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

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

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

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

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

As of July 31, ~~2020,~~2021, the number of outstanding shares of capital stock, no par value per share, of the registrant was 91,500, all of which shares were held by Toyota Financial Services International Corporation.

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.

	Three Months Ended				Three months ended
	June 30,				June 30,
	2020		2019		2021			2020
Financing revenues:
Operating lease	$	2,129	$	2,184	$	2,120		$	2,129
Retail		672		589		791			672
Dealer		111		190		88			111
Total financing revenues		2,912		2,963		2,999			2,912
Depreciation on operating leases		1,685		1,625		1,441			1,685
Interest expense		548		697		286			548
Net financing revenues		679		641		1,272			679

Insurance earned premiums and contract revenues		235		229
Voluntary protection contract revenues and insurance earned premiums						249			235
Investment and other income, net		176		118		156			176
Net financing revenues and other revenues		1,090		988		1,677			1,090

Expenses:
Provision for credit losses		183		75		(3	)		183
Operating and administrative		345		337		384			345
Insurance losses and loss adjustment expenses		75		113
Voluntary protection contract expenses and insurance losses						108			75
Total expenses		603		525		489			603

Income before income taxes		487		463		1,188			487
Provision for income taxes		113		104		267			113

Net income	$	374	$	359	$	921		$	374

	Three Months Ended					Three months ended
	June 30,					June 30,
	2020			2019		2021		2020
Net income	$	374		$	359	$	921	$	374
Other comprehensive income, net of tax
Net unrealized gains on available-for-sale marketable securities [net of tax provision of $5 and $3, respectively]		23			10
Reclassification adjustment for net gains on available-for-sale marketable securities included in investment and other income, net [net of tax provision of $3 and $0, respectively]		(11	)		-
Net unrealized gains on available-for-sale marketable securities [net of tax provision of ($3) and ($5), respectively]							9		23
Reclassification adjustment for net gains on available-for-sale marketable securities included in investment and other income, net [net of tax provision of $0 and $3, respectively]							0		(11	)
Other comprehensive income		12			10		9		12
Comprehensive income	$	386		$	369	$	930	$	386

	June 30,		March 31,		June 30,		March 31,
	2020		2020		2021		2021
ASSETS
Cash and cash equivalents	$	18,894	$	6,790	$	7,417	$	8,195
Restricted cash and cash equivalents		1,798		1,739		3,322		1,957
Investments in marketable securities		4,145		3,820		4,843		4,820
Finance receivables, net of allowance for credit losses of $1,104 and $727		71,117		73,996
Finance receivables, net of allowance for credit losses of $1,147 and $1,178						78,500		79,192
Investments in operating leases, net		35,834		36,387		37,784		37,091
Other assets		2,955		2,823		2,535		2,473
Total assets	$	134,743	$	125,555	$	134,401	$	133,728

LIABILITIES AND SHAREHOLDER’S EQUITY
Debt	$	106,969	$	97,740	$	109,133	$	109,725
Deferred income taxes		5,127		5,458		2,638		2,860
Other liabilities		7,976		7,854		6,105		5,548
Total liabilities		120,072		111,052		117,876		118,133

Commitments and contingencies (Refer to Note 9)

Shareholder’s equity:
Capital stock, no par value (100,000 shares authorized; 91,500 issued and outstanding) at June 30, 2020 and March 31, 2020		915		915
Capital stock, no par value (100,000 shares authorized; 91,500 issued and outstanding) at June 30, 2021 and March 31, 2021						915		915
Additional paid-in capital		2		2		2		2
Accumulated other comprehensive income		27		15		17		8
Retained earnings		13,727		13,571		15,591		14,670
Total shareholder's equity		14,671		14,503		16,525		15,595
Total liabilities and shareholder's equity	$	134,743	$	125,555	$	134,401	$	133,728

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

	June 30,		March 31,		June 30,		March 31,
	2020		2020		2021		2021
ASSETS
Finance receivables, net	$	16,194	$	12,375	$	21,097	$	21,745
Investments in operating leases, net		6,686		5,586		8,585		6,599
Other assets		156		131		58		89
Total assets	$	23,036	$	18,092	$	29,740	$	28,433

LIABILITIES
Debt	$	18,939	$	14,568	$	24,900	$	24,212
Other liabilities		12		12		8		14
Total liabilities	$	18,951	$	14,580	$	24,908	$	24,226

	Three months ended June 30, 2019										Three months ended June 30, 2020
					Accumulated										Accumulated
			Additional		other								Additional		other
	Capital		paid-in		comprehensive		Retained				Capital		paid-in		comprehensive		Retained
	stock		capital		income		earnings		Total		stock		capital		income		earnings			Total
Balance at March 31, 2019	$	915	$	2	$	3	$	12,658	$	13,578
Balance at March 31, 2020											$	915	$	2	$	15	$	13,571		$	14,503

Cumulative-effect of adoption of ASU 2016-13												-		-		-		(218	)		(218	)
Net income		-		-		-		359		359		0		0		0		374			374
Other comprehensive income, net of tax		-		-		10		-		10		0		0		12		0			12
Balance at June 30, 2019	$	915	$	2	$	13	$	13,017	$	13,947
Balance at June 30, 2020											$	915	$	2	$	27	$	13,727		$	14,671

Three months ended June 30, 2020

Accumulated

Additional

other

Capital

paid-in

comprehensive

Retained

stock

capital

income

earnings

Total

Balance at March 31, 2020

$
915

$
2

$
15

$
13,571

$
14,503

Cumulative-effect of adoption of ASU 2016-13

-

-

-

(218
)

(218
)
Net income

-

-

-

374

374

Other comprehensive income, net of tax

-

-

12

-

12

Balance at June 30, 2020

$
915

$
2

$
27

$
13,727

$
14,671

	Three months ended June 30, 2021
					Accumulated
			Additional		other
	Capital		paid-in		comprehensive		Retained
	stock		capital		income		earnings		Total
Balance at March 31, 2021	$	915	$	2	$	8	$	14,670	$	15,595

Net income		0		0		0		921		921
Other comprehensive income, net of tax		0		0		9		0		9
Balance at June 30, 2021	$	915	$	2	$	17	$	15,591	$	16,525

	Three months ended June 30,						Three months ended June 30,
	2020			2019			2021			2020
Cash flows from operating activities:
Net income	$	374		$	359		$	921		$	374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,710			1,655			1,471			1,710
Recognition of deferred income		(603	)		(618	)		(631	)		(603	)
Provision for credit losses		183			75			(3	)		183
Amortization of deferred costs		175			184			238			175
Foreign currency and other adjustments to the carrying value of debt, net		541			44			26			541
Net gains from investments in marketable securities		(125	)		(57	)		(115	)		(125	)
Net change in:
Derivative assets		(18	)		11			0			(18	)
Other assets and accrued interest		84			6			(182	)		84
Deferred income taxes		(259	)		46			(225	)		(259	)
Derivative liabilities		(42	)		(24	)		15			(42	)
Other liabilities		97			45			509			97
Net cash provided by operating activities		2,117			1,726			2,024			2,117

Cash flows from investing activities:
Purchase of investments in marketable securities		(778	)		(495	)		(614	)		(778	)
Proceeds from sales of investments in marketable securities		315			125			509			315
Proceeds from maturities of investments in marketable securities		277			53			200			277
Acquisition of finance receivables		(8,444	)		(7,337	)		(10,509	)		(8,444	)
Collection of finance receivables		6,140			6,174			8,506			6,140
Net change in wholesale and certain working capital receivables		4,423			(334	)		2,775			4,423
Acquisition of investments in operating leases		(2,798	)		(4,153	)		(5,248	)		(2,798	)
Disposals of investments in operating leases		2,232			3,152			3,568			2,232
Long term loans to affiliates								(100	)		0
Payments on long term loans from affiliates		6			6			100			6
Other, net		(14	)		(5	)		(13	)		(14	)
Net cash provided by (used in) investing activities		1,359			(2,814	)
Net cash (used in) provided by investing activities								(826	)		1,359

Cash flows from financing activities:
Proceeds from issuance of debt		16,968			7,336			10,242			16,968
Payments on debt		(6,452	)		(6,013	)		(11,074	)		(6,452	)
Net change in commercial paper		(1,829	)		3,095
Net change in commercial paper and other short-term financing								214			(1,829	)
Net change in financing support provided by affiliates		-			(2	)		7			0
Dividend paid		-			(10	)
Net cash provided by financing activities		8,687			4,406
Net cash (used in) provided by financing activities								(611	)		8,687
Net increase in cash and cash equivalents and restricted cash and cash equivalents		12,163			3,318			587			12,163
Cash and cash equivalents and restricted cash and cash equivalents at the beginning of the period		8,529			3,183			10,152			8,529
Cash and cash equivalents and restricted cash and cash equivalents at the end of the period	$	20,692		$	6,501		$	10,739		$	20,692
Supplemental disclosures:
Interest paid, net	$	692		$	655		$	485		$	692
Income taxes paid, net	$	24		$	18		$	55		$	24

The information furnished in these unaudited interim consolidated financial statements as of and for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 has been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, the unaudited consolidated financial information reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three months ended June 30, ~~2020~~2021 do not necessarily indicate the results which may be expected for the full fiscal year ending March 31, ~~2021~~2022 (“fiscal ~~2021”~~2022”).

These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Toyota Motor Credit Corporation’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, ~~2020~~2021 (“fiscal ~~2020”~~2021”), which was filed with the Securities and Exchange Commission on June ~~4, 2020.~~3, 2021. 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.

~~As of April 1, 2020,~~In fiscal 2021, TMCC began providing private label financial services to third-party automotive and mobility companies commencing with the provision of services to Mazda Motor of America, Inc. (“Mazda”). We are currently offer exclusive private label automotive retail, lease, and dealer financing products and services marketed under the brand Mazda Financial Services to Mazda customers and dealers in the United States. TMCC’s agreement with Mazda is for an initial term of approximately five years. We are leveraging our existing processes and personnel to originate and service the ~~newly originated assets, and~~new assets; however, we will continue to evaluate the private label financial services business, which includes partnering with or transitioning a portion of the business to our affiliates, some of which are not consolidated with TMCC. We have also made certain technology investments to support the Mazda ~~program. TMCC did not acquire any existing Mazda assets or liabilities pursuant to the agreement~~program and ~~we do not expect launch costs to be significant through fiscal year 2021.~~

~~Note 1 – Interim Financial Data (Continued)~~future private label customers.

We adopted Accounting Standards Update (“ASU”) ~~2016-13,~~2020-04, ~~Financial Instruments – Credit Losses~~Reference Rate Reform (Topic ~~326)~~848): ~~Measurement~~Facilitation of ~~Credit Losses~~the Effects of Reference Rate Reform on Financial ~~Instruments~~Reporting, ~~(“ASU 2016-13”),~~ along with the subsequently issued guidance, ~~amending~~which provides temporary optional expedients and ~~clarifying various aspects of ASU 2016-13, using the modified retrospective method as required. In accordance with that method, the comparative period’s information continues~~exceptions for applying generally accepted accounting principles to be reported under the relevant accounting guidance in effect for that period. Upon adoption of ASU 2016-13, the incurred loss impairment method was replaced with a new impairment model that reflects lifetime expected losses for our finance receivables.transactions affected by reference rate reform if certain criteria are met. The adoption of ASU 2016-13 resulted in a cumulative-effect adjustment to opening retained earnings of approximately $218 million, net of taxes, resulting from a pretax increase to our allowance for credit losses on finance receivables of approximately $292 million. Additionally, we have changed the presentation of accrued interest related to finance receivables in the Consolidated Balance Sheets from Finance receivables, net to Other assets. As of April 1, 2020, we have reclassified accrued interest of $190 million from Finance receivables, net to Other assets. The adoptionprovisions of this ~~new guidance did not result in a material impact~~update are available to ~~our available-for-sale debt securities portfolio.~~

~~Refer to Note 2 – Investments in Marketable Securities, Note 3 – Finance Receivables, Net, and Note 5 – Allowance for Credit Losses for additional information.~~

In conjunction with the adoption of ASU 2016-13, we updated our depreciation policy for operating leases so that the useful life of the vehicles incorporates our historical experience on early terminations due to customer defaults. As a result, we changed the presentation for reporting early termination expenses related to customer defaults on investments in operating leases. We now present the effects of operating lease early terminations as part of accumulated depreciation within Investments in operating leases, net in the Consolidated Balance Sheets and Depreciation on operating leases in the Consolidated Statements of Income. The comparative period’s information continues to be reported under the relevant accounting presentation in effect for that period. Refer to Note 4- Investments in Operating Leases, Net for additional information.

~~We adopted ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820),~~ ~~which modifies disclosure requirements related to fair value measurement.~~us until December 31, 2022. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.

We adopted ASU ~~2018-15,~~2020-08, ~~Intangibles – Goodwill~~Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and ~~Other-Internal-Use Software,~~Other Costs, which ~~aligns~~requires an entity to reevaluate the ~~accounting~~amortization period for ~~costs incurred~~callable debt securities held at a premium each reporting period. The premium is amortized to ~~implement a cloud computing arrangement that is a service arrangement with~~ the ~~guidance on capitalizing costs associated with developing or obtaining internal-use software.~~earliest call date of the debt security. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.

In July 2021, the FASB issued ASU 2021-05, Lessors-Certain Leases with Variable Lease Payments (Topic 842), which modifies the lease classification for certain leases. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or rate as an operating lease if certain criteria are met. This ASU is effective for us on April 1, 2022, with early application permitted. We ~~adopted ASU 2019-04,~~ ~~Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.~~ ~~The adoption~~are currently evaluating the impact of this guidance related to Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments did not have a material impact on our consolidated financial statements and related disclosures. The impact to our financial statements for Topic 326, Financial Instruments – Credit Losses is discussed above.

~~We adopted ASU 2018-17,~~ ~~Consolidation (Topic 810)~~, which requires that an indirect interest held through related parties in common control arrangements are to be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The adoption of this guidance did not have a material impactstandard on our consolidated financial statements and related disclosures.

~~In March 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are available until December 31, 2022, when the reference rate replacement activity is expected to have completed. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

Investments in marketable securities consist of debt securities and equity investments. We classify all of our debt securities as ~~available-for-sale.~~available-for-sale (“AFS”). Except when fair value option is elected, AFS debt securities are recorded at fair value with unrealized gains or losses included in accumulated other comprehensive income (“AOCI”), net of applicable taxes. All equity investments are recorded at fair value with changes in fair value included in Investment and other income, net ~~within~~in our Consolidated Statements of Income.

In fiscal 2022, we have elected the fair value option for certain debt securities held within one of our affiliate investment portfolios for operational ease given the size and composition of this portfolio. All debt securities within this specific portfolio are recorded at fair value with changes in fair value included in Investment and other income, net in our Consolidated Statements of Income. We estimate the fair value of these securities using observed transaction prices, independent third-party pricing valuation vendors, and internal valuation models. AFS debt securities for which fair value option is elected are not subject to credit loss impairment. As of June 30, 2021, we held AFS debt securities for which fair value option was elected of $724 million. The difference between the aggregate fair value and the aggregate unpaid principal balance of long-term AFS debt securities for which the fair value option was elected was not significant.

	June 30, 2020									June 30, 2021
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	cost		gains		losses			value		cost		gains		losses			value
Available-for-sale debt securities:
U.S. government and agency obligations	$	171	$	11	$	-		$	182	$	430	$	7	$	(7	)	$	430
Foreign government and agency obligations											31		0		0			31
Municipal debt securities		10		2		-			12		9		2		0			11
Certificates of deposit		-		-		-			-
Commercial paper		605		-		(1	)		604		43		0		0			43
Corporate debt securities		169		18		-			187		641		23		(1	)		663
Mortgage-backed securities:
U.S. government agency		44		2		-			46		27		1		0			28
Non-agency residential		1		-		-			1		13		0		0			13
Non-agency commercial		47		2		(2	)		47		71		3		(1	)		73
Asset-backed securities		70		3		(1	)		72		76		4		0			80
Total available-for-sale debt securities	$	1,117	$	38	$	(4	)	$	1,151	$	1,341	$	40	$	(9	)	$	1,372
Equity investments									2,994									3,471
Total investments in marketable securities								$	4,145								$	4,843

March 31, 2020

Amortized

Unrealized

Unrealized

Fair

cost

gains

losses

value

Available-for-sale debt securities:

U.S. government and agency obligations

$
160

$
16

$
-

$
176

Municipal debt securities

9

2

-

11

Certificates of deposit

250

-

(1
)

249

Commercial paper

604

-

(3
)

601

Corporate debt securities

188

10

(1
)

197

Mortgage-backed securities:

U.S. government agency

47

2

-

49

Non-agency residential

1

-

-

1

Non-agency commercial

47

-

(2
)

45

Asset-backed securities

75

-

(3
)

72

Total available-for-sale debt securities

$
1,381

$
30

$
(10
)

$
1,401

Equity investments

2,419

Total investments in marketable securities

$
3,820

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

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

~~Note 2 – Investments in Marketable Securities (Continued)~~For the three months ended June 30, 2021, non-cash investing activities related to in-kind redemptions and subsequent purchases amounted to $1.1 billion.

Available-for-sale debt securities in a continuous loss position for less than twelve months and greater than twelve months were not significant as of June 30, ~~2020~~2021 and March 31, ~~2020.~~2021.

~~We adopted ASU 2016-13 on April 1, 2020, on a modified retrospective basis, as further described in Note 1 – Interim Financial Data. Under the new guidance, once~~An allowance for credit losses is established when it is determined that a credit loss has occurred, an allowance for credit losses is established. Prior to adoption of this standard, when a decline in fair value of a debt security was determined to be other- than-temporary, an impairment charge for the credit component was recorded in Investment and other income, net and a new cost basis in the investment was established.occurred. As of June 30, ~~2020,~~2021, management determined that credit losses did not exist for securities in an unrealized loss position. This analysis considered a variety of factors including, but not limited to, performance indicators of the issuer, default rates, industry analyst reports, credit ratings, and other relevant information, which indicated that contractual cash flows are expected to occur.

