TOYOTA MOTOR CREDIT CORP - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended September 30, 1994
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OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from to
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Commission file number 1-9961
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TOYOTA MOTOR CREDIT CORPORATION
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(Exact name of registrant as specified in its charter)

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

19001 S. Western Avenue
Torrance, California 90509
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (310) 787-1310
-----------------------

Securities registered pursuant to section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- ------------------------

5 3/4% Notes Due June 15, 1995 New York Stock Exchange
- --------------------------------------- ------------------------

Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]

As of November 30, 1994, the number of outstanding shares of capital
stock, par value $10,000 per share, of the registrant was 86,500, all of which
shares were held by Toyota Motor Sales, U.S.A., Inc.

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PART I

ITEM 1. BUSINESS.

General

Toyota Motor Credit Corporation ("TMCC") provides retail and wholesale
financing, retail leasing and certain other financial services to authorized
Toyota and Lexus vehicle and Toyota industrial equipment dealers and their
customers in the United States (excluding Hawaii). TMCC is a wholly owned
subsidiary of Toyota Motor Sales, U.S.A., Inc. ("TMS" or the "Parent"). TMS
is primarily engaged in the wholesale distribution of automobiles, light
trucks, industrial equipment and related replacement parts and accessories
throughout the United States (excluding Hawaii). Substantially all of TMS's
products are either manufactured by its subsidiaries or are purchased from
Toyota Motor Corporation ("TMC"), the parent of TMS, or its affiliates.

TMCC was incorporated in California on October 4, 1982, and commenced
operations in May 1983. TMCC currently has 34 branches in various locations
in the United States. TMCC's retail and wholesale financing, and leasing
programs are currently available in 44 states for Toyota vehicles and 49
states for Lexus vehicles. TMCC has five wholly owned subsidiaries, four of
which are engaged in the insurance business and one limited purpose subsidiary
formed primarily to acquire and securitize retail finance receivables. TMCC
and its subsidiaries are collectively referred to as the "Company".

An operating agreement between TMCC and TMS (the "Operating Agreement"), dated
January 16, 1984, provides that TMCC will establish its own financing rates
and is under no obligation to TMS to finance wholesale obligations from any
dealers or retail obligations of any customers. In addition, pursuant to the
Operating Agreement, TMS will arrange for the repurchase of new Toyota and
Lexus vehicles financed at wholesale by TMCC at the aggregate cost financed
in the event of dealer default. The Operating Agreement also specifies that
TMS will retain 100% ownership of TMCC as long as TMCC has any funded debt
outstanding and that TMS will make necessary equity contributions or provide
other financial assistance TMS deems appropriate to ensure that TMCC maintains
a minimum coverage on fixed charges of 1.25 times such fixed charges in any
fiscal quarter. The Operating Agreement does not constitute a guarantee by
TMS of any obligations of TMCC. The coverage provision of the Operating
Agreement is solely for the benefit of the holders of TMCC's commercial paper,
and the Operating Agreement may be amended or terminated at any time without
notice to, or the consent of, holders of other TMCC obligations.

Vehicle Retail Financing and Leasing

Retail financing consists of purchasing installment contracts covering the
sales of new Toyota and Lexus vehicles and certain used vehicles. TMCC
acquires a security interest in the vehicles it finances and recovery of
vehicles typically is permitted upon default, subject to various requirements
of law. TMCC does not normally finance more than the dealer cost of a vehicle
and accessories plus taxes, license fees and other fees, and premiums
refundable to TMCC in the event of contract termination. Typically, contract
terms range from 36 to 60 months for new vehicles and from 24 to 60 months for
used vehicles depending on the age of the vehicle. TMCC has both recourse and
non-recourse retail financing programs available to dealers. Dealers
participating in the non-recourse program are charged a higher discount rate
but do not have any financial responsibility for repossessions. As a result

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of competitive market factors, substantially all of TMCC's retail financings
have been non-recourse. TMCC requires retail financing customers to carry
fire, theft and collision insurance on financed vehicles covering the
interests of both TMCC and the customer. In the event the customer fails to
maintain such insurance, TMCC has the right to obtain collateral protection
insurance. New vehicle retail finance receivables constituted approximately
78% of all vehicle retail finance receivables at September 30, 1994. Vehicle
retail finance receivables represented approximately 35% of total assets at
September 30, 1994.

