Financial Data (Continued)

New Accounting Guidance

In July 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance which requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The accounting guidance is effective for us on April 1, 2014. We are currently evaluating the impact of this guidance on our consolidated financial statements.

In July 2013, the FASB issued new guidance which permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a benchmark interest rate for hedge accounting purposes. The new guidance also removes the restriction on using different benchmark rates for similar hedges. The accounting guidance is effective for us on July 17, 2013 and applies prospectively for qualifying new or redesignated hedging relationships. The adoption of this guidance will not have a material impact on our consolidated financial statements.

In February 2013, the FASB issued new guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for certain obligations addressed within existing guidance in U.S. GAAP. Specifically, the new guidance requires an entity to measure these obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. Additionally, the guidance requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations within the footnotes to its financial statements. Currently no such recognition, measurement, and disclosure requirement exists under U.S. GAAP. The accounting guidance is effective for us on April 1, 2014. We are currently evaluating the impact of this guidance on our consolidated financial statements.

Recently Adopted Accounting Guidance

In July 2013, we adopted new FASB accounting guidance which permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a benchmark interest rate for hedge accounting purposes. The new guidance also removes the restriction on using different benchmark rates for similar hedges. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In April 2013,, we adopted new FASB accounting guidance that requires disclosures about offsetting assets and liabilities for derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. 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. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In April 2013,, we adopted new FASB accounting guidance that requires us to disclose significant amounts reclassified out of each component of accumulated other comprehensive income and the affected income statement line item, only if the item reclassified is required to be reclassified to net income in its entirety. The adoption of this guidance did not have a material impact on our consolidated financial statements.

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 ~~June~~September 30, 2013 and March 31, 2013, 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.

Derivative assets were reduced by a counterparty credit valuation adjustment of $1 million as of ~~June~~September 30, 2013 and March 31, 2013. Derivative liabilities were reduced by a non-performance credit valuation adjustment of less than $1 million as of ~~June~~September 30, 2013 and March 31, 2013.


As of June 30, 2013
As of September 30, 2013														As of September 30, 2013
					Fair value measurements on a recurring basis													Fair value measurements on a recurring basis
										Counterparty													Counterparty
										netting &		Fair											netting &		Fair
(Dollars in millions)	(Dollars in millions)			Level 1		Level 2		Level 3		collateral		value		(Dollars in millions)			Level 1		Level 2		Level 3		collateral		value
Cash equivalents:	Cash equivalents:													Cash equivalents:
	Money market instruments			$	344	$	443	$	-	$	-	$	787	Money market instruments			$	2,152	$	443	$	-	$	-	$	2,595
	Certificates of deposit				-		1,125		-		-		1,125	Certificates of deposit				-		1,270		-		-		1,270
	Commercial paper				-		328		-		-		328	Commercial paper				-		3		-		-		3
	Cash equivalents total				344		1,896		-		-		2,240	Cash equivalents total				2,152		1,716		-		-		3,868
Available-for-sale securities:	Available-for-sale securities:													Available-for-sale securities:
	Debt instruments:													Debt instruments:
		U.S. government and agency obligations			21		57		-		-		78		U.S. government and agency obligations			46		57		2		-		105
		Municipal debt securities			-		15		-		-		15		Municipal debt securities			-		14		-		-		14
		Certificates of deposit			-		1,837		-		-		1,837		Certificates of deposit			-		1,412		-		-		1,412
		Commercial paper			-		355		-		-		355		Commercial paper			-		202		-		-		202
		Foreign government debt securities			-		3		-		-		3		Foreign government debt securities			-		3		-		-		3
		Corporate debt securities			-		145		4		-		149		Corporate debt securities			-		135		2		-		137
		Mortgage-backed securities:													Mortgage-backed securities:
			U.S. government agency		-		79		-		-		79			U.S. government agency		-		74		-		-		74
			Non-agency residential		-		-		5		-		5			Non-agency residential		-		-		5		-		5
			Non-agency commercial		-		-		48		-		48			Non-agency commercial		-		-		49		-		49
		Asset-backed securities			-		-		19		-		19		Asset-backed securities			-		-		19		-		19
	Equity instruments:													Equity instruments:
		Fixed income mutual funds:													Fixed income mutual funds:
			Short-term sector fund		-		43		-		-		43			Short-term sector fund		-		43		-		-		43
			U.S. government sector fund		-		319		-		-		319			U.S. government sector fund		-		321		-		-		321
			Municipal sector fund		-		21		-		-		21			Municipal sector fund		-		21		-		-		21
			Investment grade corporate sector fund		-		300		-		-		300			Investment grade corporate sector fund		-		305		-		-		305
			High-yield sector fund		-		41		-		-		41			High-yield sector fund		-		42		-		-		42
			Real return sector fund		-		270		-		-		270			Real return sector fund		-		273		-		-		273
			Mortgage sector fund		-		599		-		-		599			Mortgage sector fund		-		559		-		-		559
			Asset-backed securities sector fund		-		48		-		-		48			Asset-backed securities sector fund		-		48		-		-		48
			Emerging market sector fund		-		63		-		-		63			Emerging market sector fund		-		64		-		-		64
			International sector fund		-		170		-		-		170			International sector fund		-		169		-		-		169
		Equity mutual fund			495		-		-		-		495		Equity mutual fund			499		-		-		-		499
	Available-for-sale securities total				516		4,365		76		-		4,957	Available-for-sale securities total				545		3,742		77		-		4,364
	Derivative assets:													Derivative assets:
		Foreign currency swaps			-		709		36		-		745		Foreign currency swaps			-		887		64		-		951
		Interest rate swaps			-		442		11		-		453		Interest rate swaps			-		393		13		-		406
		Counterparty netting and collateral			-		-		-		(1,151)		(1,151)		Counterparty netting and collateral			-		-		-		(1,295)		(1,295)
	Derivative assets total				-		1,151		47		(1,151)		47	Derivative assets total				-		1,280		77		(1,295)		62
Assets at fair value	Assets at fair value				860		7,412		123		(1,151)		7,244	Assets at fair value				2,697		6,738		154		(1,295)		8,294
	Derivative liabilities:													Derivative liabilities:
		Foreign currency swaps			-		(286)		(13)		-		(299)		Foreign currency swaps			-		(150)		(14)		-		(164)
		Interest rate swaps			-		(702)		-		-		(702)		Interest rate swaps			-		(688)		-		-		(688)
		Counterparty netting and collateral			-		-		-		943		943		Counterparty netting and collateral			-		-		-		851		851
	Derivative liabilities total				-		(988)		(13)		943		(58)	Derivative liabilities total				-		(838)		(14)		851		(1)
	Embedded derivative liabilities				-		-		(7)		-		(7)	Embedded derivative liabilities				-		-		(9)		-		(9)
Liabilities at fair value	Liabilities at fair value				-		(988)		(20)		943		(65)	Liabilities at fair value				-		(838)		(23)		851		(10)
Net assets at fair value	Net assets at fair value			$	860	$	6,424	$	103	$	(208)	$	7,179	Net assets at fair value			$	2,697	$	5,900	$	131	$	(444)	$	8,284

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

As of March 31, 2013
					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			$	900	$	608	$	-	$	-	$	1,508
	Certificates of deposit				-		1,945		-		-		1,945
	Commercial paper				-		798		-		-		798
	Cash equivalents total				900		3,351		-		-		4,251
Available-for-sale securities:
	Debt instruments:
		U.S. government and agency obligations			42		62		-		-		104
		Municipal debt securities			-		16		-		-		16
		Certificates of deposit			-		2,041		-		-		2,041
		Commercial paper			-		495		-		-		495
		Foreign government debt securities			-		3		-		-		3
		Corporate debt securities			-		124		4		-		128
		Mortgage-backed securities:
			U.S. government agency		-		87		-		-		87
			Non-agency residential		-		-		5		-		5
			Non-agency commercial		-		-		51		-		51
		Asset-backed securities			-		-		13		-		13
	Equity instruments:
		Fixed income mutual funds:
			Short-term sector fund		-		43		-		-		43
			U.S. government sector fund		-		312		-		-		312
			Municipal sector fund		-		22		-		-		22
			Investment grade corporate sector fund		-		327		-		-		327
			High-yield sector fund		-		42		-		-		42
			Real return sector fund		-		293		-		-		293
			Mortgage sector fund		-		648		-		-		648
			Asset-backed securities sector fund		-		47		-		-		47
			Emerging market sector fund		-		66		-		-		66
			International sector fund		-		170		-		-		170
		Equity mutual fund			484		-		-		-		484
	Available-for-sale securities total				526		4,798		73		-		5,397
	Derivative assets:
		Foreign currency swaps			-		1,076		63		-		1,139
		Interest rate swaps			-		568		12		-		580
		Counterparty netting and collateral			-		-		-		(1,661)		(1,661)
	Derivative assets total				-		1,644		75		(1,661)		58
Assets at fair value					1,426		9,793		148		(1,661)		9,706
	Derivative liabilities:
		Foreign currency swaps			-		(123)		(8)		-		(131)
		Interest rate swaps			-		(766)		-		-		(766)
		Counterparty netting and collateral			-		-		-		892		892
	Derivative liabilities total				-		(889)		(8)		892		(5)
	Embedded derivative liabilities				-		-		(12)		-		(12)
Liabilities at fair value					-		(889)		(20)		892		(17)
Net assets at fair value				$	1,426	$	8,904	$	128	$	(769)	$	9,689

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. ~~There were no transfers between levels during~~During the three and six months ended ~~June~~September 30, ~~2013.~~2013, there was a $2 million transfer from the Corporate debt securities asset class to the U.S. government and agency obligations asset class within the Level 3 debt instruments due to a reclassification of an existing debt instrument. During the three months ended ~~June~~September 30, 2012, there were no transfers between levels. During the six months ended September 30, 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 ~~three~~six months ended ~~June~~September 30, 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.

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 six months ended ~~June~~September 30, 2013 and 2012:

Three Months Ended ~~June~~September 30, 2013

			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)																							Fair value measurements using significant unobservable inputs (Level 3)
																						Total net																						Total net
																						assets																						assets
			Available-for-sale securities											Derivative instruments, net								(liabilities)				Available-for-sale securities										Derivative instruments, net								(liabilities)
					Non-agency			Non-agency
					residential			commercial				Total								Total						U.S.								Total								Total
			Corporate		mortgage-			mortgage-		Asset-		available-		Interest		Foreign				derivative						government		Corporate		Mortgage-		Asset-		available-		Interest		Foreign				derivative
			debt		backed			backed		backed		for-sale		rate		currency		Embedded		assets						and agency		debt		backed		backed		for-sale		rate		currency		Embedded		assets
(Dollars in millions)	(Dollars in millions)		securities		securities			securities		securities		securities		swaps		swaps		derivatives		(liabilities)				(Dollars in millions)		obligations		securities		securities		securities		securities		swaps		swaps		derivatives		(liabilities)
Fair value, April 1, 2013			$	4		$	5	$	51	$	13	$	73	$	12	$	55	$	(12)	$	55	$	128
Total (losses) gains
Fair value, July 1, 2013																								Fair value, July 1, 2013		$	-	$	4	$	53	$	19	$	76	$	11	$	23	$	(7)	$	27	$	103
Total gains (losses)																								Total gains (losses)
		Included in earnings		-			-		-		-		-		(1)		(22)		5		(18)		(18)		Included in earnings		-		-		-		-		-		2		28		(2)		28		28
		Included in other comprehensive income		-			-		(3)		-		(3)		-		-		-		-		(3)		Included in other comprehensive income		-		-		-		-		-		-		-		-		-		-
Purchases, issuances, sales, and	Purchases, issuances, sales, and																							Purchases, issuances, sales, and
	settlements																							settlements
		Purchases		-			-		-		7		7		-		-		-		-		7		Purchases		-		-		2		-		2		-		-		-		-		2
		Issuances		-			-		-		-		-		-		-		-		-		-		Issuances		-		-		-		-		-		-		-		-		-		-
		Sales		-			-		-		-		-		-		-		-		-		-		Sales		-		-		-		-		-		-		-		-		-		-
		Settlements		-			-		-		(1)		(1)		-		(10)		-		(10)		(11)		Settlements		-		-		(1)		-		(1)		-		(1)		-		(1)		(2)
Transfers in to Level 3	Transfers in to Level 3			-			-		-		-		-		-		-		-		-		-	Transfers in to Level 3			2		-		-		-		2		-		-		-		-		2
Transfers out of Level 3	Transfers out of Level 3			-			-		-		-		-		-		-		-		-		-	Transfers out of Level 3			-		(2)		-		-		(2)		-		-		-		-		(2)
Fair value, June 30, 2013			$	4		$	5	$	48	$	19	$	76	$	11	$	23	$	(7)	$	27	$	103
The amount of total losses
Fair value, September 30, 2013																								Fair value, September 30, 2013		$	2	$	2	$	54	$	19	$	77	$	13	$	50	$	(9)	$	54	$	131
The amount of total gains/(losses)																								The amount of total gains/(losses)
for the period included in	for the period included in																							for the period included in
earnings attributable to the	earnings attributable to the																							earnings attributable to the
change in unrealized gains or	change in unrealized gains or																							change in unrealized gains or
losses related to assets still held	losses related to assets still held																							losses related to assets still held
at the reporting date	at the reporting date													$	(1)	$	(19)	$	(1)	$	(21)	$	(21)	at the reporting date												$	2	$	28	$	(2)	$	28	$	28

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Three Months Ended June 30, 2012
Three Months Ended September 30, 2012																								Three Months Ended September 30, 2012

			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)																							Fair value measurements using significant unobservable inputs (Level 3)
																						Total net																				Total net
																						assets																				assets
			Available-for-sale securities											Derivative instruments, net								(liabilities)				Available-for-sale securities								Derivative instruments, net								(liabilities)
					Non-agency			Non-agency
					residential			commercial				Total								Total												Total								Total
			Corporate		mortgage-			mortgage-		Asset-		available-		Interest		Foreign				derivative						Corporate		Mortgage-		Asset-		available-		Interest		Foreign				derivative
			debt		backed			backed		backed		for-sale		rate		currency		Embedded		assets						debt		backed				for-sale		rate		currency		Embedded		assets
(Dollars in millions)	(Dollars in millions)		securities		securities			securities		securities		securities		swaps		swaps		derivatives		(liabilities)				(Dollars in millions)		securities						securities		swaps		swaps		derivatives		(liabilities)
Fair value, April 1, 2012			$	1		$	4	$	15	$	1	$	21	$	13	$	69	$	(24)	$	58	$	79
Total losses
Fair value, July 1, 2012																								Fair value, July 1, 2012		$	4	$	32	$	12	$	48	$	11	$	59	$	(27)	$	43	$	91
Total gains																								Total gains
		Included in earnings		-			-		-		-		-		(1)		(5)		(3)		(9)		(9)		Included in earnings		-		-		-		-		2		22		4		28		28
		Included in other comprehensive income		-			-		-		-		-		-		-		-		-		-		Included in other comprehensive income		-		1		-		1		-		-		-		-		1
Purchases, issuances, sales, and settlements	Purchases, issuances, sales, and settlements																							Purchases, issuances, sales, and settlements
		Purchases		-			-		1		-		1		-		-		-		-		1		Purchases		-		2		1		3		-		-		-		-		3
		Issuances		-			-		-		-		-		-		-		-		-		-		Issuances		-		-		-		-		-		-		-		-		-
		Sales		-			-		(1)		-		(1)		-		-		-		-		(1)		Sales		-		(2)		(1)		(3)		-		-		-		-		(3)
		Settlements		-			-		-		-		-		(1)		(5)		-		(6)		(6)		Settlements		-		(2)		(3)		(5)		(1)		(7)		-		(8)		(13)
Transfers in to Level 3	Transfers in to Level 3			3			3		10		11		27		-		-		-		-		27	Transfers in to Level 3			-		-		-		-		-		-		-		-		-
Transfers out of Level 3	Transfers out of Level 3			-			-		-		-		-		-		-		-		-		-	Transfers out of Level 3			-		-		-		-		-		-		-		-		-
Fair value, June 30, 2012			$	4		$	7	$	25	$	12	$	48	$	11	$	59	$	(27)	$	43	$	91
The amount of total losses
Fair value, September 30, 2012																								Fair value, September 30, 2012		$	4	$	31	$	9	$	44	$	12	$	74	$	(23)	$	63	$	107
The amount of total gains/(losses)																								The amount of total gains/(losses)
for the period included in	for the period included in																							for the period included in
earnings attributable to the	earnings attributable to the																							earnings attributable to the
change in unrealized gains or	change in unrealized gains or																							change in unrealized gains or
losses related to assets still held	losses related to assets still held																							losses related to assets still held
at the reporting date	at the reporting date													$	(1)	$	(5)	$	(3)	$	(9)	$	(9)	at the reporting date										$	2	$	22	$	(2)	$	22	$	22