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

	Three months ended				Three months ended
	June 30,				June 30,
	2020		2019		2021		2020
Available-for-sale debt securities:
Unrealized gains for securities for which the fair value option was elected					$	9	$	0
Realized gains	$	14	$	-	$	0	$	14

Equity investments:
Unrealized gains recognized	$	100	$	55
Unrealized gains					$	84	$	100
Realized gains on sales	$	11	$	2	$	22	$	11

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

	June 30, 2020				June 30, 2021
	Amortized cost		Fair value		Amortized cost		Fair value
Available-for-sale debt securities:
Due within 1 year	$	628	$	627	$	147	$	149
Due after 1 year through 5 years		121		129		467		476
Due after 5 years through 10 years		130		141		316		321
Due after 10 years		76		88		224		232
Mortgage-backed and asset-backed securities¹		162		166		187		194
Total	$	1,117	$	1,151	$	1,341	$	1,372

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

Upon adoption of ASU 2016-13, we elected the accounting policy to present accrued interests related to finance receivables within Other assets in the Consolidated Balance Sheets. As of June 30, 2020, accrued interest related to finance receivables is $238 million and is included in Other assets. The comparative period’s information continues to be reported within Finance receivables, net. Upon adoption of ASU 2016-13, we no longer reverse accrued interest receivables from interest income for our dealer products portfolio. For both retail loan and dealer products portfolio segments, accrued interest is written off within allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is greater than 120 days past due.

	June 30,			March 31,			June 30,			March 31,
	2020			2020			2021			2021
Retail receivables ¹	$	58,969		$	57,088		$	69,014		$	66,991
Dealer financing		13,619			17,873			10,786			13,642
		72,588			74,961			79,800			80,633

Deferred origination costs		917			890			1,207			1,145
Deferred income		(1,284	)		(1,128	)		(1,360	)		(1,408	)
Allowance for credit losses
Retail and securitized retail receivables		(933	)		(486	)		(1,052	)		(1,075	)
Dealer financing		(171	)		(241	)		(95	)		(103	)
Total allowance for credit losses		(1,104	)		(727	)		(1,147	)		(1,178	)
Finance receivables, net	$	71,117		$	73,996		$	78,500		$	79,192

Accrued interest related to finance receivables is presented in Other assets on the Consolidated Balance Sheets and was $193 million and $187 million at June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, respectively.

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.

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

Individual borrower accounts within the retail loan portfolio segment are segregated into aging categories based on the number of days outstanding. The aging ~~for each class~~ of finance receivables is updated monthly.

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

The amortized cost of retail loan portfolio excludes accrued interest of $171 million and $160 million at June 30, 2021 and March 31, 2021, respectively. The previous tables include contracts greater than 120 days past due, which are recorded at the fair value of collateral less estimated costs to sell, and contracts in bankruptcy.

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

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

The following ~~table presents~~tables present the amortized cost basis of our ~~retail loan~~dealer products portfolio by credit quality indicator based on ~~number of days outstanding~~internal risk assessments by origination ~~year at June 30, 2020:~~ year:

Amortized Cost Basis by Origination Fiscal Year

2021

2020

2019

2018

2017

2016 and Prior

Total

Aging of finance receivables:

Current

$
7,487

$
21,649

$
12,989

$
9,312

$
4,773

$
1,656

$
57,866

30-59 days past due

4

121

121

102

65

51

464

60-89 days past due

-

36

39

32

19

16

142

90 days or greater past due

-

40

41

31

16

2

130

Total

$
7,491

$
21,846

$
13,190

$
9,477

$
4,873

$
1,725

$
58,602

	Amortized Cost Basis by Origination Fiscal Year at June 30, 2021
	2022		2021		2020		2019		2018		2017 and Prior		Revolving loans		Total
Wholesale
Performing	$	0	$	0	$	0	$	0	$	0	$	0	$	3,482	$	3,482
Credit Watch		0		0		0		0		0		0		83		83
At Risk		0		0		0		0		0		0		15		15
Default		0		0		0		0		0		0	0			0
Wholesale total	$	0	$	0	$	0	$	0	$	0	$	0	$	3,580	$	3,580
Real estate
Performing	$	364	$	1,717	$	280	$	511	$	357	$	1,650	$	0	$	4,879
Credit Watch		0		0		48		3		5		98		0		154
At Risk		9		13		0		0		0		26		0		48
Default		13		0		0		0		0		0		0		13
Real estate total	$	386	$	1,730	$	328	$	514	$	362	$	1,774	$	0	$	5,094
Working Capital
Performing	$	171	$	447	$	285	$	177	$	38	$	259	$	702	$	2,079
Credit Watch		18		1	0			6	0		0		0			25
At Risk	0			1	0		0		0			7	0			8
Default	0		0		0		0		0		0		0			0
Working capital total	$	189	$	449	$	285	$	183	$	38	$	266	$	702	$	2,112
Total	$	575	$	2,179	$	613	$	697	$	400	$	2,040	$	4,282	$	10,786

	Amortized Cost Basis by Origination Fiscal Year at March 31, 2021
	2021		2020		2019		2018		2017		2016 and Prior		Revolving loans		Total
Wholesale
Performing	$	0	$	0	$	0	$	0	$	0	$	0	$	5,893	$	5,893
Credit Watch		0		0		0		0		0		0		218		218
At Risk		0		0		0		0		0		0		35		35
Default		0		0		0		0		0		0		11		11
Wholesale total	$	0	$	0	$	0	$	0	$	0	$	0	$	6,157	$	6,157
Real estate
Performing	$	1,874	$	320	$	596	$	356	$	312	$	1,493	$	0	$	4,951
Credit Watch		8		49		3		20		9		99		0		188
At Risk		13		0		0		0		12		17		0		42
Default		0		0		0		13		9		0		0		22
Real estate total	$	1,895	$	369	$	599	$	389	$	342	$	1,609	$	0	$	5,203
Working Capital
Performing	$	503	$	334	$	200	$	41	$	106	$	176	$	878	$	2,238
Credit Watch		1		0		6		1		0		19		9		36
At Risk		1		0		0		0		7		0		0		8
Default		0		0		0		0		0		0		0		0
Working capital total	$	505	$	334	$	206	$	42	$	113	$	195	$	887	$	2,282
Total	$	2,400	$	703	$	805	$	431	$	455	$	1,804	$	7,044	$	13,642

The amortized cost of ~~retail loan~~the dealer products portfolio excludes accrued interest of ~~$198~~$22 million and $27 million at June 30, ~~2020. The table includes contracts greater than 120 days past due, which~~2021 and March 31, 2021, respectively. As of June 30, 2021 and March 31, 2021, the amount of line-of-credit arrangements that are ~~recorded at the fair value of collateral less estimated costs~~converted to ~~sell, and contracts~~term loans in ~~bankruptcy.~~each reporting period was insignificant, respectively.

~~The following table presents our retail loan portfolio by credit quality indicator at March 31, 2020:~~

~~The following table presents the amortized cost basis of our dealer products portfolio by credit quality indicator based on internal risk assessments by origination year at June 30, 2020:~~

Amortized Cost Basis by Origination Fiscal Year

2021

2020

2019

2018

2017

2016 and Prior

Revolving loans

Total

Wholesale

Performing

$
-

$
-

$
-

$
-

$
-

$
-

$
5,722

$
5,722

Credit Watch

-

-

-

-

-

-

482

482

At Risk

-

-

-

-

-

-

58

58

Default

-

-

-

-

-

-

16

16

Wholesale total

$
-

$
-

$
-

$
-

$
-

$
-

$
6,278

$
6,278

Real estate

Performing

$
515

$
448

$
559

$
496

$
395

$
2,066

$
-

$
4,479

Credit Watch

11

57

34

15

37

176

-

330

At Risk

27

1

1

17

22

14

-

82

Default

-

-

-

14

9

-

-

23

Real estate total

$
553

$
506

$
594

$
542

$
463

$
2,256

$
-

$
4,914

Working Capital

Performing

$
155

$
371

$
224

$
54

$
118

$
220

$
1,115

$
2,257

Credit Watch

6

25

16

1

2

39

15

104

At Risk

-

-

3

1

16

11

35

66

Default

-

-

-

-

-

-

-

-

Working capital total

$
161

$
396

$
243

$
56

$
136

$
270

$
1,165

$
2,427

Total

$
714

$
902

$
837

$
598

$
599

$
2,526

$
7,443

$
13,619

The amortized cost of the dealer products portfolio excludes accrued interest of $40 million at June 30, 2020. As of June 30, 2020, the amount of line-of-credit arrangements that are converted to term loans in each reporting period was insignificant.

~~The following table presents our dealer products portfolio by credit quality indicator at March 31, 2020:~~

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

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

	June 30, 2020														June 30, 2021
	30 - 59 Days past due		60 - 89 Days past due		90 Days or greater past due		Total Past due		Current		Total Finance receivables		90 Days or greater past due and accruing		30 - 59 Days past due		60 - 89 Days past due		90 Days or greater past due		Total Past due		Current		Total Finance receivables		90 Days or greater past due and accruing
Retail loan	$	464	$	142	$	130	$	736	$	57,866	$	58,602	$	67	$	630	$	180	$	73	$	883	$	67,978	$	68,861	$	40
Wholesale		-		-		-		-		6,278		6,278		-		0		0		0		0		3,580		3,580		0
Real estate		-		-		1		1		4,913		4,914		-		0		0		0		0		5,094		5,094		0
Working capital		-		-		-		-		2,427		2,427		-		0		0		0		0		2,112		2,112		0
Total	$	464	$	142	$	131	$	737	$	71,484	$	72,221	$	67	$	630	$	180	$	73	$	883	$	78,764	$	79,647	$	40

~~Finance receivables excludes accrued interest of $238 million as of June 30, 2020.~~

For any customer who is granted a payment extension under an extension program, including the COVID-19 related relief program, the aging of the receivable is adjusted for the number of days of the extension granted, resulting in a favorable delinquency status.

For accounts not under bankruptcy protection, the amount of finance receivables modified as a troubled debt restructuring during the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 was not significant for each class of finance receivables. Troubled debt restructurings for accounts not under bankruptcy protection within the retail loan class of finance receivables are comprised exclusively of contract term extensions that reduce the monthly payment due from the customer. 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 or interest rate adjustments during the three months ended June 30, ~~2020~~2021 and ~~2019.~~2020.

We consider finance receivables under bankruptcy protection within the retail loan class to be 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 months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the financial impact of troubled debt restructurings related to finance receivables under bankruptcy protection was not significant to our Consolidated Statements of Income and Consolidated Balance Sheets.

~~We have~~For a limited time during fiscal 2021 we offered several programs to provide relief to customers during the COVID-19 pandemic. These programs, which were broadly available to our customers, included retail loan payment extensions and lease payment deferrals. We concluded that these programs did not meet troubled debt restructuring criteria due to the short-term nature of the modifications with no change in the contractual interest rate. To provide relief for our dealers we offered certain temporary interest reductions, interest payment deferrals, and interest waivers on dealer floorplan financing, and principal payment deferrals on dealer floorplan financing, dealer real estate and working capital loans. We also concluded that these programs did not meet troubled debt restructuring criteria as the finance receivables from the dealers were current.

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

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

Finance receivables for the dealer products portfolio segment as of June 30, 2021 includes $1,033 million in finance receivables that are guaranteed by Toyota Motor North America, Inc. (“TMNA”), and $171 million in finance receivables that are guaranteed by third-party private Toyota distributors. Finance receivables for the dealer products portfolio segment as of June 30, 2020 includes $989 million in finance receivables that are guaranteed by TMNA, and $127 million in finance receivables that are guaranteed by third-party private Toyota distributors. These finance receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMNA and third-party private Toyota distributors.

For the three months ended June 30, 2020, the allowance for credit losses increased $416 million reflecting an increase to the allowance for credit losses of $292 million related to the adoption of ASU 2016-13, and an increase of $124 million primarily due to the increase in expected credit losses driven by economic conditions caused by the COVID-19 pandemic and the restrictions designed to slow the spread of COVID-19, including stay-at-home orders, increased unemployment, and decreased consumer spending. In addition, the increase in the provision of credit losses was due to the adoption of ASU 2016-13 in fiscal 2021, which replaced the incurred loss impairment model with a model that reflects expected credit losses over the expected life of the finance receivables and certain off-balance sheet lending commitment.

Investments in operating leases, net primarily consists of vehicle lease contracts acquired from dealers. Generally, lessees have the ability to extend their lease term in six month increments up to a total of 12 months from the original lease maturity date. A lease can be terminated at any time by satisfying the obligations under the lease contract. Early termination programs may be occasionally offered to eligible lessees. At the end of the lease, the customer has the option to buy the leased vehicle or return the vehicle to the dealer.

Securitized investments in operating leases represent beneficial interests in a pool of certain vehicle leases that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements as discussed further in Note 8 - Variable Interest Entities. Cash flows from these securitized investments in operating leases are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors.

Operating lease revenues are recognized on a straight-line basis over the term of the lease. We have made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, sales and other taxes assessed by a governmental authority that are both imposed on and concurrent with a specific lease revenue-producing transaction and collected from customers. Deferred fees and costs include incentive payments made to dealers and acquisition fees collected from customers. Deferred income includes payments received on affiliate sponsored subvention and other incentive programs. Both deferred fees and costs and deferred income are capitalized or deferred and amortized on a straight-line basis over the contract term. The accrual of revenue on investments in operating leases is discontinued at the time an account is determined to be uncollectible and subsequent revenue is recognized only to the extent a payment is received. Operating leases may be restored to accrual status when future payments are reasonably assured.

Contractual residual values of vehicle lease contracts are estimated at lease inception by examining external industry data, the anticipated Toyota, Lexus, and Mazda product pipeline and our own experience. Factors considered in this evaluation include, macroeconomic forecasts, new vehicle pricing, new vehicle incentive programs, new vehicle sales, vehicle features and specifications, the mix and level of used vehicle supply, the level of current used vehicle values, and fuel prices. We are exposed to a risk of loss to the extent the customer returns the vehicle and the value of the vehicle is lower than the residual value estimated at inception of the lease or if the number of returned vehicles is higher than anticipated.

Depreciation on operating leases is recognized using the straight-line method over the lease term. The depreciable basis is the original acquisition cost of the vehicle less the estimated residual value of the vehicle at the end of the lease term. On a quarterly basis, we review the estimated end-of-term market values and return rates of leased vehicles to assess the appropriateness of the carrying values at lease-end. Factors affecting the estimated end-of-term market value are similar to those considered in the evaluation of residual values at lease inception discussed above. Adjustments to depreciation expense to reflect revised estimates of expected market values at lease termination and revised return rates are recorded prospectively on a straight-line basis over the remaining lease term.

We use various channels to sell vehicles returned at lease-end. Upon disposition, the difference between the net book value of the lease and the proceeds received from the disposition of the asset, including any insurance proceeds is recorded as an adjustment to depreciation on operating leases.

We evaluate our investment in operating leases portfolio for potential impairment when we determine a triggering event has occurred. When a triggering event has occurred, we perform a test of recoverability by comparing the expected undiscounted future cash flows (including expected residual values) over the remaining lease terms to the carrying value of asset group. If the test of recoverability identifies a possible impairment, the asset groups fair value is measured in accordance with the fair value measurement framework. An impairment charge would be recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value and would be recorded in our Consolidated Statements of Income.

In conjunction with the adoption of ASU 2016-13 on April 1, 2020, we updated our depreciation policy for operating leases so that the useful life of the vehicles incorporates our historical experience on early terminations due to customer defaults. As a result, we changed the presentation for reporting early termination expenses related to customer defaults on investments in operating leases. Previously, we presented the early termination expenses reserve on operating leases as part of the allowance for credit losses which reduced Investments in operating leases, net in the Consolidated Balance Sheets, and as part of Provision for credit losses in the Consolidated Statements of Income. We now consider the effects of operating lease early terminations when determining depreciation estimates, which are included as part of accumulated depreciation within Investments in operating leases, net in the Consolidated Balance Sheets and Depreciation on operating leases in the Consolidated Statements of Income. As of April 1, 2020, the change in presentation increased accumulated depreciation and decreased allowance for credit losses by $90 million. The comparative period’s information continues to be reported under the relevant accounting presentation in effect for that period.

¹~~Includes securitized investments in operating leases of $9.5 billion and $7.9 billion as of June 30, 2020 and March 31, 2020, respectively~~.

Investments in operating leases, net consists of vehicle lease contracts acquired from dealers, and includes deferred origination fees and costs, deferred income, and accumulated depreciation. Securitized investments in operating leases represent beneficial interests in a pool of certain vehicle leases that have been sold for ~~Credit Losses~~legal purposes to securitization trusts but continue to be included in our consolidated financial statements as discussed further in Note 8 - Variable Interest Entities. Cash flows from these securitized investments in operating leases are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors.

Upon adoption of ASU 2016-13 on April 1, 2020, the incurred loss impairment method was replaced with a new impairment model that reflects lifetime expected losses. Management develops and documents the allowance for credit losses on finance receivables based on two portfolio segments. The determination of portfolio segments is based primarily on the qualitative considerationInvestments in operating leases, net consisted of the ~~nature of our business operations and the characteristics of the underlying finance receivables, as follows:~~following:

Management’s estimate of lifetime expected credit losses is based on an evaluation of relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the future collectability of the finance receivables. Management’s evaluation takes into consideration the risks in the retail loan portfolio and dealer products portfolio, past loss experience, delinquency trends, underwriting and collection practices, changes in portfolio composition, economic forecasts and other relevant factors.

The allowance for credit losses is measured on a collective basis when loans have similar risk characteristics. Loans that do not share similar risk characteristics are evaluated on an individual basis. We generally use a discounted cash flow approach for determining allowance for credit losses for finance receivables modified as a troubled debt restructuring that are granted with interest rate concessions, and a non-discounted cash flow approach for other loans.

We measure expected losses of all components of finance receivables on an amortized cost basis, excluding accrued interest, and off-balance-sheet lending commitments that are not unconditionally cancellable by TMCC. Estimated expected credit losses for off-balance-sheet lending commitments within our dealer products portfolio is included in Other liabilities in the Consolidated Balance Sheets. We have elected to exclude accrued interest from the measurement of expected credit losses as we apply policies and procedures that result in the timely write-offs of accrued interest.