Effective November 1, 1994, the Company discontinued the origination of retail
finance receivables for Toyota vehicles through an independent finance company
in five southeastern states. The existing portfolio that was originated on
TMCC's behalf by the independent finance company will continue to be serviced
by the independent finance company. The Company does not expect the
discontinuation of Toyota retail installment contract originations in the five
states to have an adverse effect on the Company's financial condition or
results of operations.

Leasing consists primarily of purchasing new vehicles leased to retail
customers by Toyota and Lexus dealers and certain used vehicles. TMCC holds
title to vehicles it leases and generally is permitted to take possession of a
vehicle upon default by the lessee. TMCC does not normally finance more than
105% of the vehicle's Manufacturer Suggested Retail Price and accessories plus
taxes, license fees and other fees. The present program is a closed-end
program, with lease terms typically ranging from 24 to 60 months. Under the
program, the lessee is granted an option to purchase the vehicle at lease
termination, and the dealer is granted the same option if the lessee elects
to return the vehicle. The purchase price is established at the beginning of
the lease and is based upon the anticipated residual value of the vehicle.
Off-leased vehicles returned to TMCC are transported to various auction sites
throughout the United States and sold. The residual value risk on anticipated
residual values of all Toyota vehicles leased after September 30, 1990 and all
leased Lexus vehicles is directly assumed by TMCC. Anticipated residual
values on almost all Toyota vehicles leased to customers prior to October 1,
1990 were insured with an independent insurer, with TMCC assuming 25% of the
residual value risk on a last dollar basis. TMCC requires lessees to carry
fire, theft and collision insurance on leased vehicles covering the interests
of both TMCC and the lessee. In addition, TMCC requires lessees to carry
specified levels of liability insurance. New vehicle leases constituted
approximately 99% of all vehicle lease earning assets at September 30, 1994.
Vehicle lease earning assets represented approximately 51% of total assets at
September 30, 1994.

-3-

Summary of Vehicle Retail Installment Financing and Leasing Program Activity

Years Ended September 30,
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------

Contracts booked:
New vehicles......... 350,000 256,000 237,000 192,000 168,000
Used vehicles........ 64,000 56,000 56,000 52,000 44,000
-------- -------- -------- -------- --------
Total............. 414,000 312,000 293,000 244,000 212,000
======== ======== ======== ======== ========
Average amount financed:
New vehicles......... $19,900 $17,900 $16,700 $14,600 $13,300
Used vehicles........ $12,600 $10,400 $9,400 $8,500 $8,000

Outstanding portfolio at
period end ($Millions):
New vehicles...... $11,603 $8,167 $6,910 $5,285 $4,164
Used vehicles..... $1,128 $877 $837 $695 $563
Number of accounts 929,000 750,000 735,000 638,000 531,000

The outstanding balance of the sold retail finance receivables which TMCC
continues to service (not included in the above table) totaled $251 million
and $475 million, representing approximately 41,000 and 60,000 accounts, at
September 30, 1994 and 1993, respectively.