Six Months Ended September 30, 2013

		Fair value measurements using significant unobservable inputs (Level 3)
																				Total net
																				assets
		Available-for-sale securities										Derivative instruments, net								(liabilities)

		U.S.								Total								Total
		government		Corporate		Mortgage-		Asset-		available-		Interest		Foreign				derivative
		and agency		debt		backed		backed		for-sale		rate		currency		Embedded		assets
(Dollars in millions)		obligations		securities		securities		securities		securities		swaps		swaps		derivatives		(liabilities)
Fair value, April 1, 2013		$	-	$	4	$	56	$	13	$	73	$	12	$	55	$	(12)	$	55	$	128
Total gains
	Included in earnings		-		-		-		-		-		2		7		3		12		12
	Included in other comprehensive income		-		-		(3)		-		(3)		-		-		-		-		(3)
Purchases, issuances, sales, and settlements
	Purchases		-		-		2		7		9		-		-		-		-		9
	Issuances		-		-		-		-		-		-		-		-		-		-
	Sales		-		-		-		-		-		-		-		-		-		-
	Settlements		-		-		(1)		(1)		(2)		(1)		(12)		-		(13)		(15)
Transfers in to Level 3			2		-		-		-		2		-		-		-		-		2
Transfers out of Level 3			-		(2)		-		-		(2)		-		-		-		-		(2)
Fair value, September 30, 2013		$	2	$	2	$	54	$	19	$	77	$	13	$	50	$	(9)	$	54	$	131
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												$	2	$	9	$	(3)	$	8	$	8

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Six Months Ended September 30, 2012

		Fair value measurements using significant unobservable inputs (Level 3)
																		Total net
																		assets
		Available-for-sale securities								Derivative instruments, net								(liabilities)

								Total								Total
		Corporate		Mortgage-		Asset-		available-		Interest		Foreign				derivative
		debt		backed		backed		for-sale		rate		currency		Embedded		assets
(Dollars in millions)		securities		securities		securities		securities		swaps		swaps		derivatives		(liabilities)
Fair value, April 1, 2012		$	1	$	19	$	1	$	21	$	13	$	69	$	(24)	$	58	$	79
Total gains
	Included in earnings		-		-		-		-		1		17		1		19		19
	Included in other comprehensive income		-		1		-		1		-		-		-		-		1
Purchases, issuances, sales, and settlements
	Purchases		-		3		1		4		-		-		-		-		4
	Issuances		-		-		-		-		-		-		-		-		-
	Sales		-		(3)		(1)		(4)		-		-		-		-		(4)
	Settlements		-		(2)		(3)		(5)		(2)		(12)		-		(14)		(19)
Transfers into Level 3			3		13		11		27		-		-		-		-		27
Transfers out of Level 3			-		-		-		-		-		-		-		-		-
Fair value, September 30, 2012		$	4	$	31	$	9	$	44	$	12	$	74	$	(23)	$	63	$	107
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	$	16	$	(4)	$	13	$	13

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 ~~$205~~$187 million and $208 million were recorded as of ~~June~~September 30, 2013 and March 31, 2013, 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 ~~losses~~gains on net finance receivables within the dealer products portfolio segment of $2 million for the second quarter of fiscal 2014 and $30 million for the same period in fiscal 2013. The net gains offset losses incurred during the first three months of fiscal 2014 and fiscal 2013. As a result, there were no net gains or losses on net finance receivables within the dealer products portfolio segment for the six months ended ~~June~~September 30, 2013 and ~~June~~September 30, ~~2012, respectively.~~2012.

1213

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 2 – Fair Value Measurements (Continued)

Level 3 Fair Value Measurements at ~~June~~September 30, 2013 and March 31, 2013

At ~~June~~September 30, 2013, our Level 3 financial instruments subject to recurring fair value measurement consisted of available-for-sale securities of ~~$76~~$77 million, derivative assets of ~~$47~~$77 million and derivative liabilities of ~~$20~~$23 million. At March 31, 2013, our Level 3 financial instruments subject to recurring fair value measurement consisted of available-for-sale securities of $73 million, derivative assets of $75 million and derivative liabilities of $20 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 six months ended ~~June~~September 30, 2013 and as of and for the year ended March 31, 2013.

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												Fair value measurement hierarchy
			Carrying								Total Fair				Carrying								Total Fair
(Dollars in millions)	(Dollars in millions)		value		Level 1		Level 2		Level 3		Value		(Dollars in millions)		value		Level 1		Level 2		Level 3		Value
As of June 30, 2013
As of September 30, 2013													As of September 30, 2013

Financial assets	Financial assets												Financial assets
	Finance receivables, net												Finance receivables, net
		Retail loan	$	47,860	$	-	$	-	$	48,526	$	48,526		Retail loan	$	49,064	$	-	$	-	$	49,595	$	49,595
		Commercial		140		-		-		130		130		Commercial		152		-		-		141		141
		Wholesale		9,349		-		-		9,388		9,388		Wholesale		8,466		-		-		8,507		8,507
		Real estate		4,517		-		-		4,438		4,438		Real estate		4,513		-		-		4,435		4,435
		Working capital		1,726		-		-		1,713		1,713		Working capital		1,690		-		-		1,684		1,684

Financial liabilities	Financial liabilities												Financial liabilities
	Commercial paper		$	23,876	$	-	$	23,876	$	-	$	23,876	Commercial paper		$	27,517	$	-	$	27,517	$	-	$	27,517
	Unsecured notes and loans payable			47,115		-		47,278		796		48,074	Unsecured notes and loans payable			46,894		-		47,157		806		47,963
	Secured notes and loans payable			7,628		-		-		7,627		7,627	Secured notes and loans payable			7,118		-		-		7,120		7,120

1314

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 millions)			value		Level 1		Level 2		Level 3		Value
As of March 31, 2013

Financial assets
	Finance receivables, net
		Retail loan	$	47,312	$	-	$	-	$	48,313	$	48,313
		Commercial		134		-		-		126		126
		Wholesale		8,620		-		-		8,644		8,644
		Real estate		4,531		-		-		4,480		4,480
		Working capital		1,695		-		-		1,708		1,708

Financial liabilities
	Commercial paper		$	24,590	$	-	$	24,590	$	-	$	24,590
	Unsecured notes and loans payable			47,233		-		47,901		874		48,775
	Secured notes and loans payable			7,009		-		-		7,016		7,016

The carrying value of each class of finance receivables is presented ~~net of~~including accrued interest and deferred fees and costs, net of deferred income and the allowance for credit losses; the amount excludes related party transactions of ~~$88~~$84 million and $40 million at ~~June~~September 30, 2013 and March 31, 2013 and direct finance leases of ~~$231~~$243 million and $235 million at ~~June~~September 30, 2013 and March 31, 2013, 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.

1415

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:

				June 30, 2013											September 30, 2013
				Amortized		Unrealized		Unrealized		Fair					Amortized		Unrealized		Unrealized		Fair
(Dollars in millions)	(Dollars in millions)			cost		gains		losses		value		(Dollars in millions)			cost		gains		losses		value
Available-for-sale securities:	Available-for-sale securities:											Available-for-sale securities:
	Debt instruments:											Debt instruments:
		U.S. government and agency obligations		$	78	$	1	$	(1)	$	78		U.S. government and agency obligations		$	104	$	2	$	(1)	$	105
		Municipal debt securities			14		1		-		15		Municipal debt securities			14		-		-		14
		Certificates of deposit			1,836		1		-		1,837		Certificates of deposit			1,411		1		-		1,412
		Commercial paper			355		-		-		355		Commercial paper			202		-		-		202
		Foreign government debt securities			3		-		-		3		Foreign government debt securities			3		-		-		3
		Corporate debt securities			149		4		(4)		149		Corporate debt securities			136		4		(3)		137
		Mortgage-backed securities:											Mortgage-backed securities:
			U.S. government agency		78		2		(1)		79			U.S. government agency		73		2		(1)		74
			Non-agency residential		4		1		-		5			Non-agency residential		4		1		-		5
			Non-agency commercial		49		1		(2)		48			Non-agency commercial		50		1		(2)		49
		Asset-backed securities			19		-		-		19		Asset-backed securities			19		-		-		19
	Equity instruments:											Equity instruments:
		Fixed income mutual funds:											Fixed income mutual funds:
			Short-term sector fund		40		3		-		43			Short-term sector fund		40		3		-		43
			U.S. government sector fund		324		-		(5)		319			U.S. government sector fund		320		1		-		321
			Municipal sector fund		20		1		-		21			Municipal sector fund		20		1		-		21
			Investment grade corporate sector fund		259		41		-		300			Investment grade corporate sector fund		262		43		-		305
			High-yield sector fund		35		6		-		41			High-yield sector fund		36		7		(1)		42
			Real return sector fund		286		-		(16)		270			Real return sector fund		273		-		-		273
			Mortgage sector fund		599		-		-		599			Mortgage sector fund		558		1		-		559
			Asset-backed securities sector fund		39		9		-		48			Asset-backed securities sector fund		39		9		-		48
			Emerging market sector fund		64		1		(2)		63			Emerging market sector fund		63		1		-		64
			International sector fund		166		4		-		170			International sector fund		166		3		-		169
		Equity mutual fund			259		236		-		495		Equity mutual fund			250		249		-		499
Total investments in marketable securities	Total investments in marketable securities			$	4,676	$	312	$	(31)	$	4,957	Total investments in marketable securities			$	4,043	$	329	$	(8)	$	4,364

1516

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 – Investments in Marketable Securities (Continued)

					March 31, 2013
				Amortized		Unrealized		Unrealized		Fair
(Dollars in millions)				cost		gains		losses		value
Available-for-sale securities:
	Debt instruments:
		U.S. government and agency obligations		$	101	$	3	$	-	$	104
		Municipal debt securities			14		2		-		16
		Certificates of deposit			2,040		1		-		2,041
		Commercial paper			495		-		-		495
		Foreign government debt securities			3		-		-		3
		Corporate debt securities			122		6		-		128
		Mortgage-backed securities:
			U.S. government agency		83		4		-		87
			Non-agency residential		4		1		-		5
			Non-agency commercial		50		1		-		51
		Asset-backed securities			13		-		-		13
	Equity instruments:
		Fixed income mutual funds:
			Short-term sector fund		40		3		-		43
			U.S. government sector fund		296		16		-		312
			Municipal sector fund		19		3		-		22
			Investment grade corporate sector fund		273		54		-		327
			High-yield sector fund		34		8		-		42
			Real return sector fund		284		9		-		293
			Mortgage sector fund		663		-		(15)		648
			Asset-backed securities sector fund		38		9		-		47
			Emerging market sector fund		63		3		-		66
			International sector fund		163		7		-		170
		Equity mutual fund			259		225		-		484
Total investments in marketable securities				$	5,057	$	355	$	(15)	$	5,397

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 ~~$1.9~~$1.8 billion and $2.0 billion at ~~June~~September 30, 2013 and March 31, 2013, respectively. For each fund, we may redeem shares solely in cash up to the lesser of $250 thousand or 1 percent of the individual fund’s net assets during any 90 day period. Although the fund manager will normally redeem all shares for cash, in unusual circumstances, it reserves the right to pay any redemption exceeding this amount in whole or in part by a distribution in kind of securities held by the respective fund in lieu of cash.

1617

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 – Investments in Marketable Securities (Continued)

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											Less than 12 months as of
					June 30, 2013				March 31, 2013							September 30, 2013				March 31, 2013
					Fair		Unrealized		Fair		Unrealized						Fair		Unrealized		Fair		Unrealized
(Dollars in millions)	(Dollars in millions)				value		losses		value		losses		(Dollars in millions)				value		losses		value		losses
Available-for-sale securities:	Available-for-sale securities:												Available-for-sale securities:
	Debt instruments:												Debt instruments:
			U.S. government and agency											U.S. government and agency
				obligations	$	35	$	(1)	$	-	$	-			obligations	$	28	$	(1)	$	-	$	-
			Corporate debt securities			93		(4)		-		-		Corporate debt securities			51		(3)		-		-
			Mortgage backed securities:											Mortgage backed securities:
				U.S. government agency		38		(1)		-		-			U.S. government agency		29		(1)		-		-
				Non-agency commercial		29		(2)							Non-agency commercial		27		(2)		-		-
	Equity instruments:												Equity instruments:
		Fixed income mutual funds:												Fixed income mutual funds:
				U.S. government sector fund		319		(5)		-		-			High-yield sector fund		16		(1)		-		-
				Real return sector fund		270		(16)		-		-			Mortgage sector fund		-		-		532		(12)
				Mortgage sector fund		-		-		532		(12)	Total investments in marketable
				Emerging market sector fund		52		(2)		-		-		securities		$	151	$	(8)	$	532	$	(12)
	Total investments in marketable
			securities		$	836	$	(31)	$	532	$	(12)

At ~~June~~September 30, 2013, ~~there were no~~the unrealized losses of investments that had been in a ~~continuous unrealized~~ loss position for 12 consecutive months or ~~more.~~more were not significant. At March 31, 2013, 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 $3 million and $116 million, respectively.

Realized Gains and Losses on Securities

The following table represents realized gains and losses by transaction type for the three and six months ended ~~June~~September 30, 2013 and ~~June 30,~~ 2012 (dollars in millions):

Three Months Ended
June 30,
Available-for-sale securities: 2013 2012
Realized gains on sales $ 5 $ 4
Realized losses on sales $ (1) $ (1)
Impairment write-downs $ (30) $ -

			Three Months Ended September 30,				Six Months Ended September 30,
(Dollars in millions)		2013		2012		2013		2012
Available-for-sale securities:
	Realized gains on sales	$	11	$	5	$	16	$	9
	Realized (losses) on sales	$	(2)	$	(1)	$	(3)	$	(2)
	Impairment write-downs	$	(23)	$	-	$	(53)	$	-

~~The~~Substantially all of the other-than-temporary impairment write-downs of ~~$30~~$23 million and $53 million during the three and six months ended ~~June~~September 30, 2013, ~~was~~respectively, were related to ~~our mortgage sector fund investment.~~fixed income mutual funds. There were no available-for-sale debt or equity securities deemed to be other-than-temporarily impaired for the three and six months ended ~~June~~September 30, 2012.