The level of credit risk in our retail loan portfolio segment is influenced by various factors such as economic conditions, the used vehicle market, credit quality, contract structure, and collection strategies and practices. We use statistical models to estimate lifetime expected credit losses of our retail loan portfolio segment by applying probability of default and loss given default to the exposure at default on a loan level basis. Probability of default models are developed from internal risk scoring models which consider variables such as delinquency status and other credit quality indicators, as well as historical default frequency. Other credit quality indicators include (but are not limited to): loan-to-value ratio, book payment-to-income ratio, FICO score (at origination), collateral type (new or used, Lexus, Toyota, or Mazda), and term count. Loss given default models forecast the extent of losses given that a default has occurred and considers variables such as collateral, trends in recoveries and other contract structure variables, as well as historical loss severity. Exposure at default represents the expected outstanding principal balance, including the effects of expected prepayment when applicable. The lifetime expected credit losses incorporate the probability-weighted forward-looking macroeconomic forecasts for baseline, favorable, and adverse scenarios. The loan lifetime is regarded by management as the reasonable and supportable period. We use macroeconomic forecasts from a third party and update such forecasts quarterly. On an ongoing basis, we review our models, including macroeconomic factors, the selection of macroeconomic scenarios and their weighting to ensure they reflect the risk of the portfolio.

If management does not believe the models reflect lifetime expected credit losses, an adjustment is made to reflect management judgment regarding observable changes in recent or expected economic trends and conditions, portfolio composition, and other relevant factors. While management uses the best information available to make such evaluations, future adjustments to the allowance for credit losses may be necessary if conditions differ substantially from the assumptions used in making the evaluations.

The level of credit risk in our dealer products portfolio segment is influenced primarily by the financial strength of dealers within our portfolio, dealer concentration, collateral quality, and other economic factors. The financial strength of dealers within our portfolio is influenced by, among other factors, general economic conditions, the overall demand for new and used vehicles and the financial condition of automotive manufacturers. The allowance for credit losses is established for both outstanding dealer finance receivables and certain unfunded off-balance sheet lending commitments. We measure lifetime expected credit losses of our dealer products portfolio segment by applying probability of default and loss given default to the exposure at default on a loan level basis. Probability of default is primarily established based on internal risk assessments. The probability of default model also considers qualitative factors related to macroeconomic outlooks. Loss given default is established based on the nature and market value of the collateral, loan-to-value ratios and other credit quality indicators. Exposure at default represents the expected outstanding principal balance. The lifetime of the loan or lending commitment is regarded by management as the reasonable and supportable period. On an ongoing basis, we review our models to ensure they reflect the risk of the portfolio.

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

Finance receivables for the dealer products portfolio segment as of June 30, 2020 includes $989 million in finance receivables that are guaranteed by Toyota Motor North America, Inc. (“TMNA”), and $127 million in finance receivables that are guaranteed by third party private Toyota distributors. These finance receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMNA and third party private Toyota distributors.

During the first quarter of fiscal 2021, the allowance for credit losses increased $416 million reflecting an increase to the allowance for credit losses of $292 million related to the adoption of ASU 2016-13, and an increase of $124 million primarily due to the increase in expected credit losses driven by economic conditions caused by the COVID-19 pandemic and the restrictions designed to slow the spread of COVID-19, including stay-at-home orders, increased unemployment, and decreased consumer spending. In addition, the increase in the provision of credit losses was due to the adoption of ASU 2016-13 in fiscal 2021, which replaced the incurred loss impairment model with a model that reflects expected credit losses over the expected life of the finance receivables and certain off-balance sheet lending commitment.

¹~~The~~ c~~omparative period’s information continues to be reported under the relevant accounting presentation in effect for that period.~~

Finance receivables for the dealer products portfolio segment as of June 30, 2019 includes $1,088 million in finance receivables that are guaranteed by TMNA, and $132 million in finance receivables that are guaranteed by third party private Toyota distributors. These finance receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMNA and third party private Toyota distributors.

Our liabilities consist mainly of fixed and variable rate debt, denominated in U.S. dollars and various other currencies, which we issue in the global capital markets, while our assets consist primarily of U.S. dollar denominated, fixed rate receivables. We enter into interest rate swaps, and foreign currency swaps to economically hedge the interest rate and foreign currency risks that result from the different characteristics of our assets and liabilities. Our use of derivative transactions is intended to reduce long-term fluctuations in the fair value of assets and liabilities caused by market movements. All of our derivative activities are authorized and monitored by our management and our ~~Asset Liability~~Asset-Liability Committee which provides a framework for financial controls and governance to manage market risk.

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

Our International Swaps and Derivatives Association (“ISDA”) Master Agreements are our master netting agreements which permit multiple transactions to be cancelled and settled with a single net balance paid to either ~~party.~~party for our OTC derivatives. The master netting agreements also contain reciprocal collateral agreements which require the transfer of cash collateral to the party in a net asset position across all transactions. Our collateral agreements with substantially all our counterparties include a zero threshold, full collateralization arrangement. Although we have daily valuation and collateral exchange arrangements with all of our counterparties, due to the time required to move collateral, there may be a delay of up to one day between the exchange of collateral and the valuation of our derivatives. We would not be required to post additional collateral to the counterparties with whom we were in a net liability position at June 30, ~~2020~~2021, if our credit ratings were to decline, since we fully collateralize without regard to credit ratings with these counterparties. In addition, as our collateral agreements include legal right of offset provisions, collateral amounts are netted against derivative assets or derivative liabilities, and the net amount ~~of which~~ is included in Other assets or Other liabilities inon our Consolidated Balance Sheets.

22For our centrally cleared derivatives, variation margin payments are legally characterized as settlement payments and accounted for with corresponding derivative positions as one unit of account as opposed to collateral. Initial margin payments are separately recorded in Other assets on our Consolidated Balance Sheets. We perform valuation and margin exchange on a daily basis. Similar to the OTC swaps, there may be a delay of up to one day between the exchange of margin payments and the valuation of our derivatives.

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

	June 30, 2020					March 31, 2020					June 30, 2021					March 31, 2021
			Fair					Fair					Fair					Fair
	Notional		value			Notional		value			Notional		value			Notional		value
Other assets:
Interest rate swaps	$	32,041	$	1,557		$	30,362	$	1,410		$	48,706	$	1,041		$	44,125	$	1,026
Foreign currency swaps		4,120		81			488		27			7,417		348			7,274		330
Total	$	36,161	$	1,638		$	30,850	$	1,437		$	56,123	$	1,389		$	51,399	$	1,356

Counterparty netting				(969	)				(966	)				(726	)				(840	)
Collateral held				(600	)				(420	)				(609	)				(462	)
Carrying value of derivative contracts – Other assets			$	69				$	51				$	54				$	54

Other liabilities:
Interest rate swaps	$	60,804	$	1,822		$	69,079	$	1,826		$	50,656	$	880		$	55,062	$	1,142
Foreign currency swaps		9,549		704			13,181		1,290			5,283		282			4,321		243
Total	$	70,353	$	2,526		$	82,260	$	3,116		$	55,939	$	1,162		$	59,383	$	1,385

Counterparty netting				(969	)				(966	)				(726	)				(840	)
Collateral posted				(1,554	)				(2,105	)				(420	)				(544	)
Carrying value of derivative contracts – Other liabilities			$	3				$	45				$	16				$	1

As of June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, we held excess collateral of $7$19 million and ~~$10~~$29 million, respectively, which we did not use to offset derivative assets and was recorded in Other liabilities inon our Consolidated Balance Sheets. As of June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, we posted initial margin and excess collateral of ~~$17~~$2 million and $1$10 million, respectively, which we did not use to offset derivative liabilities and was recorded in Other assets inon our Consolidated Balance Sheets.

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

							Three months ended
	Three months ended June 30,						June 30,
	2020			2019			2021			2020
Interest expense on debt	$	576		$	655		$	389		$	576
Interest expense on derivatives		109			12			66			109
Interest expense on debt and derivatives		685			667			455			685

Losses on debt denominated in foreign currencies		548			15			10			548
Gains on foreign currency swaps		(593	)		(108	)
(Gains) losses on U.S. dollar interest rate swaps		(92	)		123
Losses (gains) on foreign currency swaps								25			(593	)
Gains on U.S. dollar interest rate swaps								(204	)		(92	)
Total interest expense	$	548		$	697		$	286		$	548

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

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

	June 30, 2020							March 31, 2020							June 30, 2021							March 31, 2021
	Face value		Carrying value		Weighted average contractual interest rates			Face value		Carrying value		Weighted average contractual interest rates			Face value		Carrying value		Weighted average contractual interest rates			Face value		Carrying value		Weighted average contractual interest rates
Unsecured notes and loans payable	$	88,317	$	88,030		1.80	%	$	83,477	$	83,172		2.07	%		84,483		84,233		1.21	%		85,759		85,513		1.31	%
Secured notes and loans payable		18,976		18,939		1.80	%		14,597		14,568		2.13	%		24,951		24,900		1.15	%		24,256		24,212		1.29	%
Total debt	$	107,293	$	106,969		1.80	%	$	98,074	$	97,740		2.08	%	$	109,434	$	109,133		1.20	%	$	110,015	$	109,725		1.31	%

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

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

Our unsecured notes and loans payable consist of commercial paper and fixed and variable rate debt. Short-term funding needs are met through the issuance of commercial paper in the U.S. Amounts outstanding under our commercial paper programs were ~~$24.9 billion and $27.0~~$17.0 billion as of June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, respectively.

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

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

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

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

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

~~In November 2019,~~ TMCC, Toyota Credit de Puerto Rico Corp. (“TCPR”), and other Toyota affiliates ~~re-entered into~~are party to a $5.0 billion ~~364 day~~364-day syndicated bank credit facility, a $5.0 billion ~~three year~~three-year syndicated bank credit facility, and a $5.0 billion ~~five year~~five-year syndicated bank credit facility, expiring in fiscal ~~2021,~~2022, 2023, and 2025, respectively.

The ability to make draws is subject to covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. These agreements ~~may be used for general corporate purposes~~were 0t drawn upon and ~~0ne were drawn upon~~had 0 outstanding balances as of June 30, ~~2020~~2021 and March 31, ~~2020.~~2021. We are currently in compliance with the covenants and conditions of the credit agreements described above.

~~In July 2020, we entered into~~We are party to a ~~364 day~~364-day revolving securitization facility with certain bank-sponsored asset-backed conduits and other financial ~~institutions.~~institutions expiring in fiscal 2023. Under the terms and subject to the conditions of this facility, the committed lenders under the facility have committed to make advances up to a facility limit of ~~$6.5~~$7.0 billion backed by eligible retail finance receivables transferred by us to a special-purpose entity acting as borrower. This revolving facility allows us to obtain term funding and, with the consent of the committed lenders, may be renewed on an annual basis. Any utilized portion of the facility that is not renewed is repaid as the underlying assets amortize. As of ~~July 31, 2020, $2~~June 30, 2021, $2.7 billion of this facility was utilized. We may obtain additional funding as we pay down the outstanding debt in conjunction with the amortization of transferred receivables, subject to having a sufficient amount of eligible receivables. Our utilization and renewal strategies are driven by economic considerations as well as our funding and liquidity needs.

TMCC ~~has entered into~~is party to additional unsecured credit facilities with various banks. As of June 30, ~~2020,~~2021, TMCC had committed bank credit facilities totaling ~~$4.6~~$4.4 billion, of which ~~$2.1~~$2.0 billion, ~~$300 million, $1.9~~$2.1 billion, and $300 million mature in fiscal ~~2021,~~ 2022, 2023, and 2024, respectively.

These credit agreements contain covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. These credit facilities were 0t drawn upon and had 0 outstanding balances as of June 30, ~~2020~~2021 and March 31, ~~2020.~~2021. We are currently in compliance with the covenants and conditions of the credit agreements described above.

TMCC is party to a $5.0 billion ~~three year~~three-year revolving credit facility with Toyota Motor Sales U.S.A., Inc. expiring in fiscal ~~2022.~~2025. This credit facility was 0t drawn upon and had 0 outstanding balance as of June 30, ~~2020 for a principal amount of $3.0 billion with an interest rate of 1.86%, maturing on September 30, 2020. The amount was recorded in Other liabilities on our Consolidated Balance Sheet~~2021 and ~~funds were used for general corporate purposes. On July 30, 2020, we voluntarily repaid the $3.0 billion draw and accrued interest in full.~~March 31, 2021.

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

We use one or more special purpose entities that are considered Variable Interest Entities (“VIEs”) to issue asset-backed securities to ~~third party~~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 inon our Consolidated Balance Sheets:

	June 30, 2020										June 30, 2021
			VIE Assets				VIE Liabilities						VIE Assets				VIE Liabilities
			Net										Net
	Restricted cash		securitized assets		Other assets		Debt		Other liabilities		Restricted cash		securitized assets		Other assets		Debt		Other liabilities
Retail finance receivables	$	973	$	16,194	$	35	$	14,500	$	11	$	1,344	$	21,097	$	45	$	18,819	$	7
Investments in operating leases		356		6,686		121		4,439		1		504		8,585		13		6,081		1
Total	$	1,329	$	22,880	$	156	$	18,939	$	12	$	1,848	$	29,682	$	58	$	24,900	$	8

	March 31, 2020										March 31, 2021
			VIE Assets				VIE Liabilities						VIE Assets				VIE Liabilities
			Net										Net
	Restricted cash		securitized assets		Other assets		Debt		Other liabilities		Restricted cash		securitized assets		Other assets		Debt		Other liabilities
Retail finance receivables	$	694	$	12,375	$	5	$	10,933	$	10	$	1,521	$	21,745	$	46	$	19,665	$	13
Investments in operating leases		302		5,586		126		3,635		2		436		6,599		43		4,547		1
Total	$	996	$	17,961	$	131	$	14,568	$	12	$	1,957	$	28,344	$	89	$	24,212	$	14

Restricted Cash, including cash equivalents, shown in the previous table ~~above~~ represents collections from the underlying Net securitized assets and certain reserve deposits held by TMCC for the VIEs and is included as part of Restricted cash and cash equivalents on our Consolidated Balance Sheets. Net securitized assets shown in the previous table ~~above~~ are presented net of deferred fees and costs, deferred income, accumulated depreciation and ~~the~~ allowance for credit losses. Other ~~Assets~~assets represent accrued interests related to securitized retail finance receivables and used vehicles held-for-sale that were repossessed by or returned to TMCC for the benefit of the VIEs.

In conjunction with the adoption of ASU 2016-13, we have changed the presentation of accrued interest related to finance receivables in the Consolidated Balance Sheets from Finance receivables, net to Other assets. As a result, Other assets as of June 30, 2020 include accrued interest related to securitized retail finance receivables. The comparative period’s information continues to be reported under the relevant accounting presentation in effect for that period. The related debt of these consolidated VIEs is presented net of ~~$1,248~~$1,459 million and ~~$1,182~~$1,409 million of securities retained by TMCC at June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, respectively. Other liabilities represent accrued interest on the debt of the consolidated VIEs.

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

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

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

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

We provide lending to Toyota and Lexus dealers through the Toyota Dealer Investment Group’s Dealer Capital Program (“TDIG Program”) operated by our affiliate TMNA, which has an equity interest in these dealerships. Dealers participating in this program have been determined to be VIEs. We do not consolidate the dealerships in this program as we are not the primary beneficiary and any exposure to loss is limited to the amount of the credit facility. Amounts due from these dealers under the TDIG Program that are classified as Finance receivables, net in our Consolidated Balance Sheets as of June 30, ~~2020~~2021 and March 31, ~~2020~~2021 and revenues earned from these dealers for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 were not significant.

We also have other lending relationships which have been determined to be VIEs, but these relationships are not consolidated as we are not the primary beneficiary. Amounts due and revenues earned under these relationships as of and for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 were not significant.

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

	June 30,		March 31,		June 30,		March 31,
	2020		2020		2021		2021
Commitments:
Credit facilities commitments with dealers	$	2,100	$	1,226	$	2,967	$	2,338
Commitments under operating lease agreements		134		139		132		141
Total commitments		2,234		1,365		3,099		2,479
Guarantees of affiliate pollution control and solid waste disposal bonds		100		100		100		100
Total commitments and guarantees	$	2,334	$	1,465	$	3,199	$	2,579

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

We provide fixed and variable rate working capital loans, revolving lines of credit, and real estate financing to dealers and various multi-franchise organizations referred to as dealer groups for facilities construction and refurbishment, working capital requirements, real estate purchases, business acquisitions and other general business purposes. These loans are typically secured with liens on real estate, vehicle inventory, and/or other dealership assets, as appropriate, and may be guaranteed by individual or corporate guarantees of affiliated dealers, dealer groups, or dealer principals. Although the loans are typically collateralized or guaranteed, the value of the underlying collateral or guarantees may not be sufficient to cover our exposure under such agreements. Our pricing reflects market conditions, the competitive environment, the level of support dealers provide our retail, lease and ~~insurance~~voluntary protection business 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 have also extended credit facilities to affiliates as described in Note 12 – Related Party Transactions in our fiscal ~~2020~~2021 Form 10-K.

Our operating lease portfolio consists of real estate leases. Total operating lease expense, including payments to affiliates, was $9$8 million for the three months ended June 30, ~~2020.~~2021, as compared to $9 million for the same period in fiscal 2021. We have a lease agreement through August 2032 with TMNA for our headquarters facility in Plano, Texas. Commitments under operating lease agreements in the previous table ~~above~~ include ~~$99~~$91 million and ~~$102~~$93 million for facilities leases with affiliates at June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, respectively.

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

	Amounts due on operating lease liabilities as of						June 30,
Years ending March 31,	June 30, 2020			March 31, 2020			2021
2021 ¹	$	16		$	21
2022		23			23		$	16
2023		15			15			18
2024		12			12			16
2025		10			10			13
2026								12
Thereafter		58			58			57
Total	$	134		$	139		$	132
Present value discount		(18	)		(19	)		(15	)
Total operating lease liability	$	116		$	120		$	117

¹~~Amounts due on operating lease liabilities as of June 30, 2020 excludes the amounts incurred for the three months ended June 30, 2020~~.

Operating lease liabilities and right-of-use (“ROU”) assets are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. As the interest rate implicit in the lease contract is typically not readily determinable, we utilize our incremental borrowing rate at the lease commencement date for the duration of the lease term.