Vehicle Wholesale Financing

TMCC provides wholesale financing through a floating interest rate program
that assists Toyota and Lexus dealers, with approved lines of credit, in
carrying inventories of new Toyota and Lexus vehicles. Typically, financing
is provided for up to 100% of the dealer invoice value of new vehicles.
Dealers are required to make principal reductions with respect to specific
vehicles financed based on time in inventory or use as a customer
demonstrator. Used vehicle inventory financing is also offered, but financing
is subject to certain limitations. TMCC acquires security interests in the
vehicles it finances at wholesale, and substantially all such financings are
backed by corporate or individual guarantees from or on behalf of
participating dealers. In the event of a dealer default, TMCC has the right
to liquidate any assets acquired and seek legal remedies pursuant to the
guarantees. TMCC has no right, however, to recover a vehicle sold by a dealer
to a bona fide retail buyer and is limited to the remedies under its wholesale
financing agreement with the dealer. Pursuant to the Operating Agreement, TMS
will arrange for the repurchase of new Toyota and Lexus vehicles financed at
wholesale by TMCC at the aggregate cost financed in the event of a dealer
default. At September 30, 1994, finance receivables related to new vehicle
inventory financing represented approximately 92% of TMCC's total vehicle
wholesale finance receivables. As an accommodation to Toyota and Lexus
vehicle dealers, TMCC, under certain circumstances and with certain
restrictions, provides wholesale financing for new vehicles other than Toyota
and Lexus. At September 30, 1994, finance receivables related to such
vehicles represented approximately 2% of TMCC's total vehicle wholesale
finance receivables. Vehicle wholesale finance receivables represented
approximately 5% of total assets at September 30, 1994.

-4-

Summary of Vehicle Wholesale Financing Activity

Years Ended September 30,
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------

Dealer loans ($Millions)....... $7,055 $6,378 $4,903 $3,409 $2,143
Dealer repayments ($Millions).. $7,032 $6,152 $4,745 $3,264 $2,105
Average amount financed
per vehicle................. $17,530 $16,500 $15,400 $14,200 $14,300
Outstanding portfolio at
period end ($Millions)...... $727 $703 $486 $339 $202

Credit Losses

Credit losses are an expected cost in the business of extending credit and are
considered in TMCC's rate-setting process. TMCC's objective is to minimize
credit losses while providing financing support for the sale of Toyota and
Lexus products. TMCC's credit losses to date have been primarily from retail
installment and lease contracts.

Allowances for credit losses are established based primarily on historical
loss experience. Other factors affecting collectibility are also evaluated in
determining the amount to be provided. Upon repossession of the collateral
for a delinquent account, losses are charged to the allowance for credit
losses and the estimated realizable value of the asset is reclassified to
Other Assets. When it has been determined that the collateral cannot be
recovered, losses are charged to the allowance for credit losses. Recoveries
are credited to the allowance for credit losses.

-5-

Analysis of the Allowance for Credit Losses

Years ended September 30,
------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Dollars in Millions)

Allowance for credit losses
at beginning of period........ $121 $107 $ 89 $70 $56
Provision for credit losses...... 78 54 68 68 62
Charge-offs, net of recoveries... (35) (40) (50) (49) (48)
---- ---- ---- --- ---
Allowance for credit losses
at end of period.............. $164 $121 $107 $89 $70
==== ==== ==== === ===
Allowance as percent of net
receivables and net
investments in operating
leases outstanding............ 1.16% 1.17% 1.22% 1.31% 1.31%

Losses as percent of average
gross receivables and average
net investments in operating
leases outstanding............ .28% .37% .56% .69% .88%

Aggregate balances at end of
period for installments
and lease rentals 60
or more days past due......... $16 $16 $23 $24 $18

Aggregate balances at end of
period for installments
and lease rentals 60 or more
days past due as percent
of gross receivables and
net investments in operating
leases outstanding............ .11% .14% .23% .31% .29%

Other Activities

The Company considers its primary business to be the retail and wholesale
financing and leasing of vehicles. During fiscal 1994, 1993 and 1992, the
Company derived approximately 9%, 10% and 10%, respectively, of its total
revenues from operations other than its primary business.