1718

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 – Investments in Marketable Securities (Continued)

Contractual Maturities and Yields

The fair value and contractual maturities of investments in marketable securities at ~~June~~September 30, 2013 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 $ 8 0.19 % $ 42 1.50 % $ 23 1.66 % $ 5 3.16 % $ 78 1.52 %
Municipal debt securities 2 2.39 - - 1 5.57 12 5.69 15 5.17
Certificates of deposit 1,837 0.44 - - - - - - 1,837 0.44
Commercial paper 355 0.19 - - - - - - 355 0.19
Foreign government debt
securities - - 3 2.93 - - - - 3 2.93
Corporate debt
securities 6 3.48 36 4.86 68 3.53 39 3.23 149 3.79
Mortgage-backed securities:
U.S. government agency - - - - 4 3.92 75 2.99 79 3.05
Non-agency residential - - - - - - 5 10.84 5 10.84
Non-agency commercial - - 3 3.71 2 1.18 43 3.35 48 3.30
Asset-backed securities - - - - 9 1.31 10 2.57 19 1.89
Debt instruments total 2,208 0.40 84 3.08 107 2.96 189 3.47 2,588 0.82

Equity instruments:
Fixed income mutual funds 1,874 3.80
Equity mutual fund 495 4.09
Equity instruments total - - - - 2,369 3.86
Total fair value $ 2,208 0.40 % $ 84 3.08 % $ 107 2.96 % $ 189 3.47 % $ 4,957 2.28 %
Total amortized cost $ 2,206 $ 83 $ 109 $ 187 $ 4,676

		Due in 1 Year or				Due after 1 Year				Due after 5 Years				Due after
		less				through 5 years				through 10 years				10 years					Total
(Dollars in millions)		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Available-for-Sale Securities:
Debt instruments:
	U.S. government and
	agency obligations	$	7	0.20	%	$	71	1.55	%	$	26	1.56	%	$	1	2.80	%	$	105	1.43	%
	Municipal debt securities		2	2.39			-	-			1	5.57			11	5.69			14	5.18
	Certificates of deposit		1,412	0.43			-	-			-	-			-	-			1,412	0.43
	Commercial paper		202	0.27			-	-			-	-			-	-			202	0.27
	Foreign government debt
	securities		3	2.93			-	-			-	-			-	-			3	2.93
	Corporate debt
	securities		8	4.05			40	4.72			62	3.52			27	3.66			137	3.95
	Mortgage-backed securities:
	U.S. government agency		-	-			-	-			4	3.94			70	3.01			74	3.07
	Non-agency residential		-	-			-	-			-	-			5	11.23			5	11.23
	Non-agency commercial		-	-			4	1.70			1	4.24			44	3.41			49	3.31
	Asset-backed securities		-	-			5	0.74			4	1.83			10	2.68			19	1.97
Debt instruments total			1,634	0.43			120	2.61			98	3.01			168	3.61			2,020	0.95

Equity instruments:
	Fixed income mutual funds																		1,845	3.53
	Equity mutual fund																		499	4.10
Equity instruments total			-				-				-				-				2,344	3.65
Total fair value		$	1,634	0.43	%	$	120	2.61	%	$	98	3.01	%	$	168	3.61	%	$	4,364	2.40	%
Total amortized cost		$	1,633			$	117			$	100			$	166			$	4,043

Yields are based on the amortized cost balances of securities held at ~~June~~September 30, 2013. 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 ~~June~~September 30, 2013 and March 31, 2013.

1819

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)	(Dollars in millions)		June 30, 2013		March 31, 2013		(Dollars in millions)		September 30, 2013		March 31, 2013
Retail receivables	Retail receivables		$	40,001	$	40,508	Retail receivables		$	41,665	$	40,508
Pledged retail receivables	Pledged retail receivables			8,725		7,669	Pledged retail receivables			8,321		7,669
Dealer financing	Dealer financing			15,793		14,995	Dealer financing			14,857		14,995
				64,519		63,172				64,843		63,172

Deferred origination (fees) and costs, net	Deferred origination (fees) and costs, net			637		634	Deferred origination (fees) and costs, net			647		634
Deferred income	Deferred income			(821)		(794)	Deferred income			(882)		(794)
Allowance for credit losses	Allowance for credit losses						Allowance for credit losses
	Retail and pledged retail receivables			(312)		(338)	Retail and pledged retail receivables			(294)		(338)
	Dealer financing			(112)		(107)	Dealer financing			(102)		(107)
		Total allowance for credit losses		(424)		(445)		Total allowance for credit losses		(396)		(445)
Finance receivables, net	Finance receivables, net		$	63,911	$	62,567	Finance receivables, net		$	64,212	$	62,567

Finance receivables, net and retail receivables presented in the previous table includes direct finance leases, net of $243 million and $235 million at September 30, 2013 and March 31, 2013, 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.

1920

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 an increased likelihood that default may exist 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 ~~June~~September 30, 2013 and March 31, 2013:

		Retail Loan				Commercial									Retail Loan				Commercial
(Dollars in millions)	(Dollars in millions)	June 30, 2013		March 31, 2013		June 30, 2013		March 31, 2013						(Dollars in millions)	September 30, 2013		March 31, 2013		September 30, 2013		March 31, 2013

Aging of finance receivables:	Aging of finance receivables:													Aging of finance receivables:
	Current	$	47,712	$	47,236	$	372	$	362					Current	$	48,916	$	47,236	$	388	$	362
	30-59 days past due		492		454		6		6					30-59 days past due		526		454		6		6
	60-89 days past due		111		87		1		1					60-89 days past due		113		87		1		1
	90 days past due		32		31		-		-					90 days past due		36		31		-		-
Total	Total	$	48,347	$	47,808	$	379	$	369					Total	$	49,591	$	47,808	$	395	$	369

		Wholesale				Real Estate				Working Capital					Wholesale				Real Estate				Working Capital
(Dollars in millions)	(Dollars in millions)	June 30, 2013		March 31, 20131		June 30, 2013		March 31, 2013		June 30, 2013		March 31, 2013		(Dollars in millions)	September 30, 2013		March 31, 20131		September 30, 2013		March 31, 2013		September 30, 2013		March 31, 2013

Credit quality indicators:	Credit quality indicators:													Credit quality indicators:
	Performing	$	8,622	$	7,740	$	4,013	$	3,968	$	1,656	$	1,616	Performing	$	7,863	$	7,740	$	4,071	$	3,968	$	1,598	$	1,616
	Credit Watch		786		915		535		583		72		80	Credit Watch		659		915		485		583		90		80
	At Risk		39		33		28		28		27		28	At Risk		34		33		23		28		27		28
	Default		4		1		8		1		3		2	Default		1		1		-		1		6		2
Total	Total	$	9,451	$	8,689	$	4,584	$	4,580	$	1,758	$	1,726	Total	$	8,557	$	8,689	$	4,579	$	4,580	$	1,721	$	1,726

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

2021

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 June 30, 2013 and March 31, 2013:
The following table summarizes the information related to our impaired loans by class of finance receivables as of September 30, 2013 and March 31, 2013:														The following table summarizes the information related to our impaired loans by class of finance receivables as of September 30, 2013 and March 31, 2013:

		Impaired								Individually Evaluated					Impaired								Individually Evaluated
		Finance Receivables				Unpaid Principal Balance				Allowance					Finance Receivables				Unpaid Principal Balance				Allowance
		June 30,		March 31,		June 30,		March 31,		June 30,		March 31,			September 30,		March 31,		September 30,		March 31,		September 30,		March 31,
(Dollars in millions)		2013		2013		2013		2013		2013		2013			2013		2013		2013		2013		2013		2013

Impaired account balances individually evaluated for impairment with an allowance:	Impaired account balances individually evaluated for impairment with an allowance:													Impaired account balances individually evaluated for impairment with an allowance:

Wholesale		$	24	$	16	$	24	$	16	$	4	$	3		$	13	$	16	$	13	$	16	$	1	$	3
Real estate			38		33		38		33		7		7			34		33		34		33		9		7
Working capital			25		24		25		24		24		23			24		24		24		24		23		23
Total		$	87	$	73	$	87	$	73	$	35	$	33		$	71	$	73	$	71	$	73	$	33	$	33

Impaired account balances individually evaluated for impairment without an allowance:	Impaired account balances individually evaluated for impairment without an allowance:													Impaired account balances individually evaluated for impairment without an allowance:

Wholesale		$	55	$	66	$	55	$	66						$	52	$	66	$	52	$	66
Real estate			93		97		93		97							92		97		92		97
Working capital			5		5		5		5							5		5		5		5
Total		$	153	$	168	$	153	$	168						$	149	$	168	$	149	$	168

Impaired account balances aggregated and evaluated for impairment:	Impaired account balances aggregated and evaluated for impairment:													Impaired account balances aggregated and evaluated for impairment:

Retail loan		$	389	$	415	$	385	$	410						$	366	$	415	$	362	$	410
Commercial			1		1		1		1							1		1		1		1
Total		$	390	$	416	$	386	$	411						$	367	$	416	$	363	$	411

Total impaired account balances:	Total impaired account balances:													Total impaired account balances:

Retail loan		$	389	$	415	$	385	$	410						$	366	$	415	$	362	$	410
Commercial			1		1		1		1							1		1		1		1
Wholesale			79		82		79		82							65		82		65		82
Real estate			131		130		131		130							126		130		126		130
Working capital			30		29		30		29							29		29		29		29
Total		$	630	$	657	$	626	$	652						$	587	$	657	$	583	$	652

As of ~~June~~September 30, 2013 and March 31, 2013, the impaired finance receivables balance for accounts in the dealer products portfolio segment that were on nonaccrual status was ~~$79~~$66 million and $69 million, respectively and there were no charge-offs against the allowance for credit losses. Therefore, the impaired finance receivables balance is equal to the unpaid principal balance.

2122

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 six months ended ~~June~~September 30, 2013 and 2012:

			Average Impaired Finance Receivables				Interest Income Recognized				Average Impaired Finance Receivables								Interest Income Recognized
			Three Months Ended June 30,				Three Months Ended June 30,				Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended September 30,				Six Months Ended September 30,
(Dollars in millions)	(Dollars in millions)		2013		2012		2013		2012	(Dollars in millions)	2013		2012		2013		2012		2013		2012		2013		2012

Impaired account balances individually evaluated for impairment with an allowance:	Impaired account balances individually evaluated for impairment with an allowance:									Impaired account balances individually evaluated for impairment with an allowance:

Wholesale		$	20	$	23	$	-	$	-		$	18	$	30	$	17	$	22	$	-	$	-	$	-	$	-
Real estate			36		137		-		1			36		86		35		103		1		-		1		1
Working capital			24		31		1		-			24		30		24		23		-		1		1		1
Total		$	80		191		1	$	1		$	78	$	146	$	76	$	148	$	1	$	1	$	2	$	2

Impaired account balances individually evaluated for impairment without an allowance:	Impaired account balances individually evaluated for impairment without an allowance:									Impaired account balances individually evaluated for impairment without an allowance:

Wholesale		$	60	$	60	$	-	$	-		$	53	$	61	$	58	$	61	$	-	$	1	$	-	$	1
Real estate			96		-		1		-			93		50		94		33		1		2		2		2
Working capital			5		1		-		-			5		1		5		1		-		-		-		-
Total		$	161	$	61	$	1	$	-		$	151	$	112	$	157	$	95	$	1	$	3	$	2	$	3

Impaired account balances aggregated and evaluated for impairment:	Impaired account balances aggregated and evaluated for impairment:									Impaired account balances aggregated and evaluated for impairment:

Retail loan		$	402	$	489	$	8	$	10		$	378	$	473	$	390	$	483	$	7	$	9	$	15	$	19
Commercial			1		1		-		-			1		1		1		1		-		-		-		-
Total		$	403	$	490	$	8	$	10		$	379	$	474	$	391	$	484	$	7	$	9	$	15	$	19

Total impaired account balances:	Total impaired account balances:									Total impaired account balances:

Retail loan		$	402	$	489	$	8	$	10		$	378	$	473	$	390	$	483	$	7	$	9	$	15	$	19
Commercial			1		1		-		-			1		1		1		1		-		-		-		-
Wholesale			80		83		-		-			71		91		75		83		-		1		-		1
Real estate			132		137		1		1			129		136		129		136		2		2		3		3
Working capital			29		32		1		-			29		31		29		24		-		1		1		1
Total		$	644	$	742	$	10	$	11		$	608	$	732	$	624	$	727	$	9	$	13	$	19	$	24

Interest income recognized using a cash-basis method of accounting during the three and six months ended September 30, 2013 was not significant.

2223

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 six months ended ~~June~~September 30, 2013 and ~~June~~September 30, 2012 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 six months ended ~~June~~September 30, 2013 and ~~June 30,~~ 2012.

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 six months ended ~~June~~September 30, 2013 and ~~June 30,~~ 2012, 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 three and six months ended ~~June~~September 30, 2013 and ~~June 30,~~ 2012, and for which the modification occurred within twelve months of the payment default, were not significant for all classes of such receivables.

2324

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)	June 30, 2013		March 31, 2013		September 30, 2013		March 31, 2013
Investments in operating leases	$	26,789	$	25,957	$	28,082	$	25,957
Pledged investments in operating leases		524		630		411		630
		27,313		26,587		28,493		26,587
Deferred origination (fees) and costs, net		(121)		(125)		(131)		(125)
Deferred income		(667)		(609)		(750)		(609)
Accumulated depreciation		(5,262)		(5,387)		(5,117)		(5,387)
Allowance for credit losses		(77)		(82)		(71)		(82)
Investments in operating leases, net	$	21,186	$	20,384	$	22,424	$	20,384

2425

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					Three Months Ended				Six Months Ended
		June 30,					September 30,				September 30,
(Dollars in millions)	(Dollars in millions)		2013		2012	(Dollars in millions)	2013		2012		2013		2012
Allowance for credit losses at beginning of period	Allowance for credit losses at beginning of period	$	527	$	619	Allowance for credit losses at beginning of period	$	501	$	606	$	527	$	619
Provision for credit losses	Provision for credit losses		11		16	Provision for credit losses		28		3		39		19
Charge-offs, net of recoveries	Charge-offs, net of recoveries		(37)		(29)	Charge-offs, net of recoveries		(62)		(60)		(99)		(89)
Allowance for credit losses at end of period	Allowance for credit losses at end of period	$	501	$	606	Allowance for credit losses at end of period	$	467	$	549	$	467	$	549

Charge-offs are shown net of recoveries of ~~$24~~$21 million and ~~$23~~$45 million for the three and six months ended ~~June~~September 30, 2013, respectively, and ~~June~~recoveries of $18 million and $41 million for the three and six months ended September 30, 2012, respectively.

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 six months ended ~~June~~September 30, 2013 and 2012:

For the Three and Six Months Ended ~~June~~September 30, 2013


(Dollars in millions)	(Dollars in millions)	Retail Loan		Commercial		Dealer Products		Total		(Dollars in millions)	Retail Loan		Commercial		Dealer Products		Total

Allowance for Credit Losses for Finance Receivables:

Beginning balance, July 1, 2013										Beginning balance, July 1, 2013	$	309	$	3	$	112	$	424
Charge-offs												(67)		-		-		(67)
Recoveries												16		-		-		16
Provisions												32		1		(10)		23
Ending balance, September 30, 2013										Ending balance, September 30, 2013	$	290	$	4	$	102	$	396

Beginning balance, April 1, 2013	Beginning balance, April 1, 2013	$	333	$	5	$	107	$	445	Beginning balance, April 1, 2013	$	333	$	5	$	107	$	445
Charge-offs			(49)		(1)		-		(50)			(116)		(1)		-	$	(117)
Recoveries			19		-		-		19			35		-		-		35
Provisions			6		(1)		5		10			38		-		(5)		33
Ending balance, June 30, 2013		$	309	$	3	$	112	$	424
Ending balance, September 30, 2013										Ending balance, September 30, 2013	$	290	$	4	$	102	$	396

Ending balance: Individually evaluated for impairment	Ending balance: Individually evaluated for impairment	$	-	$	-	$	35	$	35	Ending balance: Individually evaluated for impairment	$	-	$	-	$	33	$	33
Ending balance: Collectively evaluated for impairment	Ending balance: Collectively evaluated for impairment	$	309	$	3	$	77	$	389	Ending balance: Collectively evaluated for impairment	$	290	$	4	$	69	$	363

Gross Finance Receivables:	Gross Finance Receivables:									Gross Finance Receivables:

Ending balance, June 30, 2013		$	48,347	$	379	$	15,793	$	64,519
Ending balance, September 30, 2013										Ending balance, September 30, 2013	$	49,591	$	395	$	14,857	$	64,843
Ending balance: Individually evaluated for impairment	Ending balance: Individually evaluated for impairment	$	-	$	-	$	240	$	240	Ending balance: Individually evaluated for impairment	$	-	$	-	$	220	$	220
Ending balance: Collectively evaluated for impairment	Ending balance: Collectively evaluated for impairment	$	48,347	$	379	$	15,553	$	64,279	Ending balance: Collectively evaluated for impairment	$	49,591	$	395	$	14,637	$	64,623

The ending balance of gross finance receivables collectively evaluated for impairment includes approximately ~~$389~~$366 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 ~~June~~September 30, 2013, as they are deemed to be ~~insignificant~~not significant 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.~~

~~TOYOTA MOTOR CREDIT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~Note 6 – Allowance for Credit Losses (Continued)~~

~~For the Three Months Ended June 30, 2012~~

(Dollars in millions) Retail Loan Commercial Dealer Products Total

Allowance for Credit Losses for Finance Receivables:

Beginning balance, April 1, 2012 $ 395 $ 10 $ 119 $ 524
Charge-offs (44) (1) - (45)
Recoveries 18 - - 18
Provisions (13) (3) 34 18
Ending balance, June 30, 2012 $ 356 $ 6 $ 153 $ 515

Ending balance: Individually evaluated for
     impairment
$ - $ - $ 75 $ 75
Ending balance: Collectively evaluated for
     impairment
$ 356 $ 6 $ 78 $ 440

Gross Finance Receivables:

Ending balance, June 30, 2012 $ 46,024 $ 360 $ 14,091 $ 60,475
Ending balance: Individually evaluated for
     impairment
$ - $ - $ 258 $ 258
Ending balance: Collectively evaluated for
     impairment
$ 46,024 $ 360 $ 13,833 $ 60,217

The ending balance of gross finance receivables collectively evaluated for impairment includes approximately $476 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 June 30, 2012, as they are deemed to be insignificant for individual evaluation and weevaluation. We have determined that the allowance for credit losses would not be materially different if the amounts had been individually evaluated for impairment.