The following table provides additional information related to operating lease agreements for which we are the lessee:

	June 30,		June 30,
	2020		2021
ROU assets	$	110	$	107
Weighted average remaining lease term (in years)	9.20			8.7
Weighted average discount rate	3.06%			2.77	%

Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows			$	10

TMCC has guaranteed bond obligations totaling $100 million in principal that were issued by Putnam County, West Virginia and Gibson County, Indiana to finance the construction of pollution control facilities at manufacturing plants of certain TMCC affiliates. The bonds mature in the following fiscal years ending March 31: 2028 - $20 million; 2029 - $50 million; 2030 - $10 million; 2031 - $10 million; and 2032 - $10 million. TMCC would be required to perform under the guarantees in the event of non-payment on the bonds and other related obligations. TMCC is entitled to reimbursement by the applicable affiliates for any amounts paid. TMCC receives a nominal annual fee for guaranteeing such payments. TMCC has not been required to perform under any of these affiliate bond guarantees as of June 30, ~~2020~~2021 and March 31, ~~2020.~~2021.

In the ordinary course of business, we enter into agreements containing indemnification provisions standard in the industry related to several types of transactions, including, but not limited to, debt funding, derivatives, securitization transactions, and our vendor, supplier and service agreements. Performance under these indemnities would generally occur upon a breach of the representations, warranties, covenants or other commitments made or given in the agreement, or as a result of a ~~third party~~third-party claim. In addition, we have agreed in certain debt and derivative issuances, and subject to certain exceptions, to gross-up payments due to third parties in the event that withholding tax is imposed on such payments. In addition, certain of our funding arrangements may require us to pay lenders for increased costs due to certain changes in laws or regulations. Due to the difficulty in predicting events which could cause a breach of the indemnification provisions or trigger a gross-up or other payment obligation, we are not able to estimate our maximum exposure to future payments that could result from claims made under such provisions. We have not made any material payments in the past as a result of these provisions, and as of June 30, ~~2020,~~2021, we determined that it is not probable that we will be required to make any material payments in the future. As of June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, 0 amounts have been recorded under these indemnification provisions.

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

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

On November 24, 2020, the Consumer Financial Protection Bureau (“CFPB”) issued a civil investigative demand to the Company seeking, among other things, certain information relating to the Company’s vehicle and payment protection products and credit reporting policies and procedures and reporting records. We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the amount or range of any potential loss arising from this investigation.

Our provision for income taxes was $267 million for the three months ended June 30, 2021, compared to $113 million for the same period in fiscal 2021. Our effective tax rate was 2322 percent for the three months ended June 30, ~~2020,~~2021, compared to 2223 percent for the same period in fiscal ~~2020. Our provision for income taxes was $113 million for the three months ended June 30, 2020, compared to $104 million for the same period in fiscal 2020.~~2021. The increase in the provision for income taxes for the ~~first quarter of fiscal~~three months ended June 30, 2021, compared to the same period in fiscal ~~2020,~~2021, was primarily due to the increase in income before income taxes. The ~~increase~~change in ~~the~~our effective tax rate for the ~~first quarter of fiscal~~three months ended June 30, 2021, compared to the same period in fiscal ~~2020,~~2021, was primarily ~~due~~attributable to the tax benefit ~~recorded~~from the federal tax credits recognized in fiscal ~~2020 related to state tax law changes taking effect during that fiscal year.~~2022.

As of June 30, ~~2020,~~2021, we remain under IRS examination for fiscal ~~2021, 2020, 2019 and 2018.~~2018 through fiscal 2022.

We periodically review our uncertain tax positions. Our assessment is based on many factors including any ongoing IRS audits. For the three months ended June 30, ~~2020,~~2021, our assessment did not result in a material change in unrecognized tax benefits.

Our deferred tax assets include the deferred deduction of allowance for credit losses and residual value ~~losses~~loss estimates and other deferred costs. The total deferred tax liability, net of these deferred tax assets, was ~~$5.1~~$2.6 billion and ~~$5.5~~$2.9 billion at June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, respectively. Although realization of the deferred tax assets is not assured, management believes it is more likely than not that the deferred tax assets will be realized. The amount of the deferred tax assets considered realizable could be reduced if management’s estimates change.

AsIn April 2021, TMCC increased financing support available to Toyota Finance New Zealand Limited to $250 million. In August 2021, TMCC increased financing support available to Toyota Financial Savings Bank to $1.0 billion.

Except for the transactions mentioned above, as of June 30, ~~2020,~~2021, there were no material changes to our related party agreements or relationships as described in our fiscal ~~2020~~2021 Form 10-K. The tables below show the financial statement line items and amounts included in our Consolidated Statements of Income and in our Consolidated Balance Sheets under various related party agreements or relationships:

	Three months ended						Three months ended
	June 30,						June 30,
	2020			2019			2021			2020
Net financing revenues:
Manufacturer's subvention and other revenues	$	499		$	512		$	479		$	499
Depreciation on operating leases	$	(23	)	$	(10	)	$	(28	)	$	(23	)

Interest expense:
Credit support fees, interest and other expenses	$	38		$	24		$	24		$	38

Insurance earned premiums and contract revenues:
Insurance premiums and contract revenues	$	44		$	45
Voluntary protection contract revenues and insurance earned premiums:
Voluntary protection contract revenues and insurance earned premiums							$	42		$	44

Investment and other income, net:
Interest and other income	$	8		$	6		$	3		$	8

Expenses:
Operating and administrative expenses	$	20		$	21		$	21		$	20

	June 30,			March 31,			June 30,			March 31,
	2020			2020			2021			2021
Assets:
Cash and cash equivalents
Commercial paper	$	25		$	276		$	2		$	6

Investments in marketable securities
Commercial paper	$	604		$	601		$	43		$	196

Finance receivables, net
Accounts receivable	$	96		$	112		$	116		$	140
Deferred retail subvention income	$	(1,156	)	$	(1,065	)	$	(1,102	)	$	(1,156	)

Investments in operating leases, net
Investments in operating leases, net	$	(145	)	$	(100	)	$	(240	)	$	(236	)
Deferred lease subvention income	$	(1,762	)	$	(1,941	)	$	(1,477	)	$	(1,528	)

Other assets
Notes receivable	$	1,169		$	1,175		$	869		$	869
Other receivables, net	$	174		$	97		$	84		$	83

Liabilities:
Other liabilities
Unearned affiliate insurance premiums and contract revenues	$	335		$	344
Unearned voluntary protection contract revenues and insurance earned premiums							$	363		$	352
Other payables, net	$	152		$	220		$	183		$	306
Notes payable	$	3,032		$	3,032		$	26		$	19

TMCC receives subvention payments from TMNA which results in a gross monthly subvention receivable. As of June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, the subvention receivable from TMNA was ~~$271~~$138 million and ~~$113~~$184 million, respectively. We have a master netting agreement with TMNA which allows us to net settle payments for shared services and subvention transactions. Under this agreement, as of June 30, ~~2020, we had a net amount receivable from TMNA which is recorded in Other receivables, net in Other assets. As of~~2021 and March 31, ~~2020,~~2021, respectively, we had a net amount payable to TMNA which is recorded in Other payables, net in Other liabilities.

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

	June 30, 2020													June 30, 2021
								Counterparty													Counterparty
								netting &			Fair										netting &			Fair
	Level 1		Level 2			Level 3		collateral			value			Level 1		Level 2			Level 3		collateral			value
Investments in marketable securities:
Available-for-sale debt securities:
U.S. government and agency obligations	$	180	$	2		$	-	$	-		$	182		$	419	$	11		$	0	$	0		$	430
Foreign government and agency obligations															0		31			0		0			31
Municipal debt securities		-		12			-		-			12			0		8			3		0			11
Certificates of deposit		-		-			-		-			-
Commercial paper		-		604			-		-			604			0		43			0		0			43
Corporate debt securities		-		187			-		-			187			0		663			0		0			663
Mortgage-backed securities:
U.S. government agency		-		46			-		-			46			0		28			0		0			28
Non-agency residential		-		-			1		-			1			0		9			4		0			13
Non-agency commercial		-		-			47		-			47			0		70			3		0			73
Asset-backed securities		-		-			72		-			72			0		63			17		0			80
Available-for-sale debt securities total		180		851			120		-			1,151			419		926			27		0			1,372
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value												771													1,111
Total return bond funds		2,223		-			-		-			2,223			1,415		0			0		0			1,415
Equity mutual funds															945		0			0		0			945
Equity investments total		2,223		-			-		-			2,994			2,360		0			0		0			3,471
Investments in marketable securities total		2,403		851			120		-			4,145			2,779		926			27		0			4,843
Derivative assets:
Interest rate swaps		-		1,557			-		-			1,557			0		1,041			0		0			1,041
Foreign currency swaps		-		81			-		-			81			0		348			0		0			348
Counterparty netting and collateral		-		-			-		(1,569	)		(1,569	)		0		0			0		(1,335	)		(1,335	)
Derivative assets total		-		1,638			-		(1,569	)		69			0		1,389			0		(1,335	)		54
Assets at fair value		2,403		2,489			120		(1,569	)		4,214			2,779		2,315			27		(1,335	)		4,897
Derivative liabilities:
Interest rate swaps		-		(1,822	)		-		-			(1,822	)		0		(880	)		0		0			(880	)
Foreign currency swaps		-		(704	)		-		-			(704	)		0		(282	)		0		0			(282	)
Counterparty netting and collateral		-		-			-		2,523			2,523			0		0			0		1,146			1,146
Liabilities at fair value		-		(2,526	)		-		2,523			(3	)		0		(1,162	)		0		1,146			(16	)
Net assets at fair value	$	2,403	$	(37	)	$	120	$	954		$	4,211		$	2,779	$	1,153		$	27	$	(189	)	$	4,881

	March 31, 2020													March 31, 2021
								Counterparty													Counterparty
								netting &			Fair										netting &			Fair
	Level 1		Level 2			Level 3		collateral			value			Level 1		Level 2			Level 3		collateral			value
Investments in marketable securities:
Available-for-sale debt securities:
U.S. government and agency obligations	$	174	$	2		$	-	$	-		$	176		$	209	$	2		$	0	$	0		$	211
Municipal debt securities		-		11			-		-			11			0		10			0		0			10
Certificates of deposit		-		249			-		-			249
Commercial paper		-		601			-		-			601			20		176			0		0			196
Corporate debt securities		-		197			-		-			197			0		187			0		0			187
Mortgage-backed securities:
U.S. government agency		-		49			-		-			49			0		32			0		0			32
Non-agency residential		-		-			1		-			1			0		0			1		0			1
Non-agency commercial		-		-			45		-			45			0		5			42		0			47
Asset-backed securities		-		-			72		-			72			0		19			33		0			52
Available-for-sale debt securities total		174		1,109			118		-			1,401			229		431			76		0			736
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value												746													772
Total return bond funds		1,673		-			-		-			1,673			2,429		0			0		0			2,429
Equity mutual funds															883		0			0		0			883
Equity investments total		1,673		-			-		-			2,419			3,312		0			0		0			4,084
Investments in marketable securities total		1,847		1,109			118		-			3,820			3,541		431			76		0			4,820
Derivative assets:
Interest rate swaps		-		1,410			-		-			1,410			0		1,026			0		0			1,026
Foreign currency swaps		-		27			-		-			27			0		330			0		0			330
Counterparty netting and collateral		-		-			-		(1,386	)		(1,386	)		0		0			0		(1,302	)		(1,302	)
Derivative assets total		-		1,437			-		(1,386	)		51			0		1,356			0		(1,302	)		54
Assets at fair value		1,847		2,546			118		(1,386	)		3,871			3,541		1,787			76		(1,302	)		4,874
Derivative liabilities:
Interest rate swaps		-		(1,826	)		-		-			(1,826	)		0		(1,142	)		0		0			(1,142	)
Foreign currency swaps		-		(1,290	)		-		-			(1,290	)		0		(243	)		0		0			(243	)
Counterparty netting and collateral		-		-			-		3,071			3,071			0		0			0		1,384			1,384
Liabilities at fair value		-		(3,116	)		-		3,071			(45	)		0		(1,385	)		0		1,384			(1	)
Net assets at fair value	$	1,847	$	(570	)	$	118	$	1,685		$	3,826		$	3,541	$	402		$	76	$	82		$	4,873

The ~~following tables summarize the rollforward of all~~Level 3 financial assets and liabilities ~~measured~~recorded at fair value ~~on a~~which are subject to recurring ~~basis using significant unobservable inputs:~~

~~Excluded from the Three Months Ended June 30, 2019 table above is an interest rate swap. This instrument had a~~and nonrecurring fair value measurement, and the corresponding activity and change in the fair value measurements of ~~$1 million as of March 31, 2019, gains included in net income of $18 million~~these assets and ~~settlements of $6 million. It was transferred out of Level 3 but still held by the Company~~liabilities, were not significant to our Consolidated Balance Sheets as of June 30, ~~2019.~~

~~Note 12 – Fair Value Measurements (Continued)~~2021and March 31, 2021, or Consolidated Statements of Income for the three months ended June 30, 2021 and 2020.

Nonrecurring fair value measurements include Level 3 net finance receivables that are not measured at fair value on a recurring basis but are subject to fair value adjustments utilizing the fair value of the underlying collateral when there is evidence of impairment. We did not have any significant nonrecurring fair value items as of June 30, ~~2020~~2021 and March 31, ~~2020.~~

The Level 3 financial assets and liabilities recorded at fair value which are 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 Sheets or Consolidated Statements of Income as of and for the three months ended June 30, 2020 and as of and for the year ended March 31, 2020.2021.

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

	June 30, 2020										June 30, 2021
	Carrying								Total Fair		Carrying								Total Fair
	value		Level 1		Level 2		Level 3		value		value		Level 1		Level 2		Level 3		value
Financial assets
Finance receivables
Retail loan	$	57,666	$	-	$	-	$	60,540	$	60,540	$	67,974	$	0	$	0	$	71,323	$	71,323
Wholesale		6,237		-		-		6,304		6,304		3,570		0		0		3,591		3,591
Real estate		4,850		-		-		4,628		4,628		5,038		0		0		5,149		5,149
Working capital		2,267		-		-		2,092		2,092		1,992		0		0		1,959		1,959

Financial liabilities
Unsecured notes and loans payable	$	88,030	$	-	$	89,520	$	491	$	90,011	$	84,233	$	0	$	85,562	$	55	$	85,617
Secured notes and loans payable		18,939		-		-		19,297		19,297		24,900		0		0		25,169		25,169

	March 31, 2020										March 31, 2021
	Carrying								Total Fair		Carrying								Total Fair
	value		Level 1		Level 2		Level 3		value		value		Level 1		Level 2		Level 3		value
Financial assets
Finance receivables, net
Finance receivables
Retail loan	$	56,360	$	-	$	-	$	57,303	$	57,303	$	65,808	$	0	$	0	$	69,007	$	69,007
Wholesale		9,672		-		-		9,637		9,637		6,132		0		0		6,158		6,158
Real estate		4,544		-		-		4,140		4,140		5,142		0		0		5,224		5,224
Working capital		3,308		-		-		2,811		2,811		2,154		0		0		2,171		2,171

Financial liabilities
Unsecured notes and loans payable	$	83,172	$	-	$	82,429	$	560	$	82,989	$	85,513	$	0	$	86,205	$	555	$	86,760
Secured notes and loans payable		14,568		-		-		14,608		14,608		24,212		0		0		24,478		24,478

~~In conjunction with the adoption of ASU 2016-13, we have changed the presentation of accrued~~Accrued interest related to finance receivables is in Other assets in the Consolidated Balance ~~Sheet from Finance receivables, net to Other assets;~~Sheets; however, TMCC measures the fair value of each class of finance receivables using scheduled principal and interest payments. Therefore, accrued interest has been included in the carrying value of each class of finance receivables in the ~~table above,~~previous tables, along with the finance receivables, deferred origination costs, deferred income, and ~~the~~ allowance for credit losses. Finance receivables in the ~~table above~~previous tables excludes related party transactions, for which the fair value approximates the carrying value, of ~~$94~~$116 million and ~~$109~~$140 million at June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, respectively. Fair values of related party finance receivables, net are classified as Level 3 ofwithin the fair value hierarchy.

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

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

	Three months ended June 30, 2020									Three months ended June 30, 2021
	Finance		Insurance		Intercompany					Finance			Voluntary protection		Intercompany
	operations		operations		eliminations			Total		operations			operations		eliminations			Total

Total financing revenues	$	2,912	$	-	$	-		$	2,912	$	2,999		$	0	$	0		$	2,999
Depreciation on operating leases		1,685		-		-			1,685		1,441			0		0			1,441
Interest expense		548		-		-			548		286			0		0			286
Net financing revenues		679		-		-			679		1,272			0		0			1,272

Insurance earned premiums and contract revenues		-		235		-			235
Voluntary protection contract revenues and insurance earned premiums											0			249		0			249
Investment and other income, net		32		144		-			176		19			137		0			156
Net financing and other revenues		711		379		-			1,090		1,291			386		0			1,677

Expenses:
Provision for credit losses		183		-		-			183		(3	)		0		0			(3	)
Operating and administrative expenses		256		89		-			345		292			92		0			384
Insurance losses and loss adjustment expenses		-		75		-			75
Voluntary protection contract expenses and insurance losses											0			108		0			108
Total expenses		439		164		-			603		289			200		0			489

Income before income taxes		272		215		-			487		1,002			186		0			1,188
Provision for income taxes		62		51		-			113		221			46		0			267

Net income	$	210	$	164	$	-		$	374	$	781		$	140	$	0		$	921

Total assets at June 30, 2020	$	129,065	$	5,720	$	(42	)	$	134,743
Total assets at June 30, 2021										$	128,015		$	6,524	$	(138	)	$	134,401

Three months ended June 30, 2019

Finance

Insurance

Intercompany

operations

operations

eliminations

Total

Total financing revenues

$
2,963

$
-

$
-

$
2,963

Depreciation on operating leases

1,625

-

-

1,625

Interest expense

703

-

(6
)

697

Net financing revenues

635

-

6

641

Insurance earned premiums and contract revenues

-

229

-

229

Investment and other income, net

37

87

(6
)

118

Net financing and other revenues

672

316

-

988

Expenses:

Provision for credit losses

75

-

-

75

Operating and administrative expenses

246

91

-

337

Insurance losses and loss adjustment expenses

-

113

-

113

Total expenses

321

204

-

525

Income before income taxes

351

112

-

463

Provision for income taxes

76

28

-

104

Net income

$
275

$
84

$
-

$
359

Total assets at June 30, 2019

$
117,506

$
5,191

$
(1,154
)

$
121,543

	Three months ended June 30, 2020
	Finance		Voluntary protection		Intercompany
	operations		operations		eliminations			Total

Total financing revenues	$	2,912	$	0	$	0		$	2,912
Depreciation on operating leases		1,685		0		0			1,685
Interest expense		548		0		0			548
Net financing revenues		679		0		0			679

Voluntary protection contract revenues and insurance earned premiums		0		235		0			235
Investment and other income, net		32		144		0			176
Net financing and other revenues		711		379		0			1,090

Expenses:
Provision for credit losses		183		0		0			183
Operating and administrative expenses		256		89		0			345
Voluntary protection contract expenses and insurance losses		0		75		0			75
Total expenses		439		164		0			603

Income before income taxes		272		215		0			487
Provision for income taxes		62		51		0			113

Net income	$	210	$	164	$	0		$	374

Total assets at June 30, 2020	$	129,065	$	5,720	$	(42	)	$	134,743

~~Insurance~~Voluntary protection operations – ~~Revenue Recognition~~Contract revenues

For the three months ended June 30, 2021 and 2020, ~~and 2019,~~ approximately 8382 percent and 8483 percent, respectively, of ~~Insurance earned premiums and~~voluntary protection contract revenues in the ~~Insurance~~Voluntary protection operations segment were accounted for under the guidance for revenue from contracts with customers.