TMCC has five wholly owned subsidiaries, Toyota Motor Insurance Services
("TMIS"), Toyota Motor Insurance Corporation of Vermont ("TMICV"), Toyota
Motor Insurance Company ("TMIC"), Toyota Motor Life Insurance Company ("TLIC")
and Toyota Motor Credit Receivables Corporation ("TMCRC"). The insurance
subsidiaries provide certain insurance services along with certain insurance
and contractual coverages related to the sale of vehicles. In addition, the
insurance subsidiaries insure and reinsure certain TMS risks and provide
insurance for Toyota and Lexus dealers' new vehicle inventories financed by

-6-

TMCC. Insurance operations represented approximately 4% of the Company's
total revenues for the year ended September 30, 1994. See Item 13. TMCRC,
a limited purpose subsidiary, was formed in June 1993 primarily to acquire
retail finance receivables from TMCC for the purpose of securitizing such
receivables. In the fourth quarter of fiscal 1993, the Company sold
$521 million of retail finance receivables, subject to certain limited
recourse provisions. Revenues from servicing and other income related to the
sold finance receivables represented approximately 1% of the Company's total
revenues for the year ended September 30, 1994.

TMCC provides financing of new vehicles for daily rental fleets belonging to
Toyota and Lexus dealers and independent fleet operators. TMCC also provides
financing of new vehicles for retail leasing companies owned by Toyota and
Lexus dealers. Revenues from finance receivables and vehicles under operating
leases related to these programs represented approximately 1% of total
revenues for the year ended September 30, 1994.

TMCC also provides real estate and working capital loans to Toyota and Lexus
vehicle dealers. Revenues from these finance receivables represented
approximately 1% of total revenues for the year ended September 30, 1994.

In addition, TMCC provides wholesale financing as well as retail installment
financing and leasing to authorized Toyota industrial equipment dealers and
their customers in the United States (excluding Hawaii). Revenues from
finance receivables and equipment operating lease assets related to these
programs represented approximately 2% of total revenues for the year ended
September 30, 1994.

Competition

The automobile finance industry in the United States is very competitive.
Commercial banks, savings and loan associations, credit unions, finance
companies and other captive automobile finance companies provide retail
installment financing and leasing for new and used vehicles. Commercial banks
and captive automobile finance companies also provide wholesale financing for
Toyota and Lexus dealers. TMCC's strategy is to supplement, with competitive
financing programs, the overall commitment of TMS to offer a complete package
of services to authorized Toyota and Lexus dealers and their customers.

Employee Relations

At September 30, 1994, the Company had approximately 1,885 full-time
employees. The Company considers its employee relations to be satisfactory.

Government Regulations

The finance and insurance operations of the Company are regulated under both
federal and state law. The degree and nature of regulation varies from state
to state. A majority of the states have enacted legislation establishing
licensing requirements to conduct retail and other finance and insurance
activities. Most states also impose limits on the maximum rate of finance
charges. In certain states, the margin between the present statutory maximum
interest rates and borrowing costs is sufficiently narrow that, in periods of
rapidly increasing or high interest rates, there could be an adverse effect
on TMCC's operations in these states if TMCC is unable to pass on the
increased interest costs to its customers.

-7-

The Company's operations are also subject to regulation under federal and
state consumer protection statutes. The Company continually reviews its
operations to comply with applicable law. Future administrative rulings,
judicial decisions and legislation in this area may require modification of
the Company's business practices and documentation.

Toyota Motor Sales, U.S.A., Inc.

TMS, a wholly owned subsidiary of TMC, was established in 1957 and is
primarily engaged in the wholesale distribution of automobiles, light trucks,
industrial equipment and related replacement parts and accessories throughout
the United States (excluding Hawaii). Additionally, TMS exports automobiles
and related replacement parts and accessories to Europe, Asia and U.S.
territories. TMS also manufactures certain automobiles through Toyota Motor
Manufacturing, U.S.A., Inc., a subsidiary owned 80% by TMS and 20% by TMC, and
began truck manufacturing operations in the United States in 1991 through
TABC, Inc., a wholly owned subsidiary. TMS's corporate headquarters are in
Torrance, California, and it has port facilities, regional sales offices and
parts distribution centers at other locations in the United States.

