TMCC's Net Income Soars 80% on Lower Credit Losses, Interest Expense

TL;DR

**TMCC is crushing it, with net income up 80% thanks to fewer bad loans and lower interest costs – definitely a buy signal for stability.**

AI Summary

TOYOTA MOTOR CREDIT CORPORATION (TMCC) reported a significant increase in net income for the six months ended September 30, 2025, reaching $1,417 million, a substantial rise from $786 million in the prior year. This 80.3% increase was driven by a 20.6% improvement in net financing revenues, which grew to $1,945 million from $1,430 million. Total financing revenues also saw a healthy increase of 3.8%, reaching $6,751 million compared to $6,506 million in the same period last year. A key factor contributing to the improved profitability was a 55.5% reduction in the provision for credit losses, which decreased to $176 million from $395 million. Interest expense also declined by 9.9%, from $3,027 million to $2,723 million. The company's total assets decreased slightly to $152,728 million from $155,294 million as of March 31, 2025, primarily due to a reduction in finance receivables, net, from $101,749 million to $99,828 million. Debt also decreased by $4,793 million to $122,952 million. The MFS Transition, moving Mazda Financial Services origination to an unconsolidated affiliate, was substantially completed in fiscal 2025.

Why It Matters

TMCC's robust financial performance, marked by an 80.3% surge in net income, signals strong operational efficiency and effective risk management, particularly with the significant reduction in credit loss provisions. For investors, this indicates a healthier balance sheet and potentially higher returns, reinforcing confidence in Toyota's financial services arm. Employees benefit from a stable and profitable company, while customers may see continued competitive financing options. In the broader market, TMCC's strength underscores the resilience of captive finance companies, especially in a competitive automotive lending landscape, potentially influencing other auto lenders' strategies.

Risk Assessment

Risk Level: low — The risk level is low due to a significant 55.5% decrease in the provision for credit losses to $176 million for the six months ended September 30, 2025, compared to $395 million in the prior year. Additionally, interest expense decreased by $304 million, or 9.9%, to $2,723 million, indicating improved cost management and a potentially more favorable interest rate environment for the company.

Analyst Insight

Investors should consider TMCC a stable investment given its strong profitability and reduced credit risk. The substantial increase in net income and lower credit loss provisions suggest efficient operations and a healthy loan portfolio. Monitor future interest rate trends and their potential impact on financing revenues and interest expense.

Financial Highlights

revenue

$6,751 million

total Assets

$152,728 million

total Debt

$122,952 million

net Income

$1,417 million

revenue Growth

+3.8%

Revenue Breakdown

Key Numbers

• $1.417B — Net Income (Increased by 80.3% for the six months ended September 30, 2025, compared to $786 million in the prior year.)
• $176M — Provision for Credit Losses (Decreased by 55.5% for the six months ended September 30, 2025, from $395 million in the prior year.)
• $2.723B — Interest Expense (Decreased by 9.9% for the six months ended September 30, 2025, from $3,027 million in the prior year.)
• $1.945B — Net Financing Revenues (Increased by 20.6% for the six months ended September 30, 2025, from $1,430 million in the prior year.)
• $6.751B — Total Financing Revenues (Increased by 3.8% for the six months ended September 30, 2025, from $6,506 million in the prior year.)
• $152.728B — Total Assets (Decreased from $155,294 million as of March 31, 2025, to September 30, 2025.)
• $122.952B — Total Debt (Decreased from $127,745 million as of March 31, 2025, to September 30, 2025.)
• $99.828B — Finance Receivables, Net (Decreased from $101,749 million as of March 31, 2025, to September 30, 2025.)