The ~~Insurance~~Voluntary protection operations segment defers contractually determined incentives paid to dealers as contract costs for selling ~~vehicle and payment~~voluntary protection products. These costs are recorded in Other assets on our Consolidated Balance Sheets and are amortized to Operating and administrative expenses onin the Consolidated Statements of Income using a methodology consistent with the recognition of revenue. The amount of capitalized dealer incentives and the related amortization was not significant to our consolidated financial statements as of and for the three months ended June 30, ~~2020~~2021 and ~~2019.~~2020.

We had $2.4 billion and ~~$2.2~~$2.5 billion of unearned ~~insurance premiums and~~voluntary protection contract revenues from contracts with customers included in Other liabilities on our Consolidated Balance Sheets as of March 31, 2020 and ~~2019,~~March 31, 2021, respectively. We recognized ~~$188~~$192 million of these balances in ~~Insurance earned premiums and~~voluntary protection contract revenues in our Consolidated Statements of Income during the three months ended June 30, ~~2020,~~2021, compared to ~~$182~~$188 million recognized during the same period in fiscal ~~2020.~~2021. At June 30, ~~2020,~~2021, we had unearned ~~insurance premiums and~~voluntary protection contract revenues of ~~$2.3~~$2.5 billion included in Other liabilities on our Consolidated Balance Sheets, and with respect to this balance we expect to recognize revenue of ~~$534~~$558 million during fiscal ~~2021~~2022, and ~~$1.8~~$1.9 billion thereafter. At June 30, ~~2019,~~2020, we had unearned ~~insurance premiums and~~voluntary protection contract revenues of $2.3 billion associated with outstanding contracts.

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

Certain statements contained in this Form 10-Q are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, our performance and results may differ materially from those described or implied by such forward-looking statements. Words such as “believe,” “anticipate,” “expect,” “estimate,” “project,” “should,” “intend,” “will,” “may” or words or phrases of similar meaning are intended to identify forward-looking statements. We caution that the forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the risk factors set forth in “Item 1A. Risk Factors” of our Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, ~~2020~~2021 (“fiscal ~~2020”~~2021”), including the following:

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.

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

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

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

During the first quarter of the fiscal year ending March 31, ~~2021~~2022 (“fiscal ~~2021”~~2022”), the United States (“U.S.”) economy continued to be ~~significantly~~ impacted by the global outbreak of coronavirus and related variants (“COVID-19”) and the ~~introduction of~~ extraordinary governmental measures intended to slow its ~~spread, including quarantines, government-mandated actions, stay-at-home orders~~spread; However, in conjunction with increases in vaccination rates, lower COVID-19 cases since the beginning of calendar year 2021 and ~~other restrictions. The outbreak~~the easing of restrictive measures in recent months, there have been improving trends in unemployment levels and ~~curtailments, which began at~~consumer confidence. Despite these trends, there is uncertainty around the ~~end~~duration and the severity of the ~~previous fiscal year, continued~~COVID-19 pandemic, the timing and strength of the economy’s recovery and the impacts of government support and lender relief programs ending. The impact of the COVID-19 pandemic on our future operations is difficult to ~~severely curtail~~predict, but the curtailment of economic activities as a result of further outbreak of COVID-19, extended or additional government restrictions intended to slow the spread of the virus, ending of government support programs, or delayed consumer response to the lifting of restrictive measures, or permanent behavior changes in consumer spending could have further negative impact on consumer economics, dealerships, and ~~resulted in~~auction sites, which could have a ~~global economic contraction that negatively impacted~~material adverse impact on our business, financial condition, and future results of operations. In addition, changes in the ~~business of~~economy that adversely impact the consumer, such as higher interest rates, elevated debt levels and an increase in unemployment from the current levels could adversely impact our ~~affiliate, TMNA, and our ultimate parent, TMC, in a number of ways, and adversely impacted our first quarter fiscal 2021~~ results of operations.

~~The historic~~Average used vehicle values continued to increase in the first quarter of fiscal 2022 to historically high levels, primarily due to the lack of ~~unemployment and reduction in household income during this period~~availability of new vehicles as a result of economic ~~contraction has affected some of our customers’ ability to make their scheduled payments. To provide support to our customers and dealers adversely affected~~conditions caused by the COVID-19 pandemic ~~we took a number~~including production halts and supply shortages affecting the automotive industry and additional delays affecting the supply chain and logistics networks. Declines in used vehicle values resulting from increases in the supply of ~~actions~~new and used vehicles and increases in new vehicle sales incentives could unfavorably impact return rates, residual values, depreciation expense and credit losses in the future.

Conditions in the global capital markets were generally stable during the first quarter of fiscal ~~2021, including:~~

From March 13, 2020 through June 30, 2020, we granted retail loan payment extensions and lease payment deferrals to approximately 13% of our retail customers and 12% of our lease customers. For comparison, from March 13, 2019 through June 30, 2019, we granted payment extensions and deferrals for retail and lease customers who requested payment relief to approximately 2% of our retail customers and 1% of our lease customers. We may terminate, or modify the scope, duration and terms of our payment relief programs at any time.

Due to the duration of, and number of customers and dealers participating in, our payment relief programs, we have seen a decrease in our total portfolio yield and expect that our future results of operations will also be adversely impacted. Although the increase in retail loan payment extensions and lease payment deferrals has temporarily decreased incoming funds, we do not expect the relief granted under our payment relief programs to have an impact on our overall liquidity position required to maintain operations due to our increased level of excess funds, continued access to capital markets, and credit available under our undrawn bank credit facilities and credit support arrangements. As of June 30, 2020, we maintained excess funds of $20.8 billion. For additional information, refer to the “Liquidity and Capital Resources” section.

The most notable COVID-19 pandemic impacts on our results of operations for the first quarter of fiscal 2021, continued to be a higher provision for credit losses on our retail loan portfolio and dealer products portfolio and higher depreciation expense due to the decline in used vehicle values and lower expected end-of-term market values for our investment in operating leases. These impacts are also expected to have an adverse effect on our future results of operations. Refer to “Financial Condition” for further discussion of the COVID-19 pandemic impact on the provision for credit losses and depreciation expense.

Our business is dependent upon the sale of Toyota, Lexus, and Mazda vehicles, which declined significantly in the first quarter of fiscal 2021, as compared to the same period in fiscal 2020, as dealers temporarily closed showrooms for a period of time early in the quarter. Additionally, dealers have adjusted their operations and consumers have adjusted their behavior in response to restrictions designed to slow the spread of COVID-19 and an unprecedented increase in unemployment claims and a significant decline in consumer spending. To mitigate these trends, dealers have increased their utilization of online

sales channels and we have partnered with TMNA and Mazda, respectively, to offer competitive incentive programs, including 0% financing and/or first payment deferred 90 days on select Toyota, Lexus, Mazda models from April 2020 to July 2020.

In addition, from March 23, 2020 to May 8, 2020, TMNA suspended production at all of its automobile and components plants in North America at various times due to the increasing social and economic impact of the COVID-19 pandemic and a significant decline in vehicle demand. Although TMNA and many of its suppliers have resumed production, unexpected delays affecting the supply chain or logistics network could negatively impact dealer inventory levels, vehicle sales, the sale of our financing and insurance products, dealer profitability and creditworthiness, and our future results of operations.

~~During the first quarter of fiscal 2021,~~ capital markets continued to ~~experience volatility as a result of~~recover from the COVID-19 pandemic. We maintain broad global access to both domestic and international markets. However, ~~funding conditions improved and credit spreads tightened during~~uncertainty regarding the ~~first quarter in comparison to March 2020 in response to the implementation~~course of measures to support the economy and corporate credit markets by the Federal Reserve and global central banks. While our ability to access the capital markets remains largely intact, the ongoing economic uncertainty caused by the pandemic or future changes in U.S. monetary policy could cause ~~further~~ disruptions in the capital markets and increase our funding costs during the remainder of the fiscal year. Future changes in interest rates in the U.S. and foreign markets could result in volatility in our interest expense, which could affect our results of operations. ~~For additional information, refer to the “Liquidity and Capital Resources” section.~~

The continued curtailment of economic activities as a result of further outbreak of COVID-19, extended or additional government restrictions intended to slow the spread of the virus, or delayed consumer response once restrictions have been lifted could have further negative impact on used vehicle values, consumer economics, dealerships, and auction sites, which could have a material adverse impact on the future results of operations. If the number of our customers and dealers experiencing hardship increases or it becomes necessary to further extend our payment relief options, it could have a material adverse effect on our business, financial condition and our future results of operations.

Although the duration and severity of the COVID-19 pandemic is uncertain, and its ultimate impact on our results of operations is difficult to predict, it is expected to have a material adverse effect on our business, financial condition and our future results of operations.

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

	Three months ended				Three months ended
	June 30,				June 30,
(Dollars in millions)	2020		2019		2021		2020
Net income:
Finance operations¹	$	210	$	275	$	781	$	210
Insurance operations¹		164		84
Voluntary protection operations ¹						140		164
Total net income	$	374	$	359	$	921	$	374

Our consolidated net income was ~~$374~~$921 million for the first quarter of fiscal ~~2021~~2022, compared to ~~$359~~$374 million for the same period in fiscal ~~2020.~~2021. The increase in net income for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, was primarily due to a ~~$149~~$262 million decrease in interest expense, a ~~$58~~$244 million decrease in depreciation on operating leases, a $186 million decrease in provision for credit losses, and an $87 million increase in ~~investment and other income, net, and a $38 million decrease in insurance losses and loss adjustment expenses,~~total financing revenues, partially offset by a ~~$108~~$154 million increase in provision for ~~credit losses,~~income taxes, a ~~$60~~$39 million increase in ~~depreciation on~~ operating ~~leases,~~and administrative expense, and a ~~$51~~$33 million ~~decrease~~increase in ~~total financing revenues.~~voluntary protection contract expenses and insurance losses.

Our overall capital position increased ~~$0.2~~$0.9 billion, bringing total shareholder’s equity to ~~$14.7~~$16.5 billion at June 30, ~~2020~~2021 as compared to ~~$14.5~~$15.6 billion at March 31, 2020. The adoption of ASU 2016-13 resulted in a cumulative-effect adjustment to opening retained earnings of approximately $218 million, net of taxes, resulting from a pretax increase to our allowance for credit losses on finance receivables of approximately $292 million.2021. Our debt ~~increased~~decreased to ~~$107.0~~$109.1 billion at June 30, ~~2020~~2021 from ~~$97.7~~$109.7 billion at March 31, ~~2020.~~2021. Our debt-to-equity ratio ~~increased~~decreased to ~~7.3~~6.6 at June 30, ~~2020~~2021 from ~~6.7~~7.0 at March 31, ~~2020.~~2021.

Three months ended

June 30,

Percentage

(Dollars in millions)

2020

2019

Change

Financing revenues:

Operating lease

$
2,129

$
2,184

(3
)%
Retail

672

589

14
%
Dealer

111

190

(42
)%
Total financing revenues

2,912

2,963

(2
)%
Depreciation on operating leases¹

1,685

1,625

4
%
Interest expense

548

703

(22
)%
Net financing revenues

679

635

7
%

Investment and other income, net

32

37

(14
)%
Net financing and other revenues

711

672

6
%

Expenses:

Provision for credit losses ¹

183

75

144
%
Operating and administrative expenses

256

246

4
%
Total expenses

439

321

37
%

Income before income taxes

272

351

(23
)%
Provision for income taxes

62

76

(18
)%

Net income from finance operations

$
210

$
275

(24
)%

As discussed in Note 1 – Interim Financial Data, in conjunction with the adoption of ASU 2016-13, we updated our depreciation policy for operating leases and changed our presentation for reporting early termination expenses related to our investments in operating leases. We now present the effects of operating lease early terminations in Depreciation on operating leases. The information for the comparative period continues to be reported within the Provision for credit losses.

	Three months ended
	June 30,					Percentage
(Dollars in millions)	2021			2020		change
Financing revenues:
Operating lease	$	2,120		$	2,129	-%
Retail		791			672		18	%
Dealer		88			111		(21	)%
Total financing revenues		2,999			2,912		3	%
Depreciation on operating leases		1,441			1,685		(14	)%
Interest expense		286			548		(48	)%
Net financing revenues		1,272			679		87	%

Investment and other income, net		19			32		(41	)%
Net financing and other revenues		1,291			711		82	%

Expenses:
Provision for credit losses		(3	)		183		(102	)%
Operating and administrative expenses		292			256		14	%
Total expenses		289			439		(34	)%

Income before income taxes		1,002			272		268	%
Provision for income taxes		221			62		256	%

Net income from finance operations	$	781		$	210		272	%

Our finance operations reported net income of ~~$210~~$781 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$275~~$210 million for the same period in fiscal ~~2020.~~2021. The ~~decrease~~increase in net income from finance operations for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020~~2021 was primarily due to a ~~$108~~$262 million ~~increase~~decrease in interest expense, a $244 million decrease in depreciation on operating leases, a $186 million decrease in provision for credit losses, and a ~~$60~~$87 million increase ~~in depreciation on operating leases, and a $51 million decrease~~ in total financing revenues, partially offset by a ~~$155~~$159 million ~~decrease~~increase in ~~interest expense.~~ provision for income taxes and a $36 million increase in operating and administrative expenses.

Total financing revenues ~~decreased $51 million or 2~~increased 3 percent during the first quarter of fiscal ~~2021~~2022 as compared to the same period in fiscal ~~2020~~2021 due to the following:

As a result of the above, our total portfolio yield, which includes operating lease, retail and dealer financing revenues, ~~decreased~~increased to ~~4.5~~5.15 percent for the first quarter of fiscal ~~2021,~~2022, compared to ~~4.8~~4.5 percent for the same period in fiscal ~~2020.~~2021.

We reported depreciation on operating leases of ~~$1,685~~$1,441 million ~~during~~for the first quarter of fiscal ~~2021,~~2022, compared to ~~$1,625~~$1,685 million for the same period in fiscal ~~2020. Depreciation expense on operating leases increased during the first quarter of fiscal~~ 2021, ~~as compared to the same period in fiscal 2020,~~primarily due to ~~the economic conditions caused by the COVID-19 pandemic and our lease deferral programs, partially offset by~~lower residual value losses as a ~~decrease from lower~~result of an increase in average ~~operating units outstanding.~~used vehicle values. The economic conditions caused by the COVID-19 pandemic resulted in ~~a decrease in average~~higher off-lease vehicle purchases by dealers due to increased used vehicle values ~~during~~and decreased vehicle inventory supply. In fiscal 2021, there was a temporary suspension of automobile and component manufacturing and there have been additional delays affecting the ~~quarter~~supply chain and ~~a decline~~logistics networks that resulted in estimated end-of-term market values for the remainder of the fiscal year, despite an observed increase in used vehicle values in June that continued into July. In addition, the lease payment deferrals we granted to our customers who were adversely affected by the COVID-19 pandemic has contributed to an increase in ~~depreciation as~~ the additional months for the deferral period have resulted in a decrease in the expected end-of-term market values on our investments in operating leases. As discussed in Note 1 – Interim Financial Data, in conjunction with the adoptionsale of ~~ASU 2016-13, we updated our depreciation policy for operating leases and changed our presentation for reporting early termination expenses related~~used vehicles due to ~~our investments in operating leases. We now present the effects of operating lease early terminations in Depreciation on operating leases.~~ their availability.

	Three months ended						Three months ended
	June 30,						June 30,
(Dollars in millions)	2020			2019			2021			2020
Interest expense on debt	$	576		$	655		$	389		$	576
Interest expense on derivatives		109			12			66			109
Interest expense on debt and derivatives		685			667			455			685

Losses on debt denominated in foreign currencies		548			15			10			548
Gains on foreign currency swaps		(593	)		(108	)
(Gains) losses on U.S. dollar interest rate swaps		(92	)		123
Losses (gains) on foreign currency swaps								25			(593	)
Gains on U.S. dollar interest rate swaps								(204	)		(92	)
Total interest expense	$	548		$	697		$	286		$	548

During the first quarter of fiscal ~~2021,~~2022, total interest expense decreased to $286 million from $548 million, ~~from $697 million in~~for the same period in fiscal ~~2020.~~2021. The decrease is attributable to a decrease in interest expense on debt and derivatives combined, higher gains on U.S. dollar interest rate swaps, partially offset by ~~lower gains~~losses on foreign currency swaps ~~net of losses on~~and debt denominated in foreign ~~currencies and an increase in interest expense on debt and derivatives.~~currencies.