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6 – Allowance for Credit Losses (Continued)

For the Three and Six Months Ended September 30, 2012

(Dollars in millions)	Retail Loan		Commercial		Dealer Products		Total

Allowance for Credit Losses for Finance Receivables:

Beginning balance, July 1, 2012	$	356	$	6	$	153	$	515
Charge-offs		(65)		-		-		(65)
Recoveries		15		-		-		15
Provisions		27		(1)		(31)		(5)
Ending balance, September 30, 2012	$	333	$	5	$	122	$	460

Beginning balance, April 1, 2012	$	395	$	10	$	119	$	524
Charge-offs		(109)		(1)		-		(110)
Recoveries		33		-		-		33
Provisions		14		(4)		3		13
Ending balance, September 30, 2012	$	333	$	5	$	122	$	460

Ending balance: Individually evaluated for
impairment	$	-	$	-	$	45	$	45
Ending balance: Collectively evaluated for
impairment	$	333	$	5	$	77	$	415

Gross Finance Receivables:

Ending balance, September 30, 2012	$	47,355	$	361	$	13,956	$	61,672
Ending balance: Individually evaluated for
impairment	$	-	$	-	$	258	$	258
Ending balance: Collectively evaluated for
impairment	$	47,355	$	361	$	13,698	$	61,414

The ending balance of gross finance receivables collectively evaluated for impairment includes approximately $471 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 September 30, 2012, as they are deemed to be not significant for individual evaluation. We have determined that the allowance for credit losses would not be materially different if the amounts had been individually evaluated for impairment.

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)	(Dollars in millions)	June 30, 2013			March 31, 2013			(Dollars in millions)	September 30, 2013			March 31, 2013
Aggregate balances 60 or more days past due	Aggregate balances 60 or more days past due							Aggregate balances 60 or more days past due
	Finance receivables		$	144		$	119	Finance receivables		$	150		$	119
	Operating leases			37			36	Operating leases			39			36
Total	Total		$	181		$	155	Total		$	189		$	155

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 ~~June~~September 30, 2013 and March 31, 2013:

(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		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 June 30, 2013
As of September 30, 2013															As of September 30, 2013

Retail loan	$	492	$	111	$	32	$	635	$	47,712	$	48,347	$	32	$	526	$	113	$	36	$	675	$	48,916	$	49,591	$	36
Commercial		6		1		-		7		372		379		-		6		1		-		7		388		395		-
Wholesale		-		-		-		-		9,451		9,451		-		-		-		-		-		8,557		8,557		-
Real estate		1		-		-		1		4,583		4,584		-		5		-		-		5		4,574		4,579		-
Working capital		-		-		-		-		1,758		1,758		-		-		-		-		-		1,721		1,721		-
Total	$	499	$	112	$	32	$	643	$	63,876	$	64,519	$	32	$	537	$	114	$	36	$	687	$	64,156	$	64,843	$	36

(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		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, 2013	As of March 31, 2013														As of March 31, 2013

Retail loan	$	454	$	87	$	31	$	572	$	47,236	$	47,808	$	31	$	454	$	87	$	31	$	572	$	47,236	$	47,808	$	31
Commercial		6		1		-		7		362		369		-		6		1		-		7		362		369		-
Wholesale		-		-		-		-		8,689		8,689		-		-		-		-		-		8,689		8,689		-
Real estate		-		-		-		-		4,580		4,580		-		-		-		-		-		4,580		4,580		-
Working capital		-		-		-		-		1,726		1,726		-		-		-		-		-		1,726		1,726		-
Total	$	460	$	88	$	31	$	579	$	62,593	$	63,172	$	31	$	460	$	88	$	31	$	579	$	62,593	$	63,172	$	31

2728

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 interest rate and foreign currency risks. We enter into derivative transactions with the intent to reduce long term fluctuations in cash flows and fair value adjustments of assets and liabilities caused by market movements. 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 (“ALCO”), 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 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 ALCO. 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 ~~June~~September 30, 2013, we have daily valuation and collateral exchange arrangements with all of our counterparties. Our collateral agreements with substantially all our counterparties include a zero threshold, full collateralization arrangement.

The aggregate fair value of derivative instruments that contain credit risk related contingent features that were in a net liability position at ~~June~~September 30, 2013 was ~~$58~~$1 million, excluding embedded derivatives and adjustments made for our own non-performance risk. Since we fully collateralize without regard to credit ratings, we would not be required to post additional collateral to the counterparties with which we were in a net liability position at ~~June~~September 30, 2013, if our credit ratings were to decline. In order to settle all derivative instruments that were in a net liability position at ~~June~~September 30, 2013, excluding embedded derivatives and adjustments made for our own non-performance risk, we would be required to pay ~~$58~~$1 million.

2829

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Impact of Derivative Activities on Financial Statements

The following tables show the financial statement line item and amount of our derivative receivables and payables that are reported in the Consolidated Balance Sheet at ~~June~~September 30, 2013 and March 31, 2013. Derivative receivables and payables are shown before and after netting and collateral adjustments, by accounting designation and by contract type. As permitted by the accounting guidance, where a legally enforceable master netting agreement exists, we have elected to net derivative receivables and derivative payables and the related cash collateral. Our embedded derivative contracts ~~and interest rate forward contracts~~ do not meet the accounting guidance permitting netting and are therefore presented gross.


		Hedge accounting				Non-hedge				Total					Hedge accounting					Non-hedge					Total
As of June 30, 2013		derivatives				accounting derivatives				Total															Total
As of September 30, 2013														As of September 30, 2013	derivatives						accounting derivatives					Total
		Notional		Fair		Notional		Fair		Notional		Fair			Notional		Fair		Notional			Fair				Total
(Dollars in millions)	(Dollars in millions)	Notional		value		Notional		value		Notional		value		(Dollars in millions)	Notional		value		Notional				value		Notional		value
Other assets	Other assets													Other assets											Notional
Interest rate swaps	Interest rate swaps	$	465	$	40	$	24,961	$	413	$	25,426	$	453	Interest rate swaps	$	465	$	35		$	20,036		$	371	$	20,501	$	406
Interest rate forwards			-		-		12		-		12		-
Foreign currency swaps	Foreign currency swaps		1,182		461		4,839		284		6,021		745	Foreign currency swaps		1,182		491			7,431			460		8,613		951
	Total	$	1,647	$	501	$	29,812	$	697	$	31,459	$	1,198	Total	$	1,647	$	526		$	27,467		$	831	$	29,114	$	1,357

Counterparty netting and collateral	Counterparty netting and collateral												(1,151)	Counterparty netting and collateral														(1,295)
	Carrying value of derivative contracts – Other assets											$	47	Carrying value of derivative contracts – Other assets													$	62

Other liabilities	Other liabilities													Other liabilities
Interest rate swaps	Interest rate swaps	$	-	$	-	$	52,022	$	702	$	52,022	$	702	Interest rate swaps	$	-	$	-		$	57,888		$	688	$	57,888	$	688
Interest rate caps	Interest rate caps		-		-		50		-		50		-	Interest rate caps		-		-			50			-		50		-
Interest rate forwards			-		-		12		-		12		-
Foreign currency swaps	Foreign currency swaps		854		23		5,319		276		6,173		299	Foreign currency swaps		157		11			3,870			153		4,027		164
Embedded derivatives	Embedded derivatives		-		-		40		7		40		7	Embedded derivatives		-		-			40			9		40		9
	Total	$	854	$	23	$	57,443	$	985	$	58,297	$	1,008	Total	$	157	$	11		$	61,848		$	850	$	62,005	$	861

Counterparty netting and collateral	Counterparty netting and collateral												(943)	Counterparty netting and collateral														(851)
	Carrying value of derivative contracts – Other liabilities											$	65	Carrying value of derivative contracts – Other liabilities													$	10

All derivative contracts shown above are subject to master netting agreements, with the exception of embedded derivative ~~contracts and interest rate forward~~ contracts. Collateral represents cash received or deposited under reciprocal arrangements that we have entered into with our derivative counterparties. As of ~~June~~September 30, 2013, we held collateral of ~~$579~~$781 million which offset derivative assets, and we posted collateral of ~~$371~~$337 million which offset derivative liabilities. We also held collateral of ~~$22~~$1 million which we did not use to offset derivative ~~assets.~~assets, and we posted collateral of $5 million which we did not use to offset derivative liabilities.

2930

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

		Hedge accounting				Non-hedge				Total
As of March 31, 2013		derivatives				accounting derivatives				Total
		Notional		Fair		Notional		Fair		Notional		Fair
(Dollars in millions)		Notional		value		Notional		value		Notional		value
Other Assets
Interest rate swaps		$	465	$	44	$	22,336	$	536	$	22,801	$	580
Foreign currency swaps			1,246		491		7,498		648		8,744		1,139
	Total	$	1,711	$	535	$	29,834	$	1,184	$	31,545	$	1,719

Counterparty netting and collateral held													(1,661)
	Carrying value of derivative contracts – Other assets											$	58

Other liabilities
Interest rate swaps		$	-	$	-	$	51,342	$	766	$	51,342	$	766
Interest rate caps			-		-		50		-		50		-
Foreign currency swaps			790		29		3,103		102		3,893		131
Embedded derivatives			-		-		64		12		64		12
	Total	$	790	$	29	$	54,559	$	880	$	55,349	$	909

Counterparty netting and collateral held													(892)
	Carrying value of derivative contracts – Other liabilities											$	17

All derivative contracts shown above are subject to master netting agreements, with the exception of embedded derivative contracts. Collateral represents cash received or deposited under reciprocal arrangements that we have entered into with our derivative counterparties. As of March 31, 2013, we held collateral of $953 million which offset derivative assets, and we posted collateral of $184 million which offset derivative liabilities. We also held collateral of $3 million which we did not use to offset derivative assets, and we posted collateral of $6 million which we did not use to offset derivative liabilities.

3031

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 six months ended ~~June~~September 30, 2013 and 2012 as reported in our Consolidated Statement of Income:

			Three Months Ended						Three Months Ended					Six Months Ended
			June 30,						September 30,					September 30,
(Dollars in millions)	(Dollars in millions)			2013		2012	(Dollars in millions)			2013		2012		2013		2012
Interest expense on debt	Interest expense on debt		$	318	$	337	Interest expense on debt		$	320	$	347	$	638	$	684
Interest expense on hedge accounting derivatives	Interest expense on hedge accounting derivatives			(24)		(27)	Interest expense on hedge accounting derivatives			(25)		(27)		(49)		(54)
Interest expense on non-hedge accounting foreign currency	Interest expense on non-hedge accounting foreign currency						Interest expense on non-hedge accounting foreign currency
	swaps			(51)		(67)	swaps			(54)		(67)		(105)		(134)
Interest expense on non-hedge accounting interest rate swaps	Interest expense on non-hedge accounting interest rate swaps			66		103	Interest expense on non-hedge accounting interest rate swaps			61		95		127		198
		Interest expense on debt and derivatives		309		346		Interest expense on debt and derivatives		302		348		611		694

Loss on hedge accounting derivatives:
Loss (gain) on hedge accounting derivatives:							Loss (gain) on hedge accounting derivatives:
	Interest rate swaps			6		3	Interest rate swaps			4		2		10		5
	Foreign currency swaps			44		119	Foreign currency swaps			(60)		(8)		(16)		111
		Loss on hedge accounting derivatives		50		122		(Gain) loss on hedge accounting derivatives		(56)		(6)		(6)		116
Less hedged item: change in fair value of fixed rate debt	Less hedged item: change in fair value of fixed rate debt			(51)		(125)	Less hedged item: change in fair value of fixed rate debt			55		3		4		(122)
		Ineffectiveness related to hedge accounting derivatives		(1)		(3)		Ineffectiveness related to hedge accounting derivatives		(1)		(3)		(2)		(6)

Loss (gain) loss from foreign currency transactions and non-hedge
Loss (gain) from foreign currency transactions and non-hedge							Loss (gain) from foreign currency transactions and non-hedge
accounting derivatives:	accounting derivatives:						accounting derivatives:
		(Gain) on foreign currency transactions		(450)		(44)		Loss (gain) on foreign currency transactions		352		196		(98)		152
		Loss (gain) on foreign currency swaps		566		(32)		(Gain) loss on foreign currency swaps		(335)		(206)		231		(238)
		Loss (gain) on interest rate swaps		112		(209)		(Gain) loss on interest rate swaps		(4)		(52)		108		(261)
Total interest expense	Total interest expense		$	536	$	58	Total interest expense		$	314	$	283	$	850	$	341

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 for the three months ended June 30, 2013 and 2012:

Three Months Ended
June 30,
(Dollars in millions) 2013 2012

Loss related to hedge accounting derivatives $ - $ 1
Loss on non-hedge accounting foreign currency swaps - 4
Loss on non-hedge accounting interest rate swaps - 1
Total credit valuation adjustment allocated to interest expense $ - $ 6

~~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) June 30, 2013 March 31, 2013
Other assets:

Notes receivable from affiliates $ 1,250 $ 931
Used vehicles held for sale 185 265
Deferred charges 112 120
Income taxes receivable 12 13
Derivative assets 47 58
Other assets 373 353
Total other assets $ 1,979 $ 1,740

Other liabilities:

Unearned insurance premiums and contract revenues $ 1,565 $ 1,528
Derivative liabilities 65 17
Accounts payable and accrued expenses 773 685
Deferred income 275 255
Other liabilities 158 192
Total other liabilities $ 2,836 $ 2,677
The following table summarizes the relative fair value allocation of derivative credit valuation adjustments within interest expense.

~~The change in used vehicles held for sale includes non-cash activities of $80 million and $6 million for the three months ended June 30, 2013 and June 30, 2012, respectively.~~

	Three Months Ended				Six Months Ended
	September 30,				September 30,
(Dollars in millions)		2013		2012		2013		2012

(Gain) loss related to hedge accounting derivatives	$	-	$	(2)	$	-	$	(1)
(Gain) loss on non-hedge accounting foreign currency swaps		-		(4)		-		-
(Gain) loss on non-hedge accounting interest rate swaps		-		(1)		-		-
Total credit valuation adjustment allocated to interest expense	$	-	$	(7)	$	-	$	(1)

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
June 30, March 31, June 30, March 31,
(Dollars in millions) 2013 2013 2013 2013
Commercial paper $ 23,876 $ 24,590 0.21 % 0.24 %
Unsecured notes and loans payable 46,634 46,707 2.11 % 2.19 %
Secured notes and loans payable 7,628 7,009 0.55 % 0.60 %
Carrying value adjustment 481 526
Total debt $ 78,619 $ 78,832 1.38 % 1.43 %

Note 8 – Other Assets and Other Liabilities

Other assets and other liabilities consisted of the following:

(Dollars in millions)	September 30, 2013		March 31, 2013
Other assets:

Notes receivable from affiliates	$	1,288	$	931
Used vehicles held for sale		233		265
Deferred charges		109		120
Income taxes receivable		7		13
Derivative assets		62		58
Other assets		435		353
Total other assets	$	2,134	$	1,740

Other liabilities:

Unearned insurance premiums and contract revenues	$	1,611	$	1,528
Derivative liabilities		10		17
Accounts payable and accrued expenses		790		685
Deferred income		302		255
Other liabilities		166		192
Total other liabilities	$	2,879	$	2,677

The change in used vehicles held for sale includes non-cash activities of $32 million and $37 million for the six months ended September 30, 2013 and 2012, respectively.