Toyota vehicles are distributed in twelve regions, ten of which are operated
by or through Toyota Motor Distributors, Inc., a wholly owned subsidiary of
TMS. The remaining two regions are serviced by private distributors who
purchase directly from TMS and distribute to Toyota dealers within their
respective regions. For the year ended September 30, 1994, these two
distributors--Gulf States Toyota, Inc. of Houston, Texas and Southeast Toyota
Distributors, Inc. of Deerfield Beach, Florida--accounted for approximately
31% of the Toyota vehicles sold in the United States (excluding Hawaii).
Lexus vehicles are directly distributed by TMS to Lexus dealers throughout the
United States (excluding Hawaii).

For the year ended September 30, 1994, TMS sold approximately 1,071,000
automobiles and light trucks in the United States (excluding Hawaii) and
exported approximately 49,000 automobiles. TMS sales represented 26% of TMC's
worldwide sales volume for the year ended June 30, 1994. For the years ended
September 30, 1994 and 1993, Toyota and Lexus vehicles accounted for
approximately 7.1% and 7.7%, respectively, of all retail automobile and light
truck sales in the United States.

Total revenues for TMS (together with its consolidated subsidiaries) for the
fiscal years ended September 30, 1994, 1993 and 1992, aggregated approximately
$23.3 billion, $20.9 billion and $18.4 billion, respectively, of which
approximately $21.5 billion, $19.5 billion and $17.4 billion, respectively,
were attributable to revenues other than those associated with financial
services. At September 30, 1994, 1993 and 1992, TMS had total assets of
approximately $19.5 billion, $15.8 billion and $13.6 billion, respectively,
and net worth in excess of $4.3 billion, $4.1 billion and $3.7 billion,
respectively. TMS had net income in excess of $250 million in each of its
last three fiscal years.

-8-

ITEM 2. PROPERTIES.

The headquarters of the Company is in Torrance, California and its 34 branch
offices are located in various cities throughout the United States. At
September 30, 1994, all of the Company's offices were in leased facilities and
were occupied. The Company has periodically expanded or relocated existing
offices to meet current or anticipated needs. The Company has also from time
to time opened additional branch offices to better serve its customers.
Management of the Company anticipates being able to continue to obtain
adequate space to conduct its business.

ITEM 3. LEGAL PROCEEDINGS.

Various legal actions, governmental proceedings and other claims are pending
or may be instituted or asserted in the future against TMCC and its
subsidiaries with respect to matters arising from the ordinary course of
business. Certain of these actions are or purport to be class action suits.
Two such suits involve collateral protection practices and are similar to
suits which have been filed against other financial institutions and captive
finance companies. Court approval of a settlement agreement is pending as to
both collateral protection practices suits. At this time, the Company
believes any resulting liability from the above legal actions, proceedings and
other claims will not materially affect its consolidated financial position or
results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

-9-

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

All of TMCC's capital stock is owned by TMS and there is no trading market for
such stock. No dividends have been declared or paid to date.

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ITEM 6. SELECTED FINANCIAL DATA.

The following selected financial data for the five years ended September 30,
1994 has been derived from financial statements audited by Price Waterhouse
LLP, independent accountants. The following information should be read in
conjunction with the audited financial statements and notes thereto included
in Item 8 and with Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Years Ended September 30,
--------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(Dollars in Millions)

INCOME STATEMENT DATA

Financing Revenues:

Retail financing.................. $ 413 $ 468 $485 $446 $371
Leasing........................... 1,230 747 447 216 119
Wholesale and other
dealer financing............... 86 80 65 64 43
------ ------ ---- ---- ----
Total financing revenues.......... 1,729 1,295 997 726 533

Interest expense.............. 486 454 450 390 317
Depreciation on operating leases.. 735 381 178 42 8
------ ------ ---- ---- ----
Net financing revenues............ 508 460 369 294 208

Other revenues.................... 95 77 53 39 28
------ ------ ---- ---- ----
Net Financing Revenues
and Other Revenues............. 603 537 422 333 236
------ ------ ---- ---- ----
Expenses:

Operating and administrative...... 232 228 179 130 90
Provision for credit losses....... 78 54 68 68 62
------ ------ ---- ---- ----
Total Expenses.................... 310 282 247 198 152
------ ------ ---- ---- ----
Income before income taxes
and Parent adjustment.......... 293 255 175 135 84
Parent adjustment............. - - - - 1
------ ------ ---- ---- ----
Income before income taxes........ 293 255 175 135 85
Provision for income taxes........ 118 97 68 52 33
------ ------ ---- ---- ----
Net Income........................ $ 175 $ 158 $107 $ 83 $ 52
====== ====== ==== ==== ====

- -----------------
(Table Continued)

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September 30,
------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------ ------ ------
(Dollars in Millions)

BALANCE SHEET DATA

Finance receivables, net.. $7,776 $7,206 $6,983 $6,070 $5,160
Investments in operating
leases, net............ $6,215 $3,050 $1,699 $604 $64
Total assets.............. $14,719 $11,159 $9,444 $7,138 $5,579
Notes and loans payable... $11,833 $8,833 $7,705 $5,816 $4,532
Payable to Parent......... - $48 - $20 -
Capital stock......... $865 $680 $630 $550 $550
Retained earnings..... $662 $487 $329 $222 $139

RATIO OF EARNINGS TO
FIXED CHARGES.. 1.60 1.56 1.39 1.34 1.27

- ----------------

To maintain fixed charge coverage at the level specified in the
Operating Agreement, TMS from time to time has made noninterest-bearing
advances and income maintenance payments to TMCC. No such
noninterest-bearing advances and income maintenance payments were made
in fiscal years 1994, 1993, 1992 and 1991. For financial statement
presentation purposes, the imputed interest on noninterest-bearing
advances are included as charges to interest expense. These charges
and the income maintenance payments are offset in the income statement
as "Parent adjustment". See Item 13.
$10,000 par value per share.
The Company has paid no dividends to date.
The ratio of earnings to fixed charges was computed by dividing (i) the
sum of income before income taxes and fixed charges by (ii) fixed
charges. Fixed charges consist primarily of interest expense net of
the effect of noninterest-bearing advances. Had the amount shown in
"Parent adjustment" not been provided by TMS, the ratio of earnings to
fixed charges for the Company would have been 1.60, 1.56, 1.39, 1.34,
and 1.26 for the years ended September 30, 1994, 1993, 1992, 1991 and
1990, respectively. The ratio of earnings to fixed charges for TMS and
subsidiaries was 1.90, 2.07, 1.83, 2.54 and 3.31 for the years ended
September 30, 1994, 1993, 1992, 1991 and 1990, respectively. In March
1987, TMCC guaranteed payments of principal and interest on $58 million
principal amount of bonds issued in connection with the Kentucky
manufacturing facility of an affiliate. As of September 30, 1994, TMCC
has not incurred any fixed charges in connection with such guarantee
and no amount is included in any ratio of earnings to fixed charges.
See Item 13.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Introduction

The earnings of TMCC are primarily affected by interest margins and the
average outstanding balance of earning assets. The interest rates charged on
retail finance receivables and implicit in leases are fixed at the time
acquired. Yields on the majority of wholesale receivables and other loans to
dealers vary with changes in short-term interest rates. Funding requirements
are primarily met through net cash provided by operating activities, earning
asset liquidations and the issuance of debt obligations of varying terms at
both fixed and floating interest rates. TMCC utilizes interest rate exchange
agreements and foreign currency exchange agreements in managing the cost of
borrowed funds.

The Company's business is substantially dependent upon the sale of Toyota and
Lexus vehicles in the United States. Lower levels of sales of such vehicles
resulting from governmental action, decline in demand, changes in pricing due
to the appreciation of the Japanese yen against the United States dollar, or
other events, could result in a reduction in the level of finance and
insurance operations of the Company. To date, the level of the Company's
operations has not been restricted by the level of sales of Toyota and Lexus
vehicles.

Financial Condition and Results of Operations

TMCC's earning assets totaled $14.2 billion at September 30, 1994, compared
to $10.4 billion at September 30, 1993. The increase in earning assets was
primarily due to the growth in leasing.