Interest expense on debt and derivatives primarily represents contractual net interest settlements and changes in accruals on secured and unsecured notes and loans payable and derivatives, and includes amortization of discounts, premiums, and debt issuance costs. During the first quarter of fiscal ~~2021,~~2022, interest expense on debt and derivatives ~~increased~~decreased to ~~$685~~$455 million from ~~$667~~$685 million for the same period in fiscal ~~2020. The increase in interest expense on derivatives is primarily due to a decrease in interest income from pay-fixed swaps partially offset by a decrease in interest expense on pay float swaps.~~2021. The decrease in interest expense on debt is due to a decrease in weighted average interest rates, partially offset by an increase in portfolio ~~size.~~size, compared to June 30, 2020. The decrease in interest expense on derivatives is primarily due to a decrease in interest expense on pay-float swaps partially offset by an increase in interest expense on pay-fixed swaps.

Gains or losses on debt denominated in foreign currencies represent the impact of translation adjustments. We use foreign currency swaps to economically hedge the debt denominated in foreign currencies. During the first quarter of fiscal 2022, we recorded net losses of $35 million, primarily as a result of increases in foreign currency swap rates across various currencies in which our debt is denominated. During the first quarter of fiscal 2021, we recorded net gains of $45 million, primarily as a result of decreases in foreign currency swap rates across the various currencies in which our debt is denominated. ~~During the first quarter of fiscal 2020, we recorded net gains of $93 million as a result of decreases in foreign currency swap rates across all tenors.~~

Gains or losses on U.S. dollar interest rate swaps represent the change in the valuation of interest rate swaps. During the first quarter of fiscal 2022, we recorded gains of $204 million, primarily due to the impact from net interest income on our pay-fixed swaps. During the first quarter of fiscal 2021, we recorded net gains of $92 million, primarily as a result of decreases in U.S. dollar swap rates, with the majority of gains attributable to our ~~longer-term~~ pay-float swaps. During the first quarter of fiscal 2020, we recorded losses of $123 million as losses on our higher-notional, shorter-term pay-fixed swaps exceeded the gains on our longer-term pay-float swaps, primarily as a result of decreases in U.S. dollar swap rates.

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

We recorded investment and other income, net of ~~$32~~$19 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$37~~$32 million for the same period in fiscal ~~2020.~~2021. The decrease in investment and other income, net for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, was primarily due to ~~a decrease~~lower average balances in ~~interest income attributable to a decrease~~our cash equivalents and investment in ~~interest rates.~~marketable securities portfolio.

We recorded a benefit for credit losses of $3 million for the first quarter of fiscal 2022, compared to a provision for credit losses of $183 million for the ~~first quarter of fiscal 2021, compared to $75 million for the~~ same period in fiscal ~~2020.~~2021. The ~~increase~~decrease in the provision for credit losses for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, was primarily due to ~~the increase~~a decrease in expected credit losses ~~driven by~~in response to improvements in the macroeconomic forecast. In the first quarter of fiscal 2021, we increased the expected credit losses for our retail loan portfolio due to a decline in economic conditions caused by the COVID-19 pandemic and the restrictions designed to slow the spread of COVID-19, which resulted in stay-at-home orders, increased unemployment, and decreased consumer spending and our adoption of ASU 2016-13 in fiscal 2021, which replaced the incurred loss impairment model with one that reflects expected credit losses over the expected life of the finance receivables.spending.

We recorded operating and administrative expenses of ~~$256~~$292 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$246~~$256 million for the same period in fiscal ~~2020.~~2021. The increase in operating and administrative expenses for the first quarter of fiscal 2022, compared to the same period in fiscal 2021, was due to an increase in employee expenses and general operating expenses.

The following table summarizes key results of our ~~insurance~~voluntary protection operations:

	Three Months Ended							Three months ended
	June 30,				Percentage			June 30,				Percentage
	2020		2019		Change			2021		2020		change
Agreements (units in thousands)
Contracts (units in thousands)
Issued		498		655		(24	)%		824		498		65	%
Average in force		9,722		9,290		5	%		9,816		9,424		4	%

(Dollars in millions)
Insurance earned premiums and contract revenues	$	235	$	229		3	%
Voluntary protection contract revenues and insurance earned premiums								$	249	$	235		6	%
Investment and other income, net		144		87		66	%		137		144		(5	)%
Revenues from insurance operations		379		316		20	%
Revenues from voluntary protection operations									386		379		2	%

Expenses:
Insurance losses and loss adjustment expenses		75		113		(34	)%
Voluntary protection contract expenses and insurance losses									108		75		44	%
Operating and administrative expenses		89		91		(2	)%		92		89		3	%
Total expenses		164		204		(20	)%		200		164		22	%

Income before income taxes		215		112		92	%		186		215		(13	)%
Provision for income taxes		51		28		82	%		46		51		(10	)%

Net income from insurance operations	$	164	$	84		95	%
Net income from voluntary protection operations								$	140	$	164		(15	)%

Our ~~insurance~~voluntary protection operations reported net income of ~~$164~~$140 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$84~~$164 million for the same period in fiscal ~~2020.~~2021. The ~~increase~~decrease in net income from ~~insurance~~voluntary protection operations for the first quarter of fiscal 2022, compared to same period in fiscal 2021, was primarily due to a $33 million increase in voluntary protection contract expenses and insurance losses, partially offset by a $5 million decrease in provision for income taxes. Contracts issued increased 65 percent in the first quarter of fiscal 2022, compared to the same period in fiscal 2020, was primarily due to $57 million increase in investment and other income, net, and a $38 million decrease in insurance losses and loss adjustment expenses, partially offset by a $23 million increase in provision for income taxes. Agreements issued decreased 24 percent2021. The lower contract issuances in the first quarter of fiscal 2021 was mainly due to lower overall auto sales and other economic impacts caused by the COVID-19 pandemic. The average number of contracts in force increased 4 percent for the first quarter of fiscal 2022, respectively, compared to the same period in fiscal ~~2020, primarily~~2021, due to net growth in the ~~economic difficulties caused by the COVID-19 pandemic, which resulted~~voluntary protection portfolio in lower sales volume as compared to the same period in fiscal 2020. The average number of agreements in force increased 5 percent for the first quarter of fiscal 2021, compared to the same period in fiscal 2020, due to insurance portfolio growth fromrecent prior years, most notably in ~~tire and wheel protection agreements,~~ guaranteed auto protection ~~agreements~~contracts and prepaid maintenance ~~agreements.~~contracts.

Our ~~insurance~~voluntary protection operations reported voluntary protection contract revenues and insurance earned premiums ~~and contract revenues~~ of ~~$235~~$249 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$229~~$235 million for the same period in fiscal ~~2020. Insurance~~2021. Voluntary protection contract revenues and insurance earned premiums ~~and contract revenues~~ represent revenues from in force ~~agreements~~contracts and are affected by issuances as well as the level, age, and mix of in force ~~agreements. Insurance~~contracts. Voluntary protection contract revenues and insurance earned premiums ~~and contract revenues~~ are recognized over the term of the ~~agreements~~contracts in relation to the timing and level of anticipated claims. The increase in voluntary protection contract revenues and insurance earned premiums ~~and contract revenues in~~for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, was primarily due to ~~insurance~~an increase in our average in force contracts resulting from voluntary protection portfolio growth from prior ~~years.~~years.

Our ~~insurance~~voluntary protection operations reported investment and other income, net of ~~$144~~$137 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$87~~$144 million for the same period in fiscal ~~2020.~~2021. Investment and other income, net, consists primarily of dividend and interest income, realized gains and losses on investments in marketable securities, changes in fair value from equity ~~investments,~~and available-for-sale debt securities for which the fair value option was elected, and credit loss expense on available-for-sale debt securities, if any. The ~~increase~~decrease in investment and other income, net infor the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, was primarily due to a decrease in gains from the changes in fair value on our equity ~~investments~~securities, and a decrease in gains from sales of investments in marketable ~~securities.~~securities, partially offset by an increase in interest and dividend income.

Voluntary Protection Contract Expenses and Insurance Losses ~~and Loss Adjustment Expenses~~

Our ~~insurance~~voluntary protection operations reported voluntary protection contract expenses and insurance losses ~~and loss adjustment expenses~~ of ~~$75~~$108 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$113~~$75 million for the same period in fiscal ~~2020. Insurance~~2021. Voluntary protection contract expenses and insurance losses ~~and loss adjustment expenses~~ incurred are a function of the amount of covered risks, the frequency and severity of claims associated with in force ~~agreements~~contracts and the level of risk retained by our voluntary protection operations. Voluntary protection contract expenses and 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~~increase in voluntary protection contract expenses and insurance losses and loss adjustment expenses in the first quarter of fiscal 2021, compared to the same period in fiscal 2020, was primarily due to a decrease in losses on our prepaid maintenance agreements, guaranteed auto protection agreements and vehicle services agreements. Losses on prepaid maintenance agreements decreased infor the first quarter of fiscal ~~2021~~2022, compared to the same period in fiscal ~~2020~~2021, was primarily due to ~~a lower~~an increase in frequency ~~and severity~~ of ~~claims. Losses on~~claims in our prepaid maintenance contracts, guaranteed auto protection ~~agreements decreased in the~~ ~~first quarter of fiscal 2021, compared to~~ ~~same period~~contracts and tire and wheel contracts. Our voluntary protection contract expenses and insurance losses in fiscal ~~2020~~,2021 were impacted by lower claims as a result of ~~lower estimates of losses incurred but not reported. Losses on our vehicle services agreements decreased~~changes in ~~the~~ ~~first quarter of fiscal 2021, compared to~~ ~~same period in fiscal 2020, due to lower frequency of claims. Our insurance operations have lower insurance losses and loss adjustment expenses as a result of government mandated stay-at-home orders~~consumer driving patterns caused by the COVID-19 ~~pandemic.~~pandemic, including restrictions and other changes in behavior.

Our ~~insurance~~voluntary protection operations ~~reported~~ operating and administrative expenses ~~of $89~~increased slightly to $92 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$91~~$89 million for the same period in fiscal ~~2020. The decrease~~ ~~in operating and administrative expenses in the first quarter of fiscal 2021, compared to the same period in fiscal 2020,~~ ~~was attributable to lower dealer back-end program expenses due to the economic difficulties caused by the COVID-19 pandemic, which resulted in lower sales volume as compared to~~ ~~the same period in fiscal 2020.~~ ~~Insurance dealer back-end program expenses are incentives or expense reduction programs we provide to dealers based on certain performance criteria.~~

~~Our overall~~We recorded a provision for income taxes ~~was $113~~of $267 million for the first quarter of fiscal ~~2021,~~2022, compared to ~~$104~~$113 million for the same period in fiscal ~~2020.~~2021. Our effective tax rate was 2322 percent for the first quarter of fiscal ~~2021,~~2022, compared to 2223 percent for the same period in fiscal ~~2020.~~2021. The increase in the provision for income taxes for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, was primarily due to the increase in income before income taxes. The ~~increase~~change in ~~the~~our effective tax rate for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, was primarily ~~due~~attributable to the tax benefit ~~recorded~~from the federal tax credits recognized in the first quarter of fiscal ~~2020 related to state tax law changes taking effect during that fiscal year.~~2022.

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

		Three months ended										Three months ended
		June 30,						Percentage				June 30,						Percentage
(units in thousands):		2020			2019			Change				2021			2020			change
Vehicle financing volume:¹
Vehicle financing volume¹:
New retail contracts			161			164			(2	)%			192			161			19	%
Used retail contracts			102			83			23	%			126			102			24	%
Lease contracts			83			126			(34	)%			154			83			86	%
Total			346			373			(7	)%			472			346			36	%

TMNA subvened vehicle financing volume²:	TMNA subvened vehicle financing volume²:										TMNA subvened vehicle financing volume²:
New retail contracts			79			55			44	%			54			79			(32	)%
Used retail contracts			22			12			83	%			6			22			(73	)%
Lease contracts			61			115			(47	)%			101			61			66	%
Total			162			182			(11	)%			161			162			(1	)%

Market share of TMNA sales:³			64.3	%		65.5	%
Market share of TMNA sales ³:													55.9	%		64.3	%

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

Our financing volume ~~decreased 7~~increased 36 percent for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020, primarily as a result~~2021. In the first quarter of fiscal 2021our financing volume was negatively impacted by the ~~sharp~~ decline in economic conditions caused by the COVID-19 pandemic and the restrictions designed to slow the spread of COVID-19, which resulted in an unprecedented increase in unemployment claims and a significant decline in consumer spending. ~~The decrease in~~In the first quarter of fiscal 2022, as the economy continues to recover, our financing volume ~~was partially offset by~~for both retail contracts and lease contracts significantly increased, as compared to same period in fiscal 2021. In addition to the ~~new vehicle financing volume we gained from~~recovering economy, the ~~launch of our private label financial services to Mazda on April 1, 2020, as well as an~~ increase in ~~used retail contract volume. The increase in used retail contract volume~~lease contracts was driven by an increased level of incentive and subvention programs and continued growth in volume from our private label financial services. The increase in used retail contract volume was also driven by the availability of used vehicles ~~following the temporary suspension in production and decrease in dealer~~relative to new ~~vehicle inventory levels, as well as incremental used retail contract volume from the launch of private label services.~~

Industry-wide vehicle sales in the U.S. experienced a significant decline in the first quarter of fiscal 2021 as dealers temporarily closed showrooms and adjusted their operations, and consumers adjusted their behavior in response to restrictions designed to slow the spread of COVID-19, an unprecedented level of unemployment claims and a significant decline in consumer spending. To mitigate the impactvehicles. Economic conditions caused by the ~~decline~~COVID-19 pandemic, including production halts and supply shortages affecting the automotive industry and additional delays affecting the supply chain and logistics networks, have resulted in ~~economic conditions, we have partnered with TMNA to offer competitive incentive and subvention programs, including 0% financing and/or first payment deferred 90 days on select Toyota and Lexus models.~~ a decrease in the availability of new vehicles.

Our market share of TMNA sales decreased by approximately 18 percentage ~~point~~points for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, due to lower levels of subvention on new and used retail contracts and increased competition from financial institutions.

	June 30,		March 31,		Percentage			June 30,		March 31,		Percentage
(Dollars in millions)	2020		2020		Change			2021		2021		change
Net Earning Assets
Finance receivables, net
Retail finance receivables, net ²	$	57,669	$	56,364		2	%
Dealer financing, net ^{1, 2}		13,448		17,632		(24	)%
Total finance receivables, net ²		71,117		73,996		(4	)%
Retail finance receivables, net								$	67,809	$	65,653		3	%
Dealer financing, net ¹									10,691		13,539		(21	)%
Total finance receivables, net									78,500		79,192		(1	)%
Investments in operating leases, net		35,834		36,387		(2	)%		37,784		37,091		2	%
Net earning assets	$	106,951	$	110,383		(3	)%	$	116,284	$	116,283		-	%


Dealer Financing
(Number of dealers serviced)
Toyota, Lexus, and Mazda dealers¹		961		953		1	%
Dealers outside of the Toyota/Lexus/Mazda dealer network		376		371		1	%
Toyota, Lexus, and private label dealers¹									1,009		1,002		1	%
Dealers outside of the Toyota/Lexus/private label dealer network									393		395		(1	)%
Total number of dealers receiving wholesale financing		1,337		1,324		1	%		1,402		1,397		-	%

Dealer inventory outstanding (units in thousands)		195		294		(34	)%		92		185		(50	)%

Our new retail contract volume ~~decreased 2~~increased 19 percent for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, due to the recovering economy and increased demand for new vehicles, as ~~a result of the sharp decline in economic conditions caused by the COVID-19 pandemic. The decrease~~well as continued growth in new ~~retail contract~~vehicle financing volume ~~as a result of the impact of the economic conditions was partially offset by an increase in new retail contract volume resulting~~ from ~~an increased level of incentive and subvention programs and the incremental retail contract volume attributable to the launch of~~our private label financial ~~services.~~ services in fiscal 2021.

Our used retail contracts increased 23by 24 percent for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, primarily due to ~~an increased level of incentive and subvention programs,~~the availability of used vehicles ~~as well as incremental used retail contract volume~~relative to new vehicles, resulting from economic conditions caused by the ~~launch of private label financial services. The temporary suspension of automobile manufacturing~~COVID-19 pandemic, including production halts and ~~component plants has caused a temporary decrease in dealer new vehicle inventory levels~~supply shortages affecting the automotive industry and ~~resulted in an increase in~~additional delays affecting the ~~sale of used vehicles due to their availability.~~supply chain and logistic networks.

Our retail finance receivables, net increased 23 percent at June 30, ~~2020~~2021 as compared to March 31, ~~2020~~2021 due to an increase in ~~the~~new volume financed, ~~including the incremental volume from the launch of private label financial services,~~ as well as an increase in the average amount financed.

Our lease contract volume ~~decreased 34~~increased 86 percent for the first quarter of fiscal ~~2021,~~2022, compared to the same period in fiscal ~~2020,~~2021, due to the recovering economy, an increased level of incentive and subvention programs, as ~~a result of~~well as the ~~sharp decline~~continued growth in ~~economic conditions caused by the COVID-19 pandemic, lower levels of subvention, and consumer preference for retail contracts, partially offset by incremental~~ lease contract volume from ~~the launch of~~our private label financial services. Our investments in operating leases, net, ~~decreased~~increased 2 percent at June 30, ~~2020,~~2021, as compared to March 31, ~~2020~~2021, due to ~~decreased lease contract volume.~~increased vehicle values, including the additional investment in operating leases from our private label financial services.

Dealer financing, net decreased 2421 percent at June 30, ~~2020~~2021, as compared to March 31, ~~2020~~2021, primarily due to a decrease in dealer inventory and related ~~financing due to~~financing. Economic conditions caused by the COVID-19 pandemic, including production halts and supply shortages affecting the automotive industry and additional delays affecting the supply chain and logistics networks, have resulted in a temporary ~~decline~~decrease in dealer new vehicle inventory ~~levels caused by the temporary suspension of automobile manufacturing as a result of the COVID-19 pandemic.~~levels.