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
	September 30,		March 31,			September 30,		March 31,
(Dollars in millions)	2013		2013			2013		2013
Commercial paper	$	27,517	$	24,590		0.19	%	0.24	%
Unsecured notes and loans payable		46,313		46,707		2.05	%	2.19	%
Secured notes and loans payable		7,118		7,009		0.57	%	0.60	%
Carrying value adjustment		581		526
Total debt	$	81,529	$	78,832		1.29	%	1.43	%

The commercial paper balance includes unamortized premiums and discounts. ~~Included in unsecured~~As of September 30, 2013, our commercial paper had a weighted average remaining maturity of 87 days, while our notes and loans payable mature on various dates through fiscal 2047. Weighted average contractual interest rates are ~~notes and loans denominated in various foreign currencies, unamortized premiums and discounts and the effects~~calculated based on original notional or par value before consideration of ~~foreign currency transaction gains and losses on non-hedged~~premium or de-designated foreign currency denominated notes and loans payable. At June 30, 2013 and March 31, 2013, the carrying values of these foreign currency denominated notes payable were $12.3 billion and $13.2 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.discount.

~~Additionally, the~~The carrying value of our unsecured notes and loans payable at ~~June~~September 30, 2013 included ~~$16.9~~$17.4 billion of unsecured floating rate debt with contractual interest rates ranging from 0 to 6.0 percent and ~~$30.2~~$29.5 billion of unsecured fixed rate debt with contractual interest rates ranging from 0.5 to 9.4 percent. The carrying value of our unsecured notes and loans payable at March 31, 2013 included $16.8 billion of unsecured floating rate debt with contractual interest rates ranging from 0 to 6.0 percent and $30.4 billion of unsecured fixed rate debt with contractual interest rates ranging from 0.5 percent to 9.4 percent. Upon issuance of fixed rate notes, we generally elect to enter into interest rate swaps to convert fixed rate payments on notes to floating rate payments.

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 September 30, 2013 and March 31, 2013, the carrying values of these foreign currency denominated notes payable were $13.1 billion and $13.2 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.

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 1.6 percent at September 30, 2013 and 0.4 and 1.9 percent at ~~both June 30, 2013 and~~ March 31, 2013. 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 June 30, 2013, our commercial paper had a weighted average remaining maturity of 88 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.

3334

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 10 – Variable Interest Entities

Consolidated 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 ~~June~~September 30, 2013 and March 31, 2013:

	June 30, 2013													September 30, 2013

			VIE Assets							VIE Liabilities						VIE Assets							VIE Liabilities
			Gross		Net											Gross		Net
(Dollars in millions)	Restricted Cash		Securitized Assets			Securitized Assets		Other Assets		Debt		Other Liabilities		Restricted Cash		Securitized Assets			Securitized Assets		Other Assets		Debt		Other Liabilities

Retail finance receivables	$	477	$	8,725		$	8,605	$	3	$	7,437	$	1	$	474	$	8,321		$	8,209	$	3	$	6,996	$	2
Investments in operating leases		27		524			353		6		191		-		27		411			272		8		122		-
Total	$	504	$	9,249		$	8,958	$	9	$	7,628	$	1	$	501	$	8,732		$	8,481	$	11	$	7,118	$	2

	March 31, 2013

			VIE Assets							VIE Liabilities
			Gross		Net
(Dollars in millions)	Restricted Cash		Securitized Assets			Securitized Assets		Other Assets		Debt		Other Liabilities

Retail finance receivables	$	458	$	7,669		$	7,556	$	3	$	6,738	$	1
Investment in operating leases		33		630			434		9		271		-
Total	$	491	$	8,299		$	7,990	$	12	$	7,009	$	1

3435

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 ~~$740~~$929 million and $466 million of securities retained by TMCC at ~~June~~September 30, 2013 and March 31, 2013, 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.

Non-consolidated Variable Interest Entities

We provide lending to Toyota and Lexus dealers through the Toyota Dealer Investment Group’s Dealer Capital Program (“TDIG Program”) operated by our affiliate, Toyota Motor Sales, USA, Inc. (“TMS”). Dealers participating in this program have been determined to be VIEs due to TMS’s equity position in the dealerships. At ~~June~~September 30, 2013 and March 31, 2013, amounts due from these dealers that are classified as ~~Finance~~finance receivables, net in the Consolidated Balance Sheet and revenues from these dealers under the TDIG Program were insignificant. We do not consolidate the dealerships in this program as we are not the primary beneficiary of these dealerships. Additionally, any exposure to loss is limited to the amount of the credit facility.

3536

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 2013, TMCC, TCPR and other Toyota affiliates entered into a $3.8 billion 364 day syndicated bank credit facility, a $3.8 billion three year syndicated bank credit facility and a $3.8 billion five year syndicated bank credit facility, expiring in fiscal 2014, 2016, and 2018, respectively.

The ability to make draws is subject to covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on consolidations, mergers and sales of assets. These agreements may be used for general corporate purposes and none were drawn upon as of ~~June~~September 30, 2013 and March 31, 2013.

Other Unsecured Credit Agreements

TMCC has entered into additional unsecured credit facilities with various banks. As of ~~June~~September 30, 2013, TMCC had committed bank credit facilities totaling ~~$5.5~~$5.4 billion of which ~~$2.8~~$2.5 billion, $1.2$1.3 billion and ~~$1.5~~$1.6 billion mature in fiscal 2014, 2015 and 2016, respectively.

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 ~~June~~September 30, 2013 and March 31, 2013. We are in compliance with the covenants and conditions of the credit agreements described ~~above~~.above.

3637

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 unfunded amounts under these commitments and guarantees are summarized in the table below:

Maximum commitment amount as of
(Dollars in millions) June 30, 2013 March 31, 2013
Commitments:
Commitments under credit facilities with vehicle and
industrial equipment dealers $ 7,552 $ 7,396
Less: Funded commitments 6,352 6,290
Unfunded commitments 1,200 1,106

Minimum lease commitments 70 74
Total unfunded commitments 1,270 1,180
Guarantees and other contingencies:
Guarantees of affiliate pollution control and solid waste
disposal bonds 100 100
Total unfunded commitments and guarantees $ 1,370 $ 1,280

Wholesale financing demand note facilities 11,753 11,475
Less: Funded facilities 8,951 8,284
Unfunded wholesale financing demand note facilities $ 2,802 $ 3,191

~~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.~~

(Dollars in millions)			September 30, 2013		March 31, 2013
Commitments:
	Unfunded commitments under credit facilities with
		vehicle and industrial equipment dealers	$	1,321	$	1,106
	Minimum lease commitments			67		74
Total unfunded commitments				1,388		1,180
	Guarantees of affiliate pollution control and solid waste
		disposal bonds		100		100
Total unfunded commitments and guarantees			$	1,488	$	1,280

We are party to a 15-year lease agreement, which expires in 2018, with TMS for our headquarters location in the TMS headquarters complex in Torrance, California. Minimum lease commitments include ~~$35~~$34 million and $37 million for facilities leases with affiliates at ~~June~~September 30, 2013 and March 31, 2013, respectively. At ~~June~~September 30, 2013, 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		Future minimum
Years ending March 31,	lease payments		lease payments
2014	$	14	$	10
2015		18		18
2016		17		17
2017		12		12
2018		7		7
Thereafter		2		3
Total	$	70	$	67

3738

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. Our credit facility pricing reflects market conditions, the competitive environment, the level of dealer support required for the facility, and the credit worthiness of each dealer. Amounts drawn under these facilities are reviewed for collectability on a quarterly basis, in conjunction with our evaluation of the allowance for credit losses. 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 ~~June~~September 30, 2013 and March 31, 2013.

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 ~~June~~September 30, 2013, we determined that it is not probable that we will be required to make any material payments in the future. As of ~~June~~September 30, 2013 and March 31, 2013, no amounts have been recorded under these indemnifications.

3839

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.

3940

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 13 – Income Taxes

Our effective tax rate was 3738 percent for both the three and six months ended ~~June~~September 30, 2013 and ~~June~~38 and 37 percent for the three and six months ended September 30, ~~2012.~~2012, respectively. Our provision for income taxes for the ~~first quarter of fiscal 2014~~three and six months ended September 30, 2013 was ~~$53~~$149 million and $202 million, respectively, compared to ~~$279~~$200 million and $479 million for the same ~~period~~periods in fiscal 2013. The decrease in the provision is consistent with the decrease in our income before tax for the ~~first~~ three and six months ~~of fiscal 2014~~ended September 30, 2013 compared to the same ~~period~~periods in fiscal 2013.

Tax-related Contingencies

As of ~~June~~September 30, 2013, we remain under IRS examination for the fiscal years ended March 31, 2012 and March 31, 2013, 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 ~~June~~September 30, 2013, our assessment did not result in a material change in unrecognized tax benefits.

Our deferred tax assets were $1.2 billion at ~~June~~September 30, 2013 and March 31, 2013, and were primarily due to the deferred deduction of allowance for credit losses and cumulative federal and state tax loss carryforwards that expire in varying amounts through fiscal ~~2033.~~2034. The ~~total~~ deferred tax ~~liability at June~~asset related to the capital loss carryforward was reduced by a valuation allowance of $1 million during the quarter ended September 30, ~~2013, net of these deferred tax assets, was $6.3 billion compared with $6.2 billion at March 31,~~ 2013. Realization with respect to the federal and state tax loss carryforwards is dependent on generating sufficient income prior to expiration of the loss carryforwards. Although realization is not assured, management believes that apart from the valuation allowance 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. A valuation allowance was previously established for a portion of the state tax loss carryforward that management had determined would not be realizable. The total deferred tax liability at September 30, 2013, net of these deferred tax assets, was $6.5 billion compared with $6.2 billion at March 31, 2013.

4041

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 14 – Related Party Transactions

As of ~~June~~September 30, 2013, there were no material changes to our related party agreements or relationships as described in our fiscal 2013 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					Three Months Ended				Six Months Ended
		June 30,					September 30,				September 30,
(Dollars in millions)	(Dollars in millions)		2013		2012	(Dollars in millions)		2013		2012		2013		2012
Net financing revenues:	Net financing revenues:					Net financing revenues:
	Manufacturers’ subvention support and other revenues	$	232	$	226	Manufacturers’ subvention support and other revenues	$	250	$	236	$	482	$	462
	Credit support fees incurred	$	(20)	$	(8)	Credit support fees incurred	$	(20)	$	(27)	$	(40)	$	(35)
	Foreign exchange loss on loans payable to affiliates	$	-	$	(39)	Foreign exchange loss on loans payable to affiliates	$	-	$	-	$	-	$	(39)
	Interest expense on loans payable to affiliates	$	-	$	(3)	Interest expense on loans payable to affiliates	$	(1)	$	(1)	$	(1)	$	(4)

Insurance earned premiums and contract revenues:	Insurance earned premiums and contract revenues:					Insurance earned premiums and contract revenues:
	Affiliate insurance premiums and contract revenues	$	33	$	49	Affiliate insurance premiums and contract revenues	$	33	$	43	$	66	$	92

Investments and other income, net:	Investments and other income, net:					Investments and other income, net:
	Interest earned on notes receivable from affiliates	$	1	$	1	Interest earned on notes receivable from affiliates	$	2	$	2	$	3	$	3

Expenses:	Expenses:					Expenses:
	Shared services charges and other expenses	$	14	$	16	Shared services charges and other expenses	$	16	$	16	$	30	$	32
	Employee benefits expense	$	9	$	7	Employee benefits expense	$	9	$	8	$	18	$	15

4142

TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 14 – Related Party Transactions (Continued)

(Dollars in millions)	(Dollars in millions)	June 30, 2013		March 31, 2013		(Dollars in millions)	September 30, 2013		March 31, 2013
Assets:	Assets:					Assets:
Investments in marketable securities	Investments in marketable securities					Investments in marketable securities
	Investments in affiliates commercial paper	$	24	$	2	Investments in affiliates commercial paper	$	5	$	2

Finance receivables, net	Finance receivables, net					Finance receivables, net
	Accounts receivable from affiliates	$	71	$	22	Accounts receivable from affiliates	$	67	$	22
	Direct finance receivables from affiliates	$	6	$	6	Direct finance lease receivables from affiliates	$	6	$	6
	Notes receivable under home loan programs	$	17	$	18	Notes receivable under home loan programs	$	17	$	18
	Deferred retail subvention income from affiliates	$	(725)	$	(699)	Deferred retail subvention income from affiliates	$	(782)	$	(699)

Investments in operating leases, net	Investments in operating leases, net					Investments in operating leases, net
	Leases to affiliates	$	7	$	7	Leases to affiliates	$	7	$	7
	Deferred lease subvention income from affiliates	$	(647)	$	(604)	Deferred lease subvention income from affiliates	$	(728)	$	(604)

Other assets	Other assets					Other assets
	Notes receivable from affiliates	$	1,250	$	931	Notes receivable from affiliates	$	1,288	$	931
	Other receivables from affiliates	$	1	$	1	Other receivables from affiliates	$	2	$	1
	Subvention support receivable from affiliates	$	129	$	88	Subvention support receivable from affiliates	$	158	$	88

Liabilities:	Liabilities:					Liabilities:
Other liabilities	Other liabilities					Other liabilities
	Unearned affiliate insurance premiums and contract revenues	$	241	$	235	Unearned affiliate insurance premiums and contract revenues	$	241	$	235
	Accounts payable to affiliates	$	153	$	192	Accounts payable to affiliates	$	148	$	192
	Notes payable to affiliate	$	48	$	48	Notes payable to affiliate	$	53	$	48

Shareholder’s Equity:	Shareholder’s Equity:					Shareholder’s Equity:
	Dividends paid	$	-	$	1,487	Dividends paid	$	665	$	1,487
	Stock-based compensation	$	2	$	2	Stock-based compensation	$	2	$	2

Accounts receivable from affiliates

Accounts receivable from affiliates at ~~June~~September 30, 2013 included transactions with entities that were consolidated with another affiliate under the accounting guidance for variable interest entities.