Key Players & Entities

• TOYOTA MOTOR CREDIT CORPORATION (company) — registrant of the 10-Q filing
• Toyota Financial Services International Corporation (company) — sole shareholder of TMCC
• Mazda Financial Services (company) — financial services program transitioned to an affiliate
• Toyota Financial Savings Bank (company) — unconsolidated affiliate taking over MFS origination
• SEC (regulator) — Securities and Exchange Commission
• FASB (regulator) — Financial Accounting Standards Board
• $1,417 million (dollar_amount) — Net income for six months ended September 30, 2025
• $786 million (dollar_amount) — Net income for six months ended September 30, 2024
• $176 million (dollar_amount) — Provision for credit losses for six months ended September 30, 2025
• $395 million (dollar_amount) — Provision for credit losses for six months ended September 30, 2024

FAQ

Risk Factors

• Credit Loss Provisions [medium — financial]: The provision for credit losses decreased by 55.5% to $176 million from $395 million. While this improved profitability, a significant increase in defaults or a deterioration in economic conditions could lead to higher credit losses in the future.
• Interest Expense Management [medium — financial]: Interest expense declined by 9.9% to $2,723 million from $3,027 million. However, fluctuations in interest rates can impact borrowing costs and net interest margins.
• MFS Transition [low — operational]: The substantial completion of the MFS Transition, moving Mazda Financial Services origination to an unconsolidated affiliate, was completed in fiscal 2025. While intended to be beneficial, such transitions can introduce operational complexities and potential integration risks.
• Marketable Securities Valuation [low — market]: The company holds significant investments in marketable securities, including $1,698 million in available-for-sale debt securities as of September 30, 2025. Unrealized losses on these securities were $123 million, indicating potential market volatility impacting investment income.
• Adoption of New Accounting Standards [low — regulatory]: TMCC is evaluating new accounting guidance, including ASU 2023-09 for income tax disclosures and ASU 2024-03 for expense disaggregation. The adoption of these standards may require adjustments to reporting processes and disclosures.

Industry Context

Toyota Motor Credit Corporation operates in the highly competitive automotive finance sector. Key industry trends include evolving customer preferences for financing and leasing, increasing digitalization of services, and the impact of macroeconomic factors such as interest rates and economic growth on loan demand and credit quality. Competition comes from captive finance arms of other automakers, as well as independent finance companies and banks.

Regulatory Implications

As a financial services provider, TMCC is subject to various regulations related to lending, consumer protection, and data privacy. Changes in accounting standards, such as those related to income taxes and expense disclosures, require ongoing compliance efforts and potential adjustments to financial reporting.

What Investors Should Do

1. Monitor credit loss trends closely.
2. Analyze the impact of interest rate changes.
3. Evaluate the long-term benefits of the MFS Transition.

Key Dates

• 2025-09-30: Six months ended September 30, 2025 — Reported significant net income growth of 80.3% and improved net financing revenues.
• 2025-03-31: Fiscal year ended March 31, 2025 — Previous fiscal year-end, used as a comparison point for current period results. MFS Transition substantially completed.

Glossary

Provision for Credit Losses

An amount set aside by a financial institution to cover potential losses from loans or receivables that may not be repaid. (A significant decrease in this provision contributed to TMCC's improved net income.)

Net Financing Revenues

The revenue generated from a company's core lending and financing activities, after deducting interest expenses. (This metric showed strong growth, indicating improved core business performance for TMCC.)

Available-for-sale (AFS) debt securities

Debt securities that are not classified as held-to-maturity or trading securities. They are reported at fair value, with unrealized gains and losses included in other comprehensive income. (TMCC holds these securities, and their valuation impacts other comprehensive income and potential realized gains/losses.)

MFS Transition

The process of moving the origination and financing of Mazda Financial Services contracts to an unconsolidated affiliate. (This strategic move was substantially completed in fiscal 2025 and impacts the company's operational structure.)

Unconsolidated Affiliate

An entity that is not controlled by the reporting company but with which the reporting company has a significant business relationship, often through joint ownership or strategic partnership. (The MFS Transition involved moving operations to such an entity.)