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

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

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

	Three months ended							Three months ended
	June 30,				Percentage Change			June 30,				Percentage
	2020		2019		2020 to 2019			2021		2020		change
Depreciation on operating leases (dollars in millions)	$	1,685	$	1,625		4	%	$	1,441	$	1,685		(14	)%
Average operating lease units outstanding (in thousands)		1,347		1,425		(5	)%		1,342		1,347	-%

Depreciation expense on operating leases ~~increased 4~~decreased 14 percent during the first quarter of fiscal ~~2021,~~2022, as compared to the same period in fiscal ~~2020,~~2021, primarily due to ~~the economic conditions caused by the COVID-19 pandemic and our lease payment deferral programs, partially offset by~~lower residual value losses as a ~~decrease from lower~~result of an increase in average ~~operating units outstanding.~~used vehicle values. The economic conditions caused by the COVID-19 pandemic, ~~resulted in a decrease in average used vehicle values during~~including production halts and supply shortages affecting the ~~quarter~~automotive industry and ~~a decline in estimated end-of-term market values for~~additional delays affecting the remainder of the fiscal year, despite an observed increase in used vehicle values in June that continued into July. In addition, the lease payment deferrals we granted to our customers who were adversely affected by the COVID-19 pandemic has contributed to an increase in depreciation on operating leases, as the additional months for the deferral periodsupply chain and logistics networks, have resulted in a decrease in the ~~expected end-of-term market~~availability of new vehicles, which has led to higher off-lease vehicle purchases by dealers due to increased used vehicle values ~~of our investments in operating leases. As discussed in Note 1 – Interim Financial Data, in conjunction with the adoption of ASU 2016-13, we updated our depreciation policy for operating leases~~ and changed our presentation for reporting early termination expenses related to our investments in operating leases. We now present the effects of operating lease early terminations in Depreciation on operating leases.decreased vehicle inventory supply.

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

	June 30,		March 31,		June 30,		June 30,		March 31,		June 30,
	2020		2020		2019		2021		2021		2020
Average consumer portfolio origination FICO score		746		754		755		740		744		746
Average retail loan origination term (months) ¹		68		69		67		69		68		68

¹ ~~Retail loan origination greater than or equal to 78 months was 7% as of June 30, 2020 and March 31, 2020, respectively, and 6% as of June 30, 2019.~~

While we have included the average origination FICO score to illustrate origination trends, we also use a proprietary credit scoring system to evaluate an applicant’s risk profile. Refer to Part I. Item 1. Business “Finance Operations” in our fiscal ~~2020~~2021 Form 10-K for further discussion of the proprietary manner in which we evaluate risk.

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

	June 30,			March 31,			June 30,			June 30,			March 31,			June 30,
	2020			2020			2019			2021			2021			2020
Net charge-offs as a percentage of average gross^{1, 5, 6} earning assets
Finance receivables		0.32	%		0.44	%		0.32	%
Net charge-offs as a percentage of average finance receivables ^{1, 5}											0.19	%		0.29	%		0.32	%

Default frequency as a percentage of outstanding contracts ^{1, 6}
Finance receivables		0.82	%		1.09	%		1.21	%
Default frequency as a percentage of outstanding finance receivables contracts ¹											0.85	%		0.90	%		0.82	%

Average loss severity per unit ^{2, 6}
Finance receivables	$	10,129		$	9,555		$	9,237
Average finance receivables loss severity per unit ²										$	8,417		$	10,035		$	10,129

Aggregate balances for accounts 60 or more days past due as a percentage of gross earning assets ^{3, 4, 5}
Aggregate balances for accounts 60 or more days past due as a percentage of earning assets^{3, 4, 5}
Finance receivables		0.38	%		0.41	%		0.37	%		0.32	%		0.27	%		0.38	%
Operating leases		0.42	%		0.34	%		0.27	%		0.19	%		0.20	%		0.42	%

Management considers historical credit loss information when assessing the allowance for credit losses. Historical credit losses are primarily driven by two factors: default frequency and loss severity. ~~Net~~Our net charge-offs as a percentage of average ~~gross~~ finance receivables ~~remained relatively unchanged~~for first quarter of fiscal 2022 decreased to 0.19 percent at June 30, 2021 from 0.32 percent at ~~both~~ June 30, 2020, and ~~June 30, 2019. Default~~our average finance receivables loss severity per unit for the first quarter of fiscal 2022 decreased to $8,417 from $10,129 in the first quarter of fiscal 2021, primarily due to higher average used vehicle values, which reduced net charge-offs and loss per unit. Our default frequency as a percentage of outstanding finance receivable contracts ~~decreased~~increased slightly to ~~0.82~~0.85 percent for the first quarter of fiscal ~~2021,~~2022, compared to ~~1.21~~0.82 percent in the same period in fiscal 2020, primarily due to the payment extension programs offered to our customers impacted by COVID-19. Our average loss severity on finance receivables for the first quarter of fiscal 2021 increased to $10,129 from $9,237 in the first quarter of fiscal 2020 primarily due to higher average amounts financed as a result of types of vehicles financed. 2021.

Our aggregate balances for accounts 60 or more days past due on finance receivables ~~remained relatively unchanged~~decreased to 0.32 percent at ~~0.38 percent for~~ June 30, ~~2020,~~2021, compared to ~~0.37~~0.38 percent at June 30, ~~2019,~~2020, but ~~have decreased~~increased from ~~0.41~~0.27 percent at March 31, ~~2020, as a result of the payment extension and deferral programs offered to our customers and dealers impacted by COVID-19 and our typical seasonal pattern for delinquency.~~2021. Our aggregate balances for accounts 60 or more days past due on operating leases ~~increased~~decreased to ~~0.42 percent for June 30, 2020, compared to 0.27~~0.19 percent at June 30, ~~2019,~~2021, compared to 0.42 percent at June 30, 2020, and ~~0.34~~0.20 percent at March 31, ~~2020, as~~2021. For a ~~result~~period of ~~decline~~time in ~~economic conditions caused by the COVID-19 pandemic and by government restrictions on repossession~~fiscal 2021, we temporarily suspended outbound collection activities in ~~certain~~ states with state-wide stay-at-home orders but have since resumed these activities where legally permissible to do so, which resulted in lower aggregate balances for ~~which we have a high percentage of lease contracts.~~accounts 60 or more days past due. If the negative economic conditions caused by the COVID-19 pandemic continue, delinquencies and charge-offs could increase.

~~Upon adoption of ASU 2016-13 on April 1, 2020, the~~We maintain an allowance for credit losses which is measured by ~~a new~~an impairment model that reflects lifetime expected ~~losses, which replaced the incurred loss impairment method.~~losses.

The allowance for credit losses for our retail consumer portfolio is ~~established using~~measured on a collective basis when loans have similar risk characteristics such as loan-to-value ratio, book payment-to-income ratio, FICO score at origination, collateral type, contract term, and other relevant factors. We use statistical ~~models. Lifetime~~models to estimate lifetime expected credit losses ~~is estimated~~of our retail loan portfolio segment by applying probability of default and loss given default to the exposure at default on a loan level basis. Probability of default models are developed from internal risk scoring models which consider variables such as delinquency status, historical default frequency, and other credit quality ~~indicators, as well as historical default frequency.~~indicators. Other credit quality indicators include ~~(but are not limited to):~~ loan-to-value ratio, book payment-to-income ratio, FICO score ~~(at origination),~~at origination, collateral type (new or used, Lexus, Toyota, or ~~Mazda)~~private label), and ~~term count.~~contract term. Loss given default models forecast the extent of losses given that a default has occurred and consider variables such as collateral, trends in recoveries, historical loss severity, and other contract structure ~~variables, as well as historical loss severity.~~variables. Exposure at default represents the expected outstanding principal balance, including the effects of expected prepayment when applicable. The lifetime expected credit losses incorporate the probability-weighted forward-looking macroeconomic forecasts for baseline, favorable, and adverse scenarios. The loan lifetime is regarded by management as the reasonable and supportable period. We use macroeconomic forecasts from a third party and update such forecasts quarterly. On an ongoing basis, we review our models, including macroeconomic factors, the selection of macroeconomic scenarios and their weighting to ensure they reflect the risk of the portfolio.

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

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

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

	Three months ended						Three months ended
	June 30,						June 30,
(Dollars in millions)	2020			2019			2021			2020
Allowance for credit losses at beginning of period	$	727		$	499		$	1,215		$	727
Adoption of ASU 2016-13 ¹		292			-			-			292
Charge-offs		(69	)		(72	)		(33	)		(69	)
Recoveries		10			14			17			10
Provision for credit losses		183			63			(3	)		183
Allowance for credit losses at end of period ²	$	1,143		$	504		$	1,196		$	1,143

Our allowance for credit losses increased ~~from $504~~by $53 million ~~at June 30, 2019 to~~from $1,143 million at June 30, 2020 ~~reflecting an~~to $1,196 million at June 30, 2021. The increase toin the allowance for credit losses ~~of $292 million related to the adoption of ASU 2016-13, and an increase of $120 million~~was primarily due to the increase in size of our retail loan portfolio, partially offset by lower expected credit losses ~~driven by a decline~~ in ~~economic conditions caused by the COVID-19 pandemic and the restrictions designed~~response to ~~slow the spread of COVID-19, including stay-at-home orders, increased unemployment, and decreased consumer spending. In addition, the increase~~improvements in the ~~provision for credit losses was due to the adoption~~macroeconomic forecast as well as a decrease in size of ASU 2016-13 in fiscal 2021, which replaced the incurred loss impairment model with a model that reflects expected credit losses over the expected life of the finance receivables and certain off-balance sheet lending commitments.our dealer products portfolio.

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

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

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

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

During the first quarter of fiscal 2021, capital markets continued to experience volatility as a result of the COVID-19 pandemic. However, funding conditions improved and credit spreads tightened during the first quarter in comparison to March 2020 in response to the implementation of measures to support the economy and corporate credit markets by the Federal Reserve and global central banks. We maintain broad access to a variety of domestic and global markets and may choose to realign our funding activities depending upon market conditions, relative costs, and other factors. We believe that our funding sources, combined with operating and investing activities, provide sufficient liquidity to meet future funding requirements and business growth. For liquidity purposes, we hold cash in excess of our immediate funding needs. These excess funds are invested in short-term, highly liquid and investment grade money market instruments as well as certain available-for-sale debt securities, which provide liquidity for our short-term funding needs and flexibility in the use of our other funding sources. We maintained excess funds ranging from ~~$11.8~~$7.2 billion to ~~$25.4~~$10.5 billion with an average balance of ~~$18.6~~$8.8 billion during the quarter ended June 30, ~~2020.~~2021. The amount of excess funds we hold may fluctuate, depending on market conditions and other factors. We also have access to liquidity under the $5.0 billion credit facility with Toyota Motor Sales U.S.A., Inc. (“TMS”), which as of June 30, ~~2020~~2021 was not drawn upon ~~for the principal amount of $3.0 billion~~ and ishad no outstanding balance as further described in Note 7 – Debt and Credit Facilities of the Notes to the Consolidated Financial Statements. We believe we have sufficient capacity to meet our short-term funding requirements and manage our liquidity.

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

TMC’s obligations under its credit support agreement with TFSC rank pari passu with TMC’s senior unsecured debt obligations. Refer to Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations “Liquidity and Capital Resources” in our fiscal ~~2020~~2021 Form 10-K for further discussion.

We routinely monitor global financial conditions and our financial exposure to our global counterparties, particularly in those countries experiencing significant economic, fiscal or political strain, and the corresponding likelihood of default. ~~We do not currently have~~As of June 30, 2021 our exposure to foreign sovereign and non-sovereign counterparties ~~in countries experiencing significant economic, fiscal or political strain or any other sovereign counterparties.~~was not significant. Refer to the “Liquidity and Capital Resources - Credit Facilities and Letters of Credit” section and Part I, Item 1A. Risk Factors – “The failure or commercial soundness of our counterparties and other financial institutions may have an effect on our liquidity, results of operations or financial condition” in our fiscal ~~2020~~2021 Form 10-K for further discussion.

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

	June 30, 2020							March 31, 2020							June 30, 2021							March 31, 2021
(Dollars in millions)	Face value		Carrying value		Weighted average contractual interest rates			Face value		Carrying value		Weighted average contractual interest rates			Face value		Carrying value		Weighted average contractual interest rates			Face value		Carrying value		Weighted average contractual interest rates
Unsecured notes and loans payable
Commercial paper	$	24,999	$	24,948		1.25	%	$	27,040	$	26,968		1.85	%	$	17,012	$	17,006		0.14	%	$	17,027	$	17,021		0.20	%
U.S. medium term note ("MTN") program		36,893		36,752		2.25	%		33,658		33,527		2.44	%		45,014		44,864		1.52	%		44,294		44,149		1.64	%
Euro medium term note ("EMTN") program		17,590		17,497		1.70	%		17,074		16,974		1.69	%		17,310		17,220		1.46	%		16,262		16,173		1.57	%
Other debt		8,835		8,833		1.65	%		5,705		5,703		2.06	%		5,147		5,143		1.22	%		8,176		8,170		1.33	%
Total Unsecured notes and loans payable		88,317		88,030		1.80	%		83,477		83,172		2.07	%		84,483		84,233		1.21	%		85,759		85,513		1.31	%
Secured notes and loans payable		18,976		18,939		1.80	%		14,597		14,568		2.13	%		24,951		24,900		1.15	%		24,256		24,212		1.29	%
Total debt	$	107,293	$	106,969		1.80	%	$	98,074	$	97,740		2.08	%	$	109,434	$	109,133		1.20	%	$	110,015	$	109,725		1.31	%

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

(Dollars in millions)	Commercial paper¹			MTNs			EMTNs		Other			Total Unsecured notes and loans payable			Commercial paper ¹			MTNs			EMTNs			Other			Total Unsecured notes and loans payable
Balance at March 31, 2020	$	27,040		$	33,658		$	17,074	$	5,705		$	83,477
Balance at March 31, 2021															$	17,027		$	44,294		$	16,262		$	8,176		$	85,759
Issuances		-			7,051			-		3,468			10,519			-			4,505			1,207			525			6,237
Maturities and terminations		(2,041	)		(3,816	)		-		(369	)		(6,226	)		(15	)		(3,785	)		(169	)		(3,550	)		(7,519	)
Non-cash changes in foreign currency rates		-			-			516		31			547			-			-			10			(4	)		6
Balance at June 30, 2020	$	24,999		$	36,893		$	17,590	$	8,835		$	88,317
Balance at June 30, 2021															$	17,012		$	45,014		$	17,310		$	5,147		$	84,483

Short-term funding needs are met through the issuance of commercial paper in the U.S. Commercial paper outstanding under our commercial paper programs ranged from approximately ~~$24.9~~$16.7 billion to ~~$28.4~~$17.9 billion during the quarter ended June 30, ~~2020,~~2021, with an average outstanding balance of ~~$26.5~~$17.1 billion. Our commercial paper programs are supported by the ~~liquidity~~credit facilities discussed under the heading “Credit Facilities and Letters of Credit.” We believe we have sufficient capacity to meet our short-term funding requirements and manage our liquidity.

We maintain a shelf registration statement with the Securities and Exchange Commission (“SEC”) to provide for the issuance of debt securities in the U.S. capital markets to retail and institutional investors. We currently qualify as a well-known seasoned issuer under SEC rules, which allows us to issue under our registration statement an unlimited amount of debt securities during the three year period ending January ~~2021.~~2024. Debt securities issued under the U.S. shelf registration statement are issued pursuant to the terms of an indenture which requires TMCC to comply with certain covenants, including negative pledge and cross-default provisions. We are currently in compliance with these covenants.

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 ~~2019,~~2020, 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 €50.0 billion or the equivalent in other currencies, of which ~~€15.5~~€15.4 billion was available for issuance at June 30, ~~2020.~~2021. The authorized amount is shared among all EMTN Issuers. The authorized aggregate principal amount under the EMTN program may be increased from time to time. Debt securities issued under the EMTN program are issued pursuant to the terms of an agency agreement. Certain debt securities issued under the EMTN program are subject to negative pledge provisions. We are currently in compliance with these covenants.

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

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

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

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

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

(Dollars in millions)	Secured notes and loans payable		Secured notes and loans payable
Balance at March 31, 2020	$	14,597
Balance at March 31, 2021			$	24,256
Issuances		6,649		4,270
Maturities and terminations		(2,270)		(3,575	)
Balance at June 30, 2020	$	18,976
Balance at June 30, 2021			$	24,951

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

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

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

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

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

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

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

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

We maintain a shelf registration statement with the SEC to provide for the issuance of securities backed by Securitized Assets in the U.S. capital markets during the ~~three year~~three-year period ending December 2021. We regularly sponsor public securitization trusts that issue securities backed by retail finance receivables, including registered securities that we retain. None of these securities have defaulted, experienced any events of default or failed to pay principal in full at maturity. As of June 30, ~~2020~~2021 and March 31, ~~2020,~~2021, we did not have any outstanding lease securitization transactions registered with the SEC.

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

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

The ability to make draws is subject to covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. These agreements ~~may be used for general corporate purposes~~were not drawn upon and ~~none were drawn upon~~had no outstanding balances as of June 30, ~~2020~~2021 and March 31, ~~2020.~~2021. We are currently in compliance with the covenants and conditions of the credit agreements described above.

TMCC ~~has entered into~~is party to additional unsecured credit facilities with various banks. As of June 30, ~~2020,~~2021, TMCC had committed bank credit facilities totaling ~~$4.6~~$4.4 billion of which ~~$2.1~~$2.0 billion, ~~$300 million, $1.9~~$2.1 billion, and $300 million, mature in fiscal ~~2021,~~ 2022, 2023, and 2024, respectively.

These credit agreements contain covenants and conditions customary in transactions of this nature, including negative pledge provisions, cross-default provisions and limitations on certain consolidations, mergers and sales of assets. These credit facilities were not drawn upon and had no outstanding balances as of June 30, ~~2020~~2021 and March 31, ~~2020.~~2021. We are currently in compliance with the covenants and conditions of the credit agreements described above.