4243

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 six months ended ~~June~~September 30, 2013 is summarized as follows (dollars in millions):

		Finance		Insurance		Intercompany
Fiscal 2014:		operations		operations		eliminations		Total
Three Months Ended September 30, 2013

Total financing revenues		$	1,838	$	-	$	7	$	1,845
Insurance earned premiums and contract revenues			-		150		(7)		143
Investment and other income, net			22		(8)		-		14
Total gross revenues			1,860		142		-		2,002

Less:
	Depreciation on operating leases		966		-		-		966
	Interest expense		314		-		-		314
	Provision for credit losses		28		-		-		28
	Operating and administrative expenses		183		50		-		233
	Insurance losses and loss adjustment expenses		-		68		-		68
	Provision for income taxes		140		9		-		149
Net income		$	229	$	15	$	-	$	244

Six Months Ended September 30, 2013

Total financing revenues		$	3,626	$	-	$	14	$	3,640
Insurance earned premiums and contract revenues			-		296		(14)		282
Investment and other income, net			34		(14)		-		20
Total gross revenues			3,660		282		-		3,942

Less:
	Depreciation on operating leases		1,917		-		-		1,917
	Interest expense		850		-		-		850
	Provision for credit losses		39		-		-		39
	Operating and administrative expenses		363		97		-		460
	Insurance losses and loss adjustment expenses		-		139		-		139
	Provision for income taxes		185		17		-		202
Net income		$	306	$	29	$	-	$	335

Total assets at September 30, 2013		$	95,139	$	3,613	$	(669)	$	98,083

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 ~~June~~six months ended September 30, 2012 is summarized as follows (dollars in millions):

													Finance1		Insurance		Intercompany
		Finance		Insurance			Intercompany
Fiscal 2014:		operations				eliminations			Total
Three Months Ended June 30, 2013
Fiscal 2013:												Fiscal 2013:	operations		operations		eliminations		Total
Three Months Ended September 30, 2012												Three Months Ended September 30, 2012

Total financing revenues	Total financing revenues	$	1,788	$	-		$	7		$	1,795	Total financing revenues	$	1,816	$	-	$	6	$	1,822
Insurance earned premiums and contract revenues	Insurance earned premiums and contract revenues		-		146			(7)			139	Insurance earned premiums and contract revenues		-		151		(6)		145
Investment and other income, net	Investment and other income, net		12		(6)			-			6	Investment and other income, net		11		27		-		38
Total gross revenues	Total gross revenues		1,800		140			-			1,940	Total gross revenues		1,827		178		-		2,005

Less:	Less:											Less:
	Depreciation on operating leases		951		-			-			951	Depreciation on operating leases		891		-		-		891
	Interest expense		536		-			-			536	Interest expense		283		-		-		283
	Provision for credit losses		11		-			-			11	Provision for credit losses		3		-		-		3
	Operating and administrative expenses		180		47			-			227	Operating and administrative expenses		187		42		-		229
	Insurance losses and loss adjustment expenses		-		71			-			71	Insurance losses and loss adjustment expenses		-		73		-		73
	Provision for income taxes		45		8			-			53	Provision for income taxes		177		23		-		200
Net income	Net income	$	77	$	14		$	-		$	91	Net income	$	286	$	40	$	-	$	326

Total assets at June 30, 2013		$	92,530	$	3,540		$	(715)		$	95,355

Fiscal 2013:
Three Months Ended June 30, 2012
Six Months Ended September 30, 2012												Six Months Ended September 30, 2012

Total financing revenues	Total financing revenues	$	1,791	$	-		$	6		$	1,797	Total financing revenues	$	3,607	$	-	$	12	$	3,619
Insurance earned premiums and contract revenues	Insurance earned premiums and contract revenues		-		156			(6)			150	Insurance earned premiums and contract revenues		-		307		(12)		295
Investment and other income, net	Investment and other income, net		10		25			-			35	Investment and other income, net		21		52		-		73
Total gross revenues	Total gross revenues		1,801		181			-			1,982	Total gross revenues		3,628		359		-		3,987

Less:	Less:											Less:
	Depreciation on operating leases		855		-			-			855	Depreciation on operating leases		1,746		-		-		1,746
	Interest expense		58		-			-			58	Interest expense		341		-		-		341
	Provision for credit losses		16		-			-			16	Provision for credit losses		19		-		-		19
	Operating and administrative expenses		173		43			-			216	Operating and administrative expenses		360		85		-		445
	Insurance losses and loss adjustment expenses		-		81			-			81	Insurance losses and loss adjustment expenses		-		154		-		154
	Provision for income taxes		257		22			-			279	Provision for income taxes		434		45		-		479
Net income	Net income	$	442	$	35		$	-		$	477	Net income	$	728	$	75	$	-	$	803

Total assets at June 30, 2012		$	88,739	$	3,343		$	(388)		$	91,694
Total assets at September 30, 2012												Total assets at September 30, 2012	$	90,230	$	3,453	$	(555)	$	93,128
1 Certain prior period amounts have been reclassified to conform to the current period presentation.												1 Certain prior period amounts have been reclassified to conform to the current period presentation.

4345

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, 2013 (“fiscal 2013”), 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 for 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, federal and state regulatory examinations and investigations, and related costs;

·	Natural disasters, changes in fuel prices, manufacturing disruptions and production suspensions of Toyota, Lexus and Scion vehicles models and related parts supply;

·	Operational risks, including security breaches or cyber attacks;

·	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, Lexus and Scion 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.

4446

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, residual value and credit 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, Lexus and Scion 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, Lexus and Scion 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. Changes in the volume of vehicles sales, vehicle dealers’ utilization of our insurance programs, or the level of coverage purchased by affiliates could materially impact our insurance operations. Additionally, our funding programs and related costs are influenced by changes in the global capital markets, prevailing interest rates, and our credit ratings and those of our parent companies, which may affect our ability to obtain cost effective funding to support earning asset growth.

4547

Fiscal 2014 First ~~Three~~Six Months Operating Environment

During the first ~~quarter~~half of the fiscal year ending March 31, 2014 (“fiscal 2014”), economic growth in the United States (“U.S.”) continued at a moderate pace, as labor market conditions continued to show signs of improvement. The housing sector improved as housing starts continued to trend higher and home prices rose compared to the same period in fiscal 2013. Consumer spending improved as consumer confidence strengthened. In addition, sales of motor vehicles improved compared to the same period in fiscal 2013. While the U.S. economy has shown positive trends during the first ~~quarter~~half of fiscal 2014, the impact of U.S. fiscal policies, ~~and tax increases,~~ fluctuations in gasoline prices, and uncertainty in certain global economies may weigh on the U.S. economy in the near future.

Conditions in the global capital markets were generally stable during most of the first ~~quarter~~half of fiscal 2014. However, the U.S. capital markets and interest rate environment experienced periods of increased volatility ~~in the latter part of the first quarter of fiscal 2014~~ due to the prospect of changes to U.S. monetary ~~policy. Europe’s ongoing~~policy and a partial U.S. government shutdown. U.S. fiscal concerns and the approach of the debt ~~and financial crisis also continued to~~ceiling 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.~~ Despite ~~the challenging fixed income market~~these conditions, we ~~continue~~continued to maintain broad global access to both domestic and international markets. Future changes in interest and foreign exchange rates could continue to result in ~~significant~~ volatility in our interest expense ~~impacting~~thereby affecting our results of operations.

Industry-wide vehicle sales in the United States and sales incentives throughout the auto industry increased during the first ~~quarter~~half of fiscal 2014 as compared to the same period in the prior year. Vehicle sales by Toyota Motor Sales, USA, Inc. (“TMS”) increased 79 percent in the first ~~quarter~~half of fiscal 2014 compared to the same period in fiscal 2013. The increase in TMS sales was attributable to new product launches and return of consumer demand for new ~~vehicles~~. ~~Despite slight declines, used~~vehicles. In addition, we are currently experiencing a greater increase in lease volume as compared to retail volume.

Used vehicle values remained strong during the first ~~quarter~~half of fiscal 2014 compared to the same period in the prior ~~year.~~year, despite slight declines. However, it remains uncertain whether the used vehicle market will continue to be strong in the ~~future, and declines~~future. Declines in used vehicle values and a higher proportion of lease volume as compared to retail volume could affect return rates, depreciation expense and credit losses.

4648

RESULTS OF OPERATIONS

Fiscal 2014 First Quarter Summary
Fiscal 2014 Summary

		Three Months Ended			Three Months Ended				Six Months Ended
		June 30,			September 30,				September 30,
(Dollars in millions)		2013		2012	2013		2012		2013		2012
Net income:
Finance operations1	$	77	$	442	$	229	$	286	$	306	$	728
Insurance operations1		14		35		15		40		29		75
Total net income	$	91	$	477	$	244	$	326	$	335	$	803

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 ~~$91~~$335 million and $244 million for the first half and second quarter of fiscal 2014, respectively, compared to ~~$477~~$803 million and $326 million for the same ~~period~~periods in fiscal 2013. The decrease for the first half of fiscal 2014 was primarily due to an increase of ~~$478~~$509 million in our interest expense driven by valuation losses on derivatives, an increase of ~~$96~~$171 million in depreciation on operating leases and a decline of ~~$29~~$53 million in investment and other income, partially offset by a decline of ~~$226~~$277 million in the provision for income taxes. The decrease for the second quarter of fiscal 2014 was primarily due to an increase of $75 million in depreciation on operating leases, an increase of $31 million in our interest expense driven by valuation losses on derivatives and an increase of $25 million in our provision for credit losses, partially offset by a decline of $51 million in the provision for income taxes.

Our overall capital position, ~~remained consistent~~taking into account the payment of a $665 million dividend in September 2013 to Toyota Financial Services Americas Corporation (“TFSA”), decreased by $0.3 billion from March 31, 2013, bringing total shareholder’s equity to $7.2 billion at ~~June~~September 30, ~~2013, as compared to March 31,~~ 2013. Our debt ~~decreased~~increased to ~~$78.6~~$81.5 billion at ~~June~~September 30, 2013 from $78.8 billion at March 31, 2013. Our debt-to-equity ratio ~~of 10.3~~increased to 11.3 at ~~June~~September 30, 2013 ~~remained relatively consistent~~compared with a ratio of 10.4 at March 31, 2013.

4749

Finance Operations	Finance Operations							Finance Operations

			Three Months Ended						Three Months Ended						Six Months Ended
			June 30,			Percentage			September 30,				Percentage		September 30,				Percentage
(Dollars in millions)	(Dollars in millions)		2013		2012	Change		(Dollars in millions)		2013	20121		Change		2013		20121		Change
Financing revenues:	Financing revenues:							Financing revenues:
Operating lease	Operating lease	$	1,209	$	1,157	4	%	Operating lease	$	1,255	$	1,187	6	%	$	2,464	$	2,344	5	%
Retail1			478		532	(10)	%
Retail2								Retail2		483		525	(8)	%		961		1,057	(9)	%
Dealer	Dealer		101		102	(1)	%	Dealer		100		104	(4)	%		201		206	(2)	%
Total financing revenues	Total financing revenues		1,788		1,791	-	%	Total financing revenues		1,838		1,816	1	%		3,626		3,607	1	%

Investment and other income			12		10	20	%
Investment and other income, net								Investment and other income, net		22		11	100	%		34		21	62	%
Gross revenues from finance operations	Gross revenues from finance operations		1,800		1,801	-	%	Gross revenues from finance operations		1,860		1,827	2	%		3,660		3,628	1	%

Less:	Less:							Less:
	Depreciation on operating leases		951		855	11	%	Depreciation on operating leases		966		891	8	%		1,917		1,746	10	%
	Interest expense		536		58	824	%	Interest expense		314		283	11	%		850		341	149	%
	Provision for credit losses		11		16	(31)	%	Provision for credit losses		28		3	833	%		39		19	105	%
	Operating and administrative expenses		180		173	4	%	Operating and administrative expenses		183		187	(2)	%		363		360	1	%
	Provision for income taxes		45		257	(82)	%	Provision for income taxes		140		177	(21)	%		185		434	(57)	%
Net income from finance operations		$	77	$	442	(83)	%
1	Includes direct finance lease revenues.
Net income from finance								Net income from finance
								operations	$	229	$	286	(20)	%	$	306	$	728	(58)	%

1 Certain prior period amounts have been reclassified to conform to the current period presentation.								1 Certain prior period amounts have been reclassified to conform to the current period presentation.
2 Includes direct finance lease revenues.								2 Includes direct finance lease revenues.

Our finance operations reported net income of ~~$77~~$306 million and $229 million for the first half and second quarter of fiscal 2014, respectively, compared to ~~$442~~$728 million and $286 million for the same ~~period~~periods in fiscal 2013. Finance operations results for the first half of fiscal 2014 decreased as compared to the same period in fiscal 2013 primarily due to an increase of $509 million in interest expense driven by valuation losses on derivatives and an increase of $171 million in depreciation on operating leases, partially offset by a decline of $249 million in the provision for income taxes. Finance operations results for the second quarter of fiscal 2014 decreased as compared to the same period in fiscal 2013 primarily due to an increase of ~~$478~~$75 million in depreciation on operating leases, an increase of $31 million in interest expense driven by valuation losses on derivatives and an increase of ~~$96~~$25 million in ~~depreciation on operating leases,~~the provision for credit losses, partially offset by a decline ~~in $212~~of $37 million in the provision for income ~~taxes.~~taxes and an increase of $22 million in total financing revenue.

Financing Revenues

Total financing revenues ~~remained substantially unchanged~~increased 1 percent during the first half and second quarter of fiscal 2014 as compared to the same ~~period~~periods in fiscal 2013 due to the following factors:

·	Operating lease revenues increased 45 percent and 6 percent in the first half and second quarter of fiscal 2014, respectively, as compared to the same ~~period~~periods in fiscal 2013, primarily due to higher average outstanding earning asset balances, partially offset by lower portfolio yields.

Retail contract revenues decreased 109 percent and 8 percent in the first half and second quarter of fiscal 2014, respectively, as compared to the same ~~period~~periods in fiscal 2013, primarily due to a decrease in our portfolio yields, partially offset by higher average outstanding earning asset balances.

Dealer financing revenues decreased 12 percent and 4 percent in the first half and second quarter of fiscal 2014, respectively, as compared to the same ~~period~~periods in fiscal 2013, primarily due to a decrease in our portfolio yields, partially offset by higher average outstanding earning asset balances.

Our total portfolio, which includes operating lease, retail, and dealer financing, had a yield of 4.0 percent and 4.1 percent during the first half and second quarter of fiscal 2014, respectively, compared to ~~4.8~~4.7 and 4.6 percent for the same ~~period~~periods in fiscal 2013 due primarily to decreases in our retail 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 half and second quarter of fiscal 2014.

Depreciation on Operating Leases

Depreciation on operating leases increased 1110 percent and 8 percent during the first half and second quarter of fiscal 2014, respectively, as compared to the same ~~period~~periods in fiscal 2013. The increase in depreciation was primarily attributable to an increase in average operating lease units outstanding coupled with a ~~slight~~ decline in used vehicle values during the first ~~quarter~~half of fiscal 2014 as compared to the same period in fiscal 2013.

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			Three Months Ended				Six Months Ended
		June 30,			September 30,				September 30,
(Dollars in millions)		2013		2012	2013		2012		2013		2012
Interest expense on debt	$	318	$	337	$	320	$	347	$	638	$	684
Interest expense on derivatives		(9)		9		(18)		1		(27)		10
Interest expense on debt and derivatives		309		346		302		348		611		694

Ineffectiveness related to hedge accounting derivatives		(1)		(3)		(1)		(3)		(2)		(6)
(Gain) on foreign currency transactions		(450)		(44)
Loss (gain) on foreign currency swaps		566		(32)
Loss (gain) on non-hedge accounting foreign currency transactions					Loss (gain) on non-hedge accounting foreign currency transactions	352		196		(98)		152
(Gain) loss on non-hedge accounting foreign currency swaps					(Gain) loss on non-hedge accounting foreign currency swaps	(335)		(206)		231		(238)
Loss (gain) on non-hedge accounting interest rate swaps		112		(209)		(4)		(52)		108		(261)
Total interest expense	$	536	$	58	$	314	$	283	$	850	$	341

During the first ~~quarter~~half of fiscal 2014, total interest expense increased to ~~$536~~$850 million from ~~$58~~$341 million during the same period of fiscal 2013. Although the notional amount of ~~the~~ debt increased during the first ~~quarter~~six months of fiscal 2014 compared to the same period in fiscal 2013, interest rates on our outstanding debt declined, resulting in a decrease in interest expense on debt. The primary driver of the increase in total interest expense was an increase in swap rates induring the first ~~quarter~~six months of fiscal 2014, resulting in valuation losses on non-hedge accounting interest rate swaps and foreign currency swaps, net of ~~the~~ associated foreign currency transactions. During the second quarter of fiscal 2014, interest expense increased to $314 million from $283 million during the same period of fiscal 2013 primarily as a result of lower gains on our non-hedge accounting interest rate swaps.

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 ~~$318~~$638 million and $320 million during the first half and second quarter of fiscal 2014 from ~~$337~~$684 million and $347 million in the same ~~period~~periods in fiscal 2013 primarily as a result of a lower weighted average interest rate on our debt portfolio, partially offset by higher debt balances.