Year-Over-Year Comparison

For the six months ended September 30, 2025, TMCC demonstrated robust performance compared to the prior year. Net income surged by 80.3% to $1,417 million, largely due to a 20.6% increase in net financing revenues and a significant 55.5% reduction in the provision for credit losses. Interest expense also decreased by 9.9%. Total assets and total debt saw slight decreases, reflecting a more streamlined balance sheet.

Filing Documents

• ck0000834071-20250930.htm (10-Q) — 5645KB
• ck0000834071-ex31_1.htm (EX-31.1) — 14KB
• ck0000834071-ex31_2.htm (EX-31.2) — 14KB
• ck0000834071-ex32_1.htm (EX-32.1) — 10KB
• ck0000834071-ex32_2.htm (EX-32.2) — 10KB
• 0001193125-25-266960.txt ( ) — 24311KB
• ck0000834071-20250930.xsd (EX-101.SCH) — 1394KB
• ck0000834071-20250930_htm.xml (XML) — 7540KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 3

Financial Statements

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

Notes to Consolidated Financial Statements 7 Note 1. Interim Financial Data 7 Note 2. Investments in Marketable Securities 9 Note 3. Finance Receivables, Net 12 Note 4. Allowance for Credit Losses 17 Note 5. Investments in Operating Leases, Net 19 Note 6. Derivatives, Hedging Activities and Interest Expense 20 Note 7. Debt and Credit Facilities 22 Note 8. Variable Interest Entities 24 Note 9. Commitments and Contingencies 26 Note 10. Income Taxes 28 Note 11. Related Party Transactions 29 Note 12. Fair Value Measurements 31 Note 13. Segment Information 34

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 37

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 59

Controls and Procedures

Item 4. Controls and Procedures 59

OTHER INFORMATION

PART II. OTHER INFORMATION 60

Legal Proceedings

Item 1. Legal Proceedings 60

Risk Factors

Item 1A. Risk Factors 60

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 60

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 60

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 60

Other Information

Item 5. Other Information 60

Exhibits

Item 6. Exhibits 61

Signatures

Signatures 62 2 Table of Contents

FINANCI AL INFORMATION

PART I. FINANCI AL INFORMATION

FINANC IAL STATEMENTS

ITEM 1. FINANC IAL STATEMENTS TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STAT EMENTS OF INCOME (Dollars in millions) (Unaudited) Three months ended Six months ended September 30, September 30, 2025 2024 2025 2024 Financing revenues: Operating lease $ 1,627 $ 1,539 $ 3,245 $ 3,060 Retail 1,507 1,487 3,003 2,907 Dealer 254 271 503 539 Total financing revenues 3,388 3,297 6,751 6,506 Depreciation on operating leases 1,060 1,015 2,083 2,049 Interest expense 1,418 1,584 2,723 3,027 Net financing revenues 910 698 1,945 1,430 Voluntary protection contract revenues and insurance earned premiums 328 300 648 595 Investment and other income, net 356 388 712 611 Net financing revenues and other revenues 1,594 1,386 3,305 2,636 Expenses: Provision for credit losses 131 206 176 395 Operating and administrative 489 453 916 893 Voluntary protection contract expenses and insurance losses 179 161 353 320 Total expenses 799 820 1,445 1,608 Income before income taxes 795 566 1,860 1,028 Provision for income taxes 190 137 443 242 Net income $ 605 $ 429 $ 1,417 $ 786 CONSOLIDATED STATEMENTS O F COMPREHENSIVE INCOME (Dollars in millions) (Unaudited) Three months ended Six months ended September 30, September 30, 2025 2024 2025 2024 Net income $ 605 $ 429 $ 1,417 $ 786 Other comprehensive income, net of tax Net unrealized gains on available-for-sale debt securities [net of tax provision of ($ 1 ), ($ 6 ), ($ 2 ) and ($ 5 ), respectively] 6 21 8 16 Reclassification of net losses realized on available-for-sale debt securities included in investment and other income, net [net of tax benefit of $ 0 , $ 0 , $ 0 and $ 0 , respectively] - - 1 3 Other comprehensive income 6 21 9 19 Comprehensive income $ 611