TMCC is party to a $5.0 billion ~~three year~~three-year revolving credit facility with TMS expiring in fiscal ~~2022.~~2025. This credit facility was not drawn upon and had no outstanding balance as of June 30, ~~2020 for a principal amount of $3.0 billion with an interest rate of 1.86%, maturing on September 30, 2020. The amount was recorded in Other liabilities on our Consolidated Balance Sheet~~2021 and ~~funds were used for general corporate purposes. On July 30, 2020, we voluntarily repaid the $3.0 billion draw and accrued interest in full.~~March 31, 2021.

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

The cost and availability of unsecured financing is influenced by credit ratings, which are intended to be an indicator of the creditworthiness of a particular company, security, or obligation. Lower ratings generally result in higher borrowing costs as well as reduced access to capital markets. Credit ratings are not recommendations to buy, sell, or hold securities, and are subject to revision or withdrawal at any time by the assigning credit rating organization. Each credit rating organization may have different criteria for evaluating risk, and therefore ratings should be evaluated independently for each organization. Our credit ratings depend in part on the existence of the credit support agreements of TFSC and TMC. Refer to “Part I, Item 1A. Risk Factors - Our borrowing costs and access to the unsecured debt capital markets depend significantly on the credit ratings of TMCC and its parent companies and our credit support arrangements” in our fiscal ~~2020~~2021 Form 10-K.

Our liabilities consist mainly of fixed and variable rate debt, denominated in U.S. dollars and various other currencies, which we issue in the global capital markets, while our assets consist primarily of U.S. dollar denominated, fixed rate receivables. We enter into interest rate swaps and foreign currency swaps to economically hedge the interest rate and foreign currency risks that result from the different characteristics of our assets and liabilities. Our use of derivative transactions is intended to reduce long-term fluctuations in the fair value of assets and liabilities caused by market movements. All of our derivative activities are authorized and monitored by our management and our Asset-Liability Committee which provides a framework for financial controls and governance to manage market risk.

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

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

Our International Swaps and Derivatives Association (“ISDA”) Master Agreements are our master netting agreements which permit multiple transactions to be cancelled and settled with a single net balance paid to either ~~party.~~party for our OTC derivatives. The master netting agreements also contain reciprocal collateral agreements which require the transfer of cash collateral to the party in a net asset position across all transactions. Our collateral agreements with substantially all our counterparties include a zero threshold, full collateralization arrangement. Although we have daily valuation and collateral exchange arrangements with all of our counterparties, due to the time required to move collateral, there may be a delay of up to one day between the exchange of collateral and the valuation of our derivatives. We would not be required to post additional collateral to the counterparties with whom we were in a net liability position at June 30, ~~2020,~~2021, if our credit ratings were to decline, since we fully collateralize without regard to credit ratings with these counterparties. In addition, as our collateral agreements include legal right of offset provisions, collateral amounts are netted against derivative assets or derivative liabilities.

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

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. ~~As of June 30, 2020, we~~We had no hedge accounting ~~derivatives.~~derivatives as of June 30, 2021 and March 31, 2021, respectively.

Refer to Note 6 – Derivatives, Hedging Activities and Interest Expense of the Notes to Consolidated Financial Statements.

The following table summarizes our derivative assets and liabilities, which are included in Other assets and Other liabilities inon our Consolidated Balance Sheets:

	June 30,			March 31,			June 30,			March 31,
(Dollars in millions)	2020			2020			2021			2021
Gross derivatives assets, net of credit valuation adjustment	$	1,638		$	1,437		$	1,389		$	1,356
Less: Counterparty netting		(969	)		(966	)		(726	)		(840	)
Less: Collateral held		(600	)		(420	)		(609	)		(462	)
Derivative assets, net	$	69		$	51		$	54		$	54

Gross derivative liabilities, net of credit valuation adjustment	$	2,526		$	3,116		$	1,162		$	1,385
Less: Counterparty netting		(969	)		(966	)		(726	)		(840	)
Less: Collateral posted		(1,554	)		(2,105	)		(420	)		(544	)
Derivative liabilities, net	$	3		$	45		$	16		$	1

Collateral represents cash received or deposited under reciprocal arrangements that we have entered into with our derivative counterparties. As of June 30, ~~2020,~~2021 and March 31, 2021, we held excess collateral of $7$19 million and $29 million, respectively, which we did not use to offset derivative ~~assets,~~assets. As of June 30, 2021 and March 31, 2021, we posted initial margin and excess collateral of ~~$17~~$2 million and $10 million, respectively, which we did not use to offset derivative liabilities. As of March 31, 2020, we held excess collateral of $10 million which we did not use to offset derivative assets, and we posted excess collateral of $1 million which we did not use to offset derivative liabilities.

In July 2017, the ~~U.K.~~United Kingdom Financial Conduct Authority (“FCA”), which regulates the London Inter-bank Offered Rate (“LIBOR”), announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after ~~calendar year~~ 2021. In November 2020, ICE Benchmark Administration, the administrator of LIBOR, announced its intention to continue publication of overnight and one-, three-, six- and 12- month U.S. dollar LIBOR rates through June 30, 2023. However, the United States Federal Reserve and other regulatory agencies issued guidance encouraging banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. On March 5, 2021, the FCA announced that certain LIBOR rates will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021 (or, in the case of overnight and one-, three-, six- and 12-month U.S. dollar LIBOR rates, immediately after June 30, 2023). We ~~have exposures~~are exposed to LIBOR-based financial instruments, including through our dealer financing activities, derivative contracts, secured and unsecured debt, and investment securities. To facilitate an orderly transition from LIBOR to alternative reference rates (“ARRs”), we have established an initiative led by senior management, with Board and committee oversight, to assess, monitor and mitigate risks associated with the expected discontinuation of LIBOR, to achieve operational readiness and engage impacted borrowers and counterparties in connection with the transition to ARRs. Our efforts under this initiative include monitoring developments and the usage of ARRs, monitoring the regulatory and financial reporting guidance, as well as reviewing and updating current legal contracts, internal systems and processes to accommodate the use of ARRs. For example, we are evaluating ~~SOFR,~~the Secured Overnight Financing Rate (“SOFR”) and Prime, among other alternatives and actions, as a potential ~~alternative reference rate~~ARRs to LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed ~~purchase~~repurchase transactions. Although we have issued SOFR-linked debt, at this time it is not possible to predict whether SOFR will be the primary, or sole, LIBOR replacement index.

We are also ~~actively~~continuously assessing how the expected discontinuation of LIBOR ~~could~~will impact accounting and financial reporting. We also continue to monitor the activities of the standard setters such as the FASB, which has issued new accounting standard updates that provide certain relief related to the transition away from LIBOR. For example, ~~in March 2020, the FASB issued~~on April 1, 2021, we adopted ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as further discussed in Note 1 – Interim Financial Data of the Notes to ~~the~~ Consolidated Financial Statements. ~~This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform. We are currently in the process of evaluating the amendments.~~

Refer to Part I, Item 1A. Risk Factors – ~~“Our~~“Uncertainty about the transition away from the London Interbank Offered Rate (“LIBOR”) and the adoption of alternative reference rates could adversely impact our business and results of ~~operations, financial condition and cash flows may be adversely affected by changes in interest rates, foreign currency exchange rates and market prices”~~operations” in our fiscal ~~2020~~2021 Form 10-K for further discussion.

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

~~As a result of the April 1, 2020 adoption of ASU 2016-13,~~ ~~Credit Losses – Measurement of Credit Losses on Financial Instruments~~, the incurred loss impairment method was replaced with a new impairment model that reflects lifetime expected losses. As such, we are updating the Critical Accounting Estimate disclosed in our fiscal 2020 Form 10-K as follows:

We maintain an allowance for credit losses to cover lifetime expected credit losses as of the balance sheet date on our earning assets resulting from the failure of customers or dealers to make required payments. For evaluation purposes, exposures to credit losses are segmented into the two primary categories of “consumer” and “dealer”. Our consumer portfolio consists, for accounting purposes, of our retail loan portfolio segment which are characterized by smaller contract balances than our dealer portfolio. Our dealer portfolio consists, for accounting purposes, of our dealer products portfolio segment. The overall allowance is evaluated at least quarterly, considering a variety of assumptions and factors to determine whether reserves are considered adequate to cover lifetime expected credit losses as of the balance sheet date. For further discussion of the accounting treatment of our allowance for credit losses, refer to Note 5 – Allowance for Credit Losses of the Notes to Consolidated Financial Statements.

The level of credit risk for the consumer portfolio is influenced by various factors such as economic conditions, the used vehicle market, credit quality, contract structure, and collection strategies and practices. We use statistical models to estimate lifetime expected credit losses of our retail loan portfolio segment by applying probability of default and loss given default to the exposure at default on a loan level basis. Probability of default models are developed from internal risk scoring models which consider variables such as delinquency status and other credit quality indicators, as well as historical default frequency. Other credit quality indicators include (but are not limited to): loan-to-value ratio, book payment to income ratio, FICO score (at origination), collateral type (new or used, Lexus, Toyota, or Mazda), and term count. Loss given default models forecast the extent of losses given that a default has occurred and considers variables such as collateral, trends in recoveries and other contract structure variables, as well as historical loss severity. Exposure at default represents the expected outstanding principal balance, including the effects of expected prepayment when applicable. The lifetime expected credit losses incorporate the probability-weighted forward-looking macroeconomic forecasts for baseline, favorable, and adverse scenarios. The loan lifetime is regarded by management as the reasonable and supportable period. We use macroeconomic forecasts from a third party and update such forecasts quarterly. On an ongoing basis, we review our models, including macroeconomic factors, the selection of macroeconomic scenarios and their weighting to ensure they reflect the risk of the portfolio.

The level of credit risk in the dealer portfolio is influenced primarily by the financial strength of dealers within our portfolio, dealer concentration, collateral quality, and other economic factors. The financial strength of dealers within our portfolio is influenced by, among other factors, general economic conditions, the overall demand for new and used vehicles and the financial condition of automotive manufacturers. The allowance for credit losses is established for both outstanding dealer finance receivables and certain unfunded off-balance sheet lending commitments. We measure lifetime expected credit losses of our dealer products portfolio segment by applying probability of default and loss given default to the exposure at default on a loan level basis. Probability of default is primarily established based on internal risk assessments. The probability of default model also considers qualitative factors related to macroeconomic outlooks. Loss given default is established based on the nature and market value of the collateral, loan-to-value ratios and other credit quality indicators. Exposure at default represents the expected outstanding principal balance. The lifetime of the loan or lending commitment is regarded by management as the reasonable and supportable period. On an ongoing basis, we review our models to ensure they reflect the risk of the portfolio.

The assumptions used in evaluating our exposure to credit losses involve estimates and significant judgment. The majority of our credit losses are related to our consumer portfolio. Holding other estimates constant, a 10 percent increase or decrease in the assumptions used to derive probability of default and loss given default would have resulted in a change in the allowance for credit losses of $93 million as June 30, 2020.

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

A description of our lending commitments is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Off-Balance Sheet Arrangements” and Note 12 - Related Party Transactions of the Notes to Consolidated Financial Statements in our fiscal ~~2020~~2021 Form 10-K, as well as in Note 9 - Commitments and Contingencies of the Notes to Consolidated Financial Statements.

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

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the principal executive officer) and Chief Financial Officer (the principal financial officer), of the effectiveness of our “disclosure controls and procedures” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) concluded that the disclosure controls and procedures were effective as of June 30, ~~2020,~~2021, to ensure that information required to be disclosed in reports filed under the Exchange Act was recorded, processed, summarized and reported within the time periods specified by the SEC’s rules, regulations, and forms and that such information is accumulated and communicated to our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

~~During the three months ended June 30, 2020, we implemented new technology platforms in conjunction with the adoption of ASU 2016-13 -~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ and the commencement of providing private label financial services to third-party automotive and mobility companies. These new platforms were adopted to support and enhance the capabilities and flexibility of our financial reporting. We added, modified, and eliminated certain controls to account for the new technology and modified business processes. We continue to monitor the newly implemented platforms to ensure the systems are performing as expected. There have been no ~~other~~ changes in our internal control over financial reporting that occurred during the three months ended June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Various~~For a discussion of 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. In addition, we are subject to governmental and regulatory examinations, information-gathering requests, and investigations from time to time at the state and federal levels. It is inherently difficult to predict the course of such legal actions and governmental inquiries. 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 probable loss or range of loss, whether in excess of any related accrued liability or where there is no accrued liability. Refer tosee “Part I. Financial Information – Item 1. Financial Statements - Note 9 – Commitments and Contingencies of the Notes to Consolidated Financial ~~Statements. Given the inherent uncertainty associated with legal matters, the actual costs of resolving legal claims~~Statements – Litigation and associated costs of defense may be substantially higher or lower than the amounts for which accruals have been established. Based on available information and established accruals, we do not believe it is reasonably probable that the results of these proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations.Governmental Proceedings.”

There are no material changes from the risk factors set forth under “Item 1A. Risk Factors” in our fiscal ~~2020~~2021 Form 10-K.

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)

31.1

Certification of Chief Executive Officer

Filed Herewith

31.2

Certification of Chief Financial Officer

Filed Herewith

32.1

Certification pursuant to 18 U.S.C. Section 1350

Furnished Herewith

32.2

Certification pursuant to 18 U.S.C. Section 1350

Furnished Herewith

101.INS

Inline XBRL instance document

Filed Herewith

101.CAL

Inline XBRL taxonomy extension calculation linkbase document

Filed Herewith

101.DEF

Inline XBRL taxonomy extension definition linkbase document

Filed Herewith

101.LAB

Inline XBRL taxonomy extension labels linkbase document

Filed Herewith

101.PRE

Inline XBRL taxonomy extension presentation linkbase document

Filed Herewith

101.SCH

Inline XBRL taxonomy extension schema document

Filed Herewith

104

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

Filed Herewith

Exhibit Number	Description	Method of Filing

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

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

31.1	Certification of Chief Executive Officer	Filed Herewith

31.2	Certification of Chief Financial Officer	Filed Herewith

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

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

101.INS	Inline XBRL instance document	Filed Herewith

101.CAL	Inline XBRL taxonomy extension calculation linkbase document	Filed Herewith

101.DEF	Inline XBRL taxonomy extension definition linkbase document	Filed Herewith

101.LAB	Inline XBRL taxonomy extension labels linkbase document	Filed Herewith

101.PRE	Inline XBRL taxonomy extension presentation linkbase document	Filed Herewith

101.SCH	Inline XBRL taxonomy extension schema document	Filed Herewith

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

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.

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

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

INDEX
PART I	3
Item 1. Financial Statements	3
Consolidated Statements of Income	3
Consolidated Statements of Comprehensive Income	3
Consolidated Balance Sheets	4
Consolidated Statements of Shareholder’s Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4237
Item 3. Quantitative and Qualitative Disclosures About Market Risk	7363
Item 4. Controls and Procedures	7363
PART II	7464
Item 1. Legal Proceedings	7464
Item 1A. Risk Factors	7464
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	7464
Item 3. Defaults Upon Senior Securities	7464
Item 4. Mine Safety Disclosures	7464
Item 5. Other Information	7464
Item 6. Exhibits	7565
Signatures	7666

	June 30,			March 31,
	2020			2020
Investments in operating leases ¹	$	48,187		$	48,638
Deferred origination (fees) and costs, net		(199	)		(223	)
Deferred income		(1,824	)		(1,962	)
Accumulated depreciation		(10,330	)		(9,976	)
Allowance for credit losses		-			(90	)
Investments in operating leases, net	$	35,834		$	36,387

	June 30,			March 31,
	2021			2021
Investments in operating leases ¹	$	48,692		$	48,337
Deferred origination (fees) and costs, net		(72	)		(101	)
Deferred income		(1,790	)		(1,759	)
Accumulated depreciation		(9,046	)		(9,386	)
Investments in operating leases, net	$	37,784		$	37,091

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

	Retail loan
	March 31, 2020
Aging of finance receivables:
Current	$	56,064
30-59 days past due		717
60-89 days past due		203
90 days or greater past due		104
Total	$	57,088

	Three months ended June 30, 2021
	Retail loan			Dealer products			Total
Beginning balance, April 1, 2021	$	1,075		$	140		$	1,215
Charge-offs		(33	)		0	��		(33	)
Recoveries		17			0			17
Provision for credit losses		(7	)		4			(3	)
Ending balance, June 30, 2021 ¹	$	1,052		$	144		$	1,196

	Three months ended June 30, 2020
Allowance for Credit Losses for Finance Receivables:	Retail loan			Dealer products			Total
Beginning balance, April 1, 2020	$	486		$	241		$	727
Adoption of ASU 2016-13 ¹		281			11			292
Charge-offs		(69	)		0			(69	)
Recoveries		9			1			10
Provision for credit losses		226			(43	)		183
Ending balance, June 30, 2020 ²	$	933		$	210		$	1,143

	Three months ended June 30, 2019 ¹
Allowance for Credit Losses for Finance Receivables:	Retail loan			Dealer products			Total
Beginning balance, April 1, 2019	$	304		$	195		$	499
Charge-offs		(72	)		-			(72	)
Recoveries		14			-			14
Provision for credit losses		81			(18	)		63
Ending balance, June 30, 2019	$	327		$	177		$	504

	Three Months Ended June 30, 2020

	Available-for-sale debt securities
						Total
	Mortgage-		Asset-			available-
	backed		backed			for-sale debt
	securities		securities			securities
Fair value, April 1, 2020	$	46	$	72		$	118
Total gains (losses)
Included in other comprehensive income		2		5			7
Purchases, issuances, sales, and settlements
Purchases		-		-			-
Issuances		-		-			-
Sales		-		(1	)		(1	)
Settlements		-		(4	)		(4	)
Transfers into Level 3		-		-			-
Transfers out of Level 3		-		-			-
Fair value, June 30, 2020	$	48	$	72		$	120
The amount of total unrealized gains (losses) included in other comprehensive income attributable to assets held at the reporting date	$	2	$	5		$	7

	TOYOTA MOTOR CREDIT CORPORATION
	(Registrant)

Date: August ~~7, 2020~~5, 2021	By	/s/ Mark S. Templin
		Mark S. Templin
		President and Chief Executive Officer
		(Principal Executive Officer)
		��
Date: August ~~7, 2020~~5, 2021	By	/s/ Scott Cooke
		Scott Cooke
		Group Vice President and Chief Financial Officer (Principal Financial Officer)