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 half and second quarter of fiscal 2014, we recorded net interest income of $9$27 million and $18 million, respectively, compared to net interest expense of $9$10 million and $1 million, respectively, during the same ~~period~~periods of fiscal 2013.

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 half and second quarter of fiscal 2014, we experienced ~~an increase in swap rates, resulting in a valuation loss~~losses of ~~$116~~$133 million and $17 million on our foreign currency transactions net of the associated foreign currency swaps. ~~In comparison, we experienced a valuation gain of $76 million~~The losses during the ~~same period~~first half of fiscal 2014 resulted from an increase in swap rates. During the first half and second quarter of fiscal 2013, ~~as a result~~we experienced gains of $86 million and $10 million on our foreign currency transactions net of the associated foreign currency swaps due to a decrease in swap rates.

We recorded a valuation loss of ~~$112~~$108 million and a valuation gain of $4 million on non-hedge accounting interest rate swaps during the first half and second quarter of fiscal 2014, respectively. The valuation losses during the first half of fiscal 2014 were as a result of an increase in ~~U.S~~U.S. dollar swap rates. ~~During~~The U.S. dollar swap rates were relatively flat during the second quarter of fiscal 2014. We recorded valuation gains of $261 million and $52 million on non-hedge accounting interest rate swaps during the first half and second quarter of fiscal 2013, respectively. The gains during the first half of fiscal 2013 were as a result of a decrease in U.S. dollar swap ~~rates decreased resulting in a valuation gain of $209 million. The net valuation gain on these swaps excludes net interest settlements and changes in accruals.~~rates.

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

Provision for Credit Losses

We recorded a provision for credit losses of ~~$11~~$39 million and $28 million for the first half and second quarter of fiscal 2014, compared to ~~$16~~$19 million and $3 million for the same ~~period~~periods in fiscal 2013. The ~~decrease~~increase in the provision for credit losses for fiscal 2014 was due to ~~the continuation of historically low losses primarily~~increased loss severity, driven by declines in used vehicle values, partially offset by lower default frequency. The overall credit quality of our consumer portfolio in the first ~~quarter~~half of fiscal 2014 continued to benefit from our continued focus on purchasing practices and collection efforts.

Operating and Administrative Expenses

Operating expenses increased during the first half and second quarter of fiscal 2014 compared to the same ~~period~~periods in fiscal 2013 primarily due to increases in employee expenses and general operating ~~expenses and insurance dealer back-end program~~ expenses.

5052

Insurance Operations	Insurance Operations							Insurance Operations

The following table summarizes key results of our Insurance Operations:	The following table summarizes key results of our Insurance Operations:							The following table summarizes key results of our Insurance Operations:

		Three Months Ended							Three Months Ended						Six Months Ended
		June 30,				Percentage			September 30,				Percentage		September 30,				Percentage
(Dollars in millions)	(Dollars in millions)	2013		2012		Change		(Dollars in millions)	2013		2012		Change		2013		2012		Change
Agreements (units in thousands)	Agreements (units in thousands)							Agreements (units in thousands)
	Issued		449		385	17	%	Issued		485		397	22	%		934		782	19	%
	In force		5,823		6,150	(5)	%	In force		5,904		5,938	(1)	%		5,904		5,938	(1)	%

Insurance earned premiums and contract revenues	Insurance earned premiums and contract revenues	$	146	$	156	(6)	%	Insurance earned premiums and contract revenues	$	150	$	151	(1)	%	$	296	$	307	(4)	%
Investment and other income			(6)		25	(124)	%
Gross revenues from insurance operations			140		181	(23)	%
Investment and other income, net								Investment and other income, net		(8)		27	(130)	%		(14)		52	(127)	%
Gross revenues from insurance								Gross revenues from insurance
								operations		142		178	(20)	%		282		359	(21)	%

Less:	Less:							Less:
Insurance losses and loss adjustment expenses			71		81	(12)	%
Operating and administrative expenses			47		43	9	%
Insurance losses and loss								Insurance losses and loss
								adjustment expenses		68		73	(7)	%		139		154	(10)	%
Operating and administrative								Operating and administrative
								expenses		50		42	19	%		97		85	14	%
Provision for income taxes	Provision for income taxes		8		22	(64)	%	Provision for income taxes		9		23	(61)	%		17		45	(62)	%
Net income from insurance operations	Net income from insurance operations	$	14	$	35	(60)	%	Net income from insurance operations	$	15	$	40	(63)	%	$	29	$	75	(61)	%

Our insurance operations reported net income of ~~$14~~$29 million and $15 million for the first half and second quarter of fiscal 2014, compared to ~~$35~~$75 million and $40 million for the same ~~period~~periods in fiscal 2013. The decrease in net income for the first half of fiscal 2014 was attributable to a ~~$31~~$66 million decrease in investment and other income, a ~~$10~~$12 million increase in operating and administrative expenses and a $11 million decrease in insurance earned premiums and contract revenues, partially offset by a decrease of $28 million in provision for income taxes and a $4decrease of $15 million in insurance losses and loss adjustment expenses. The decrease in net income for the second quarter of fiscal 2014 was attributable to a $35 million decrease in investment and other income and an $8 million increase in operating and administrative expenses, partially offset by a ~~$10~~$14 million decrease in provision for income taxes and a $5 million decrease in insurance losses and loss adjustment ~~expenses and a $14 million decrease in provision for income taxes.~~expenses.

Agreements issued increased by 1719 percent and 22 percent during the first half and second quarter of fiscal 2014 compared to the same period in fiscal 2013. The increase was primarily due to the overall increase in TMS vehicle sales. Despite an increase in agreements issued, the number of agreements in force, which represent active insurance policies written and contracts issued, ~~decreased by 5 percent~~remained relatively flat during the first half and second quarter of fiscal 2014 compared to the same ~~period~~periods in fiscal 2013. ~~Agreements~~The number of agreements in force ~~for the first quarter of fiscal~~at September 30, 2013 was ~~higher~~slightly lower compared to the prior year, as the prior year balance included affiliate agreements, issued in support of special TMS sales and customer loyalty programs, that subsequently expired in the second half of fiscal 2013.

Our insurance operations reported insurance earned premiums and contract revenues of ~~$146~~$296 million and $150 million for the first half and second quarter of fiscal 2014, compared to ~~$156~~$307 million and $151 million for the same ~~period~~periods in fiscal 2013. Insurance earned premiums and contract revenues represent revenues from agreements in force and are affected by sales volume as well as the level, age, and mix of agreements in force. Our insurance earned premiums and contract revenues decreased for the first half and second quarter of fiscal 2014, compared to the same ~~period~~periods in fiscal 2013, primarily due to the decrease in ~~our~~the number of agreements in force.

Our insurance operations incurred ~~a loss~~losses in investment and other income of $6$14 million and $8 million for the first half and second quarter of fiscal 2014, compared to ~~a gain~~gains in investment and other income of ~~$25~~$52 million and $27 million for the same ~~period~~periods in fiscal 2013. Investment and other income consists primarily of dividend and interest income, realized gains and losses ~~on available-for-sale securities~~ and other-than-temporary ~~impairment~~impairments on available-for-sale securities, if any. The ~~loss~~losses incurred in investment and other income for the first half and second quarter of fiscal 2014 ~~was~~were due to an other-than-temporary impairment ~~write-down~~write-downs of ~~$30~~$53 million ~~of a mortgage sector~~and $23 million, respectively, for various fund ~~investment~~investments and fixed income securities resulting from interest rate volatility, ~~partially offset by~~and a decrease in dividend and interest income and realized gains on available-for-sale securities. Continued volatility in interest rates could result in additional future write-downs if conditions indicate that ~~other~~additional investments are ~~other than temporarily~~other-than-temporarily impaired.

Our insurance operations reported insurance losses and loss adjustment expenses of ~~$71~~$139 million and $68 million for the first half and second quarter of fiscal 2014, compared to ~~$81~~$154 million and $73 million for the same ~~period~~periods in fiscal 2013. 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 half and second quarter of fiscal 2014 compared to the same periods in fiscal 2013 was primarily due to lower claim frequency experienced in our prepaid maintenance contracts as a result of the expiration of the affiliate agreements issued in support of special TMS sales and customer loyalty programs. The decrease related to our prepaid maintenance contracts was partially offset by an increase in the frequency of claims experienced with our guaranteed auto protection agreements.

Our insurance operations reported operating and administrative expenses of ~~$47~~$97 million and $50 million for the first half and second quarter of fiscal 2014, compared to ~~$43~~$85 million and $42 million for the same ~~period~~periods in fiscal 2013. The increase was attributable to an increase in various product expenses, general operating expenses, and insurance dealer back-end program 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 half and second quarter of fiscal 2014 was ~~$53~~$202 million and $149 million, respectively, compared to ~~$279~~$479 million and $200 million for the same ~~period~~periods in fiscal 2013. Our effective tax rate was 3738 percent for both the first half and second quarter of fiscal 2014 and 37 percent and 38 percent for the first half and second quarter of fiscal ~~2013.~~2013, respectively. The change in our provision for income taxes is consistent with the change in our income before tax in the first half and second quarter of fiscal 2014 compared to the same ~~period~~periods in fiscal 2013.

5254

FINANCIAL CONDITION

Vehicle Financing Volume and Net Earning Assets	Vehicle Financing Volume and Net Earning Assets						Vehicle Financing Volume and Net Earning Assets

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

	Three Months Ended						Three Months Ended						Six Months Ended
	June 30,				Percentage		September 30,				Percentage		September 30,				Percentage
(units in thousands):	2013		2012		Change		2013		2012		Change		2013		2012		Change
TMS new sales volume1	441		414		7	%	476		429		11	%	917		843		9	%

Vehicle financing volume2
New retail contracts	176		180		(2)	%	203		196		4	%	379		376		1	%
Used retail contracts	78		72		8	%	82		71		15	%	160		143		12	%
Lease contracts	108		79		37	%	125		80		56	%	233		159		47	%
Total	362		331		9	%	410		347		18	%	772		678		14	%

TMS subvened vehicle financing volume (units included in the above table):	TMS subvened vehicle financing volume (units included in the above table):						TMS subvened vehicle financing volume (units included in the above table):
New retail contracts	101		92		10	%	127		119		7	%	228		211		8	%
Used retail contracts	24		21		14	%	22		19		16	%	46		40		15	%
Lease contracts	97		64		52	%	117		67		75	%	214		131		63	%
Total	222		177		25	%	266		205		30	%	488		382		28	%

TMS subvened vehicle financing volume as a percent of vehicle financing volume:	TMS subvened vehicle financing volume as a percent of vehicle financing volume:						TMS subvened vehicle financing volume as a percent of vehicle financing volume:

New retail contracts	57.4	%	51.1	%			62.6	%	60.7	%			60.2	%	56.1	%
Used retail contracts	30.8	%	29.2	%			26.8	%	26.8	%			28.8	%	28.0	%
Lease contracts	89.8	%	81.0	%			93.6	%	83.8	%			91.8	%	82.4	%
Overall subvened contracts	61.3	%	53.5	%			64.9	%	59.1	%			63.2	%	56.3	%

Market share:3
Retail contracts	39.9	%	43.4	%			42.5	%	45.6	%			41.2	%	44.5	%
Lease contracts	24.3	%	19.1	%			26.2	%	18.6	%			25.3	%	18.8	%
Total	64.2	%	62.5	%			68.7	%	64.2	%			66.5	%	63.3	%

Represents total domestic TMS sales of new Toyota, Lexus and Scion 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 ~~87%~~86% Toyota and ~~13%~~14% Lexus vehicles for the first half and second quarter of ~~both~~ fiscal 2014 and fiscal 2013.

Total financing volume is comprised of approximately 82% Toyota, 15% Lexus, and 3% non-Toyota/Lexus vehicles for the first half and second quarter of fiscal 2014 and the first half of fiscal 2013. Total financing volume is comprised of approximately ~~81%~~83% Toyota, ~~16%~~14% Lexus, and 3% non-Toyota/Lexus vehicles for the ~~first~~second quarter of fiscal 2013.

3	Represents the percentage of total domestic TMS sales of new Toyota, Lexus and Scion 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.

5355

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. Vehicle sales by TMS increased 79 percent and 11 percent for the first half and second quarter of fiscal 2014, respectively, compared to the same ~~period~~periods in fiscal 2013 driven ~~by the return of inventory levels to pre-disasters levels. In addition, TMS sales were positively affected~~ by new product and model launches and higher consumer demand.

Our financing volume increased 914 percent and market share also increased in the first ~~quarter~~half of fiscal 2014 compared to the same period in fiscal 2013. The increase in volume was driven primarily by the ~~increased supply of new Toyota, Lexus and Scion vehicles~~increase in consumer demand and an increase in retail and lease subvention. Lease volume increased more significantly than retail volume in the first half and second quarter of fiscal 2014 due primarily to a higher focus by TMS on lease subvention compared to the same period in fiscal 2013.

5456

The composition of our net earning assets is summarized below:
						Percentage							Percentage
(Dollars in millions)	(Dollars in millions)	June 30, 2013		March 31, 2013		Change		(Dollars in millions)	September 30, 2013		March 31, 2013		Change
Net Earning Assets	Net Earning Assets							Net Earning Assets
Finance receivables, net	Finance receivables, net							Finance receivables, net
	Retail finance receivables, net1	$	48,232	$	47,679	1	%	Retail finance receivables, net1	$	49,459	$	47,679	4	%
	Dealer financing, net		15,679		14,888	5	%	Dealer financing, net		14,753		14,888	(1)	%
Total finance receivables, net	Total finance receivables, net		63,911		62,567	2	%	Total finance receivables, net		64,212		62,567	3	%
Investments in operating leases, net	Investments in operating leases, net		21,186		20,384	4	%	Investments in operating leases, net		22,424		20,384	10	%
Net earning assets	Net earning assets	$	85,097	$	82,951	3	%	Net earning assets	$	86,636	$	82,951	4	%

Dealer Financing															(Number of dealers serviced)
Toyota and Lexus dealers2	Toyota and Lexus dealers2		1,000		996	-	%	Toyota and Lexus dealers2		998		996	-	%
Vehicle dealers outside of the	Vehicle dealers outside of the							Vehicle dealers outside of the
	Toyota/Lexus dealer network		471		480	(2)	%	Toyota/Lexus dealer network		474		480	(1)	%
Industrial equipment dealers	Industrial equipment dealers		140		140	-	%	Industrial equipment dealers		140		140	-	%
Total number of dealers receiving	Total number of dealers receiving							Total number of dealers receiving
	wholesale financing		1,611		1,616	-	%	wholesale financing		1,612		1,616	-	%

Dealer inventory financed (units in thousands)	Dealer inventory financed (units in thousands)		325		300	8	%	Dealer inventory financed (units in thousands)		295		300	(2)	%

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 1 percent and 4 percent during the first half and second quarter of fiscal 2014, respectively, compared to the same periods in fiscal 2013. In addition, our used retail contract volume increased ~~slightly~~12 percent and 15 percent during the first half and second quarter of fiscal 2014, asrespectively, compared to the same ~~period~~periods in fiscal 2013. The increase in both new and used vehicle financing volume during the first ~~quarter~~half of fiscal 2014 contributed to the increase in retail finance receivables, net at ~~June~~September 30, 2013.

Lease Contract Volume and Earning Assets

Our vehicle lease contract volume during the first half and second quarter of fiscal 2014 increased 47 percent and 56 percent, respectively, as compared to the same ~~period~~periods in fiscal 2013. Much of the increase during the first half and second quarter of fiscal 2014 was attributable to an increase in TMS sales and a higher focus on lease subvention during the ~~quarter,~~period, resulting in an increase in investments in operating leases, net at ~~June~~September 30, 2013 as compared to the balance at March 31, 2013.

Dealer Financing and Earning Assets

Dealer financing, net ~~increased 5 percent~~decreased slightly from March 31, 2013, primarily due to ~~increases~~decreases in dealer inventory financed. The ~~higher~~lower level of dealer inventory was attributable to ~~the return of~~higher consumer demand for new vehicles. The total number of dealers receiving wholesale financing was relatively consistent with March 31, 2013.