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) N ote 1 – Interim Financial Data Basis of Presentation The information furnished in these unaudited interim consolidated financial statements as of and for the three and six months ended September 30, 2025 and 2024 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 and six months ended September 30, 2025, do not necessarily indicate the results which may be expected for the full fiscal year ending March 31, 2026 ("fiscal 2026"). 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, 2025 ("fiscal 2025 "), which was filed with the Securities and Exchange Commission on June 3, 2025. References herein to "TMCC" denote Toyota Motor Credit Corporation, and references herein to "we", "our", and "us" denote Toyota Motor Credit Corporation and its consolidated subsidiaries. Recently Adopted Accounting Guidance On March 31, 2025 , we adopted ASU 2023-07, Segment Reporting (Topic 280) , Improvements to Reportable Segment Disclosure requirements. This ASU enhances disclosure requirements for reportable segments primarily through enhanced disclosures about significant segment expenses. The adoption of this guidance did not have a material impact on our consolidated financial statements or related disclosures. Refer to Note 13 - Segment Information for additional information. Accounting Guidance Issued But Not Yet Adopted In December 2023, the FA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) Note 1 – Interim Financial Data (Continued) Other Matters In fiscal 2025, as it was deemed to be in the best interests of the Company and its sole shareholder, Toyota Financial Services International Corporation, the Board of Directors of TMCC approved transition of the origination and financing of new automotive finance and lease contracts under the Mazda Financial Services ("MFS") Agreement to Toyota Financial Savings Bank, an unconsolidated affiliate of TMCC (the "MFS Transition"). The MFS Transition commenced and was substantially completed during the fourth quarter of fiscal 2025 . 8 Table of Contents TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) Note 2 – Investments in Marketable Securities Investments in marketable securities consist of debt securities and equity investments. We classify all of our debt securities as available-for-sale ("AFS"). Except when the fair value option is elected, AFS debt securities are recorded at fair value with unrealized gains or losses included in accumulated other comprehensive income ("AOCI"), net of applicable taxes. Interest income is recognized on an accrual basis and determined using the effective interest method. Realized gains and losses from sales of AFS debt securities are determined using the specific identification method or first in first out method. Dividend income, interest income, and realized gains and losses from the sales of AFS debt securities are included in Investment and other income, net in our Consolidated Statements of Income. We elected the fair value option for certain debt securities held within one of our investment portfolios for operational ease given the size and composition of this portfolio. All debt securities within this specific portfolio are recorded at fair value with changes in fair value included in Investment and other income, net in our Consolidated Statements of Income. AFS debt securities for which the fair value option is elected are not subject to credit loss impairment evaluation. As of September 30, 2025 and March 31, 2025, we held AFS debt securities for which the fair value option was elected of $ 907 million and $ 829 million , respectively. The difference between the aggregate fair value and the aggregate unpaid principal balance of AFS debt securities for which the fair value option was elected was an unrealized loss of $ 49 million and $ 61 million as of September 30, 2025 and March 31, 2025, respectively. All equity investments are recorded at fair value with changes in fair value included in Investment and other income, net in our

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) Note 2 – Investments in Marketable Securities (Continued) March 31, 2025 Amortized Unrealized Unrealized Fair cost gains losses value Available-for-sale debt securities: U.S. government and agency obligations $ 824 $ 2 $ ( 83 ) $ 743 Foreign government and agency obligations 21 - ( 1 ) 20 Municipal debt securities 8 1 ( 1 ) 8 Commercial paper 15 - - 15 Corporate debt securities 488 2 ( 40 ) 450 Mortgage-backed securities: U.S. government agency 146 - ( 5 ) 141 Non-agency residential 12 - ( 1 ) 11 Non-agency commercial 50 - ( 5 ) 45 Asset-backed securities 136 1 ( 3 ) 134 Total available-for-sale debt securities $ 1,700 $ 6 $ ( 139 ) $ 1,567 Equity investments 3,014 Total investments in marketable securities $ 4,581 A portion of our equity investments are investments in funds that are privately placed and managed by an open-end investment management company (the "Trust"). If we elect to redeem shares, the Trust will normally redeem all shares for cash, but may, in unusual circumstances, redeem amounts exceeding the lesser of $ 250 thousand or 1 percent of the Trust's asset value by payment in kind of securities held by the respective fund during any 90 -day period. We also invest in actively traded open-end mutual funds. Redemptions are subject to normal terms and conditions as described in each fund's prospectus. Unrealized Losses on Securities The following table presents the aggregate fair value and unrealized losses on AFS debt securities in a continuous unrealized loss position: September 30, 2025 Less than 12 months 12 months or longer Total Available-for-sale debt securities: Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses U.S. government and age

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) Note 2 – Investments in Marketable Securities (Continued) March 31, 2025 Less than 12 months 12 months or longer Total Available-for-sale debt securities: Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses U.S. government and agency obligations $ 104 $ ( 1 ) $ 534 $ ( 82 ) $ 638 $ ( 83 ) Foreign government and agency obligations 7 - 6 ( 1 ) 13 ( 1 ) Municipal debt securities - - 2 ( 1 ) 2 ( 1 ) Corporate debt securities 42 ( 1 ) 288 ( 39 ) 330 ( 40 ) Mortgage-backed securities U.S. Government agency 68 ( 1 ) 37 ( 4 ) 105 ( 5 ) Non-agency residential 1 - 7 ( 1 ) 8 ( 1 ) Non-agency commercial 3 - 41 ( 5 ) 44 ( 5 ) Asset-backed securities 37 - 41 ( 3 ) 78 ( 3 ) Total available-for-sale debt securities $ 262 $ ( 3 ) $ 956 $ ( 136 ) $ 1,218 $ ( 139 ) An allowance for credit losses is established when it is determined that a credit loss has occurred. As of September 30, 2025 and March 31, 2025, management determined credit losses for securities in an unrealized loss position were not significant. This analysis considered a variety of factors including, but not limited to, performance indicators of the issuer, default rates, industry analyst reports, credit ratings, and other relevant information. Gains and Losses on Securities The following table represents gains and losses on our investments in marketable securities presented in our Consolidated Statements of Income: Three months ended Six months ended September 30, September 30, 2025 2024 2025 2024 Available-for-sale debt securities: Unrealized gains on securities for which the fair value option was elected $ 11 $ 32 $ 12 $ 27 Realized losses on

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) Note 3 – Finance Receivables, Net Finance receivables, net consists of the retail loan and dealer products portfolio segments, and includes deferred origination costs, deferred income, and allowance for credit losses. Finance receivables, net also includes securitized retail receivables, which represent retail receivables that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements, as discussed further in Note 8 – Variable Interest Entities . Cash flows from these securitized retail receivables are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors. Finance receivables, net consisted of the following: September 30, March 31, 2025 2025 Retail receivables 1 $ 84,636 $ 87,418 Dealer financing 17,353 16,521 101,989 103,939 Deferred origination costs 1,126 1,227 Deferred income ( 1,771 ) ( 1,773 ) Allowance for credit losses Retail receivables ( 1,387 ) ( 1,544 ) Dealer financing ( 129 ) ( 100 ) Total allowance for credit losses ( 1,516 ) ( 1,644 ) Finance receivables, net $ 99,828 $ 101,749 1 Includes gross securitized retail receivables of $ 33.4 billion and $ 34.4 billion as of September 30, 2025 and March 31, 2025 , respectively. Accrued interest related to finance receivables is presented in Other assets on the Consolidated Balance Sheets and was $ 383 million as of both September 30, 2025 and March 31, 2025. 12 Table of Contents TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) Note 3 – Finance Receivables, Net (Continued) Credit Quality Indicators We are exposed to credit risk on our finance receivables. Credit risk is the risk of loss arising from the failur

View Full Filing

View this 10-Q filing on SEC EDGAR