5557

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							Three Months Ended						Six Months Ended
		June 30,				Percentage			September 30,				Percentage		September 30,				Percentage
		2013		2012		Change			2013			20121	Change		2013			20121	Change
Depreciation on operating	Depreciation on operating							Depreciation on operating
	leases (dollars in millions)	$	951	$	855	11	%	leases (dollars in millions)	$	966	$	891	8	%	$	1,917	$	1,746	10	%
Average operating lease units	Average operating lease units							Average operating lease units
	outstanding (in thousands)		827		785	5	%	outstanding (in thousands)		852		800	7	%		839		792	6	%

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

Depreciation expense on operating leases increased 1110 percent and 8 percent during the first half and second quarter of fiscal 2014 as compared to the same ~~period~~periods in fiscal 2013, due primarily to an increase in the average operating lease units outstanding over the same periods and a decline in used vehicle values during the first ~~quarter~~half of fiscal 2014. Despite this decline, used vehicle values remained strong during the first ~~quarter~~half of fiscal 2014. The level of lease maturities during the first ~~quarter~~half of fiscal 2014 increased as compared to the same period in fiscal ~~2013 and is~~2013. Lease maturities are expected to continue to remain ~~at high levels~~higher than our historical pattern for the next few ~~years.~~years as a result of the recent increase in leasing volume. This increase could affect return rates, used vehicle values and depreciation expense.

5658

Credit Risk

Credit Loss Experience

The overall credit quality of our consumer portfolio in the first ~~quarter~~half of fiscal 2014 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~~are of better credit quality than non-subvened contracts. These factors, combined with strong used vehicle values, contributed to ~~decreased~~ levels of ~~delinquency~~default frequency remaining relatively consistent during the first ~~quarter~~half of fiscal 2014 as compared to the same period in fiscal 2013.

			June 30,			March 31,			June 30,					September 30,			March 31,			September 30,
			2013			2013			2012					2013			2013			20121
Net charge-offs as a percentage of average gross earning assets 1
Net charge-offs as a percentage of average gross earning assets 2												Net charge-offs as a percentage of average gross earning assets 2
		Finance receivables		0.19	%		0.29	%		0.17	%		Finance receivables		0.26	%		0.29	%		0.25	%
		Operating leases		0.11	%		0.18	%		0.07	%		Operating leases		0.15	%		0.18	%		0.14	%
		Total		0.17	%		0.27	%		0.15	%		Total		0.23	%		0.27	%		0.23	%

Default frequency as a percentage of outstanding contracts	Default frequency as a percentage of outstanding contracts			1.21	%		1.23	%		1.16	%	Default frequency as a percentage of outstanding contracts			1.14	%		1.23	%		1.15	%
Average loss severity per unit	Average loss severity per unit		$	6,226		$	5,737		$	5,817		Average loss severity per unit		$	6,056		$	5,737		$	5,844

Aggregate balances for accounts 60 or more days past due as a	Aggregate balances for accounts 60 or more days past due as a											Aggregate balances for accounts 60 or more days past due as a
	percentage of gross earning assets 2											percentage of gross earning assets 3
		Finance receivables 3		0.22	%		0.19	%		0.24	%		Finance receivables 4		0.23	%		0.19	%		0.26	%
		Operating leases 3		0.18	%		0.18	%		0.18	%		Operating leases 4		0.17	%		0.18	%		0.19	%
		Total		0.21	%		0.19	%		0.23	%		Total		0.22	%		0.19	%		0.24	%

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

2	Net charge-off ratios have been annualized using ~~three~~six month results for the periods ended ~~June~~September 30, 2013 and ~~June 30,~~ 2012.

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

34	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. Net charge-offs as a percentage of average gross earning assets ~~increased from 0.15~~remained consistent at 0.23 percent at ~~June 30, 2012 to 0.17 percent at June~~September 30, 2013 ~~due primarily to higher severity.~~and September 30, 2012.

Default frequency as a percentage of average outstanding contracts ~~increased to 1.21~~remained relatively consistent at 1.14 percent during the first ~~quarter~~half of fiscal 2014 compared to ~~1.16~~1.15 percent during the same period in fiscal 2013. This increase primarily reflects lower default frequency experienced in the first quarter of fiscal 2013 driven by historically high used vehicle values. In the first quarter of fiscal 2013, some customers, who otherwise might have defaulted, were able to sell their vehicles in order to pay off their finance contracts lowering frequency of loss, whereas declines in used vehicle values since the first quarter of 2013 have reduced this impact. Default frequency was higher for the fiscal year ended March 31, 2013 compared to both the first ~~quarter~~half of fiscal 2014 and fiscal 2013 due to units lost or damaged in Hurricane ~~Sandy.~~Sandy in the latter half of fiscal 2013.

Our loss severity for the first ~~quarter~~half of fiscal 2014 was affected by the decline in used vehicle values compared to the first ~~quarter~~half of fiscal 2013. Severity for the first ~~quarter~~half of fiscal 2014 was also higher than for the fiscal year ended March 31, 2013 due to the receipt of vehicle insurance proceeds related to Hurricane Sandy during fiscal 2013, which resulted in lower severity per unit.

5759

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 six months ended ~~June~~September 30, 2013 and 2012:

	Three Months Ended				Three Months Ended				Six Months Ended
	June 30,				September 30,				September 30,
(Dollars in millions)	2013		2012		2013		2012		2013		2012
Allowance for credit losses at beginning of period	$	527	$	619	$	501	$	606	$	527	$	619
Provision for credit losses		11		16		28		3		39		19
Charge-offs, net of recoveries1		(37)		(29)		(62)		(60)		(99)		(89)
Allowance for credit losses at end of period	$	501	$	606	$	467	$	549	$	467	$	549

1 Charge-offs are shown net of recoveries of ~~$24~~$21 million and ~~$23~~$45 million for the three and six months ended ~~June~~September 30, 2013, respectively, and ~~June~~recoveries of $18 million and $41 million for the three and six months ended September 30, 2012, respectively.

During the first ~~quarter~~half of fiscal 2014, our allowance for credit losses decreased ~~$26~~$60 million from $527 million at March 31, 2013. ~~The~~During the first half of fiscal 2014, our provision for credit losses increased due to increased loss severity, driven by declines in used vehicle values, partially offset by lower default frequency. Despite recent higher loss severity, the decline in our allowance for credit losses was due to the continuation of ~~low loss experience~~lower losses in relation to our historical patterns.

5860

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)	June 30, 2013		March 31, 2013		September 30, 2013		March 31, 2013
Commercial paper1	$	23,876	$	24,590	$	27,517	$	24,590
Unsecured notes and loans payable2		46,634		46,707		46,313		46,707
Secured notes and loans payable		7,628		7,009		7,118		7,009
Carrying value adjustment3		481		526		581		526
Total debt	$	78,619	$	78,832	$	81,529	$	78,832

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.

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 ~~$4.7~~$4.6 billion to ~~$9.6~~$7.0 billion with an average balance of ~~$6.7~~$5.8 billion for the ~~first~~second quarter of fiscal 2014.

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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, 2013 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 countries for which these conditions exist; Portugal, Ireland, Italy, Greece, Spain, Cyprus and certain other countries. We do not currently have exposure to these or other European sovereign counterparties. As of ~~June~~September 30, 2013, 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 $17 billion in committed ~~and uncommitted~~ syndicated and bilateral credit facilities for our liquidity purposes as of ~~June~~September 30, 2013. As of ~~June~~September 30, 2013, less than 3 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” in our fiscal 2013 Form 10-K 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 ~~$23.4~~$23.6 billion to ~~$26.0~~$28.0 billion during the quarter ended ~~June~~September 30, 2013, with an average outstanding balance of ~~$24.6~~$25.3 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 payable4
Balance at March 31, 20131
$ 26,716 $ 13,598 $ 803 $ 5,777 $ 46,894
Issuances during the three months
     ended June 30, 2013
2,905 2
- -
650 3
3,555
Maturities and terminations
     during the three months
     ended June 30, 2013 (2,085) (461) - (650) (3,196)
Balance at June 30, 20131
$ 27,536 $ 13,137 $ 803 $ 5,777 $ 47,253

(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, 20131	$	26,716	$	13,598	$	803	$	5,777	$	46,894
Issuances during the six months
ended September 30, 2013		4,805 2		1,788 3		-		650 4		7,243
Maturities and terminations
during the six months
ended September 30, 2013		(4,710)		(1,896)		-		(900)		(7,506)
Balance at September 30, 20131	$	26,811	$	13,490	$	803	$	5,527	$	46,631

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 ~~three months~~half of fiscal 2014 had terms to maturity ranging from approximately 1 year to 10 years, and had interest rates at the time of issuance ranging from ~~0.3~~0.2 percent to 1.0 percent.

3	EMTNs issued during the first half of fiscal 2014 had terms to maturity ranging from approximately 1 year to 7 years, and had interest rates at the time of issuance ranging from 0.5 percent to 1.8 percent.

4	Consists of long-term borrowings, with terms to maturity ranging from approximately 1 year to 3 years, and had interest rates at the time of issuance ranging from 0.1 percent to 0.6 percent.

45	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,~~2013, 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 ~~€34~~€33 billion was available for issuance at ~~June~~September 30, 2013. 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.

6163

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. 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 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:~~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.

The following are asset-backed securitization transactions that we have executed.

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. We regularly sponsor public securitization trusts that issue securities backed by retail finance receivables, including registered securities that we retain. Funding obtained from our public term securitization transactions is repaid as the underlying Securitized Assets amortize. None of these securities have defaulted, experienced any events of default or failed to pay principal in full at maturity. As of ~~June~~September 30, 2013 and March 31, 2013, we did not have any outstanding lease securitization transactions registered with the SEC.

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

Other Unsecured Credit Agreements

TMCC has entered into additional unsecured credit facilities with various banks. As of ~~June~~September 30, 2013, TMCC had committed bank credit facilities totaling ~~$5.5~~$5.4 billion of which ~~$2.8~~$2.5 billion, ~~$1.2~~$1.3 billion and ~~$1.5~~$1.6 billion mature in fiscal 2014, 2015 and 2016, respectively.

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 2013 Form 10-K.

6466

DERIVATIVE INSTRUMENTS

Risk Management Strategy

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 2013 Form 10-K, and Note 7 – Derivatives, Hedging Activities and Interest Expense in this Form 10-Q for additional information.

6567

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)	June 30, 2013		March 31, 2013		September 30, 2013		March 31, 2013
Gross derivatives assets, net of credit valuation adjustment	$	1,198	$	1,719	$	1,357	$	1,719
Less: Counterparty netting and collateral		(1,151)		(1,661)		(1,295)		(1,661)
Derivative assets, net	$	47	$	58	$	62	$	58

Gross derivative liabilities, net of credit valuation adjustment	$	1,001	$	897	$	852	$	897
Less: Counterparty netting and collateral		(943)		(892)		(851)		(892)
Derivative liabilities, net	$	58	$	5	$	1	$	5
Embedded derivative liabilities	$	7	$	12	$	9	$	12

Collateral represents cash received or deposited under reciprocal arrangements that we have entered into with our derivative counterparties. As of ~~June~~September 30, 2013, we held collateral of ~~$579~~$781 million which offset derivative assets, and we posted collateral of ~~$371~~$337 million which offset derivative liabilities. We also held collateral of ~~$22~~$1 million which we did not use to offset derivative ~~assets.~~assets and we posted collateral of $5 million which we did not use to offset derivative liabilities. As of March 31, 2013, we held collateral of $953 million which offset derivative assets, and we posted collateral of $184 million which offset derivative liabilities. We held collateral of $3 million which we did not use to offset derivative assets, and we posted collateral of $6 million which we did not use to 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 ~~June~~September 30, 2013 were assigned investment grade ratings by a credit rating organization. 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 ~~June~~September 30, 2013, we have daily valuation and collateral exchange arrangements with all of our counterparties. Our collateral agreements with substantially all our counterparties include a zero threshold, full collateralization arrangement, 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, the net amount of 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 2013 Form 10-K for further discussion.

6668

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

(Dollars in millions)	June 30, 2013		March 31, 2013		September 30, 2013		March 31, 2013
Credit Rating
AA	$	-	$	1	$	-	$	1
A		47		56		62		56
BBB		-		2		1		2
Total net counterparty credit exposure	$	47	$	59	$	63	$	59

The amounts above are shown net of credit valuation adjustments of $1 million at ~~June~~September 30, 2013 and March 31, 2013, related to non-performance risk of our counterparties. 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.

6769

NEW ACCOUNTING STANDARDS

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

~~OFF-BALANCE-SHEET~~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 2013 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.

6870

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 ~~June~~September 30, 2013, 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 ~~June~~September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6971

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Litigation

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors set forth under “Item 1A. Risk Factors” in our fiscal 2013 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.

7072

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.

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates during the quarter ended ~~June~~September 30, 2013 that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below. For affiliates that we do not control and that are our affiliates solely due to their common control by our parent Toyota Motor Corporation (“TMC”), a Japanese corporation, we have relied upon TMC for information regarding their activities, transactions and dealings. TMC has provided us with the following ~~information:~~information for the quarterly period ended September 30, 2013:

~~During the quarter ended June 30, 2013, Toyota Tourist International, Inc., (“Toyota Tourist”) a majority-owned subsidiary of Toyota, obtained three~~

·	Toyota Tourist International, Inc., (“Toyota Tourist”) a majority-owned subsidiary of Toyota, obtained two visas from the Iranian embassy in Japan in connection with certain travel arrangements.

·	Tokyo Toyota Motor Co., Ltd. (“Tokyo Toyota Motor”) a wholly owned indirect subsidiary of TMC, performed maintenance services for Toyota vehicles owned by the Iranian embassy in Japan.

These activities contributed an insignificant amount to gross revenues and net profit to TMC. TMC believes that none of the above transactions would subject it or its affiliates to U.S. sanctions. As of the date of this report, TMC has informed us that Toyota Tourist intends to cease conducting the activities described above inand that no determination has been made as to whether Tokyo Toyota Motor will cease conducting the ~~future.~~activities described above.

ITEM 6. EXHIBITS

See Exhibit Index on page ~~73.~~75.

7173

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: ~~August~~November 12, 2013	By ~~/S/ GEORGE E. BORST~~��/S/ MICHAEL GROFF

	~~George E. Borst~~Michael Groff
	President and
	Chief Executive Officer
	(Principal Executive Officer)

Date: ~~August~~November 12, 2013	By /S/ CHRIS BALLINGER

	Chris Ballinger
	Senior Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

7274

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)

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 13, 2013, 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,~~13, 2013, Commission File Number 1-9961.

7375

EXHIBIT INDEX

Exhibit Number	Description	Method of Filing

4.2(b)	Amended and Restated Note Agency Agreement, dated September ~~14, 2012,~~13, 2013, 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.

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,~~13, 2013, 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.

7476

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

7577

The following table summarizes the relative fair value allocation of derivative credit valuation adjustments
within interest expense for the three months ended June 30, 2013 and 2012:

	Three Months Ended
	June 30,
(Dollars in millions)		2013		2012

Loss related to hedge accounting derivatives	$	-	$	1
Loss on non-hedge accounting foreign currency swaps		-		4
Loss on non-hedge accounting interest rate swaps		-		1
Total credit valuation adjustment allocated to interest expense	$	-	$	6

			Maximum commitment amount as of
(Dollars in millions)			June 30, 2013		March 31, 2013
Commitments:
	Commitments under credit facilities with vehicle and
		industrial equipment dealers	$	7,552	$	7,396
	Less: Funded commitments			6,352		6,290
	Unfunded commitments			1,200		1,106

	Minimum lease commitments			70		74
Total unfunded commitments				1,270		1,180
Guarantees and other contingencies:
	Guarantees of affiliate pollution control and solid waste
		disposal bonds		100		100
Total unfunded commitments and guarantees			$	1,370	$	1,280

Wholesale financing demand note facilities				11,753		11,475
Less: Funded facilities				8,951		8,284
Unfunded wholesale financing demand note facilities			$	2,802	$	3,191