Retail finance receivables, net of unearned income, were $5.4 billion and
$4.6 billion at September 30, 1994 and 1993, respectively. Retail finance
receivables increased as a result of contract volume exceeding liquidations.

Lease earning assets consisting of lease finance receivables, net of unearned
income, and investments in operating leases, net of accumulated depreciation,
totaled $7.7 billion and $4.8 billion at September 30, 1994 and 1993,
respectively. The increase in lease earning assets reflected the continuation
of significant growth in lease contract volume, primarily in operating leases.
The growth in lease volume was primarily attributable to the effect of special
lease programs sponsored by TMS and also to the broader acceptability of
leasing in the vehicle retail sales market. Management of the Company
anticipates further growth in lease earning assets as special lease programs
continue and the broader acceptability of leasing as a financing option for
retail consumers continues.

Wholesale receivables and other dealer loans were $1.1 billion at
September 30, 1994 and $1.0 billion at September 30, 1993. The increase in
these receivables resulted primarily from the higher average wholesale
receivables balance per dealer offset by a decrease in the number of active
dealers. The number of active dealers participating in the Company's vehicle
wholesale financing program at September 30, 1994 decreased as compared to
September 30, 1993 primarily due to competitive reasons. Although further
declines in the number of active dealers participating in the wholesale
program is possible, management of the Company has taken various steps to
enhance the program's competitive position.

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Total financing revenues increased 34% in fiscal 1994 and 30% in fiscal 1993.
The increases were primarily due to earning asset growth from higher contract
volume and an increase in the average amount financed per contract. Contract
volume and finance penetration related to TMCC's vehicle retail installment
financing and leasing programs are summarized below:

Years Ended September 30,
-----------------------------
1994 1993 1992
------- ------- -------

Contracts booked:
Vehicle retail installment contracts.. 210,000 200,000 212,000
Vehicle lease contracts............... 204,000 112,000 81,000
------- ------- -------
Total.............................. 414,000 312,000 293,000
======= ======= =======

Finance penetration...................... 36.7% 27.1% 25.6%

In fiscal 1994 and 1993, the growth in total contract volume and finance
penetration was due to the increased leasing of both Toyota and Lexus
vehicles. Finance penetration represents the percentage of new Toyota and
Lexus vehicle deliveries in the United States (excluding Hawaii) financed or
leased by TMCC. The increases in lease contract volume were primarily
attributable to the growth in special lease programs sponsored by TMS and also
to the broader acceptability of leasing in the vehicle retail sales market.
Under these special lease programs, TMCC offered reduced monthly payments on
certain new vehicles to qualified lessees and received an amount from TMS for
each vehicle leased. Amounts received approximate the balances required by
TMCC to maintain revenues at standard program levels and are earned over the
expected lease terms. The level of sponsored program activity varies based
on TMS marketing strategies. TMCC recognized revenues related to all amounts
received under various TMS programs of $54 million, $25 million and
$16 million in fiscal 1994, 1993 and 1992, respectively.

Retail financing revenues decreased 12% in fiscal 1994 and 4% in fiscal 1993.
Retail financing revenues decreased in both fiscal 1994 and 1993 due to a
continuing decline in portfolio yield resulting from lower yielding contracts
replacing liquidating higher yielding contracts. The declines in yields
reflected the effect of competitive market conditions. Management of the
Company anticipates that the level of retail financing yields and revenues in
fiscal 1995 will approximate those of fiscal 1994.

During fiscal 1994 and 1993, TMCC's primary source of revenue and earning
asset growth was leasing. Leasing revenues increased 65% and 67% in fiscal
1994 and 1993, respectively. The growth in leasing revenues was attributable
to a 90% and 121% increase in average investments in operating leases in
fiscal 1994 and 1993, respectively. Management of the Company anticipates
continued growth in leasing revenues as special lease programs sponsored by
TMS continue to contribute to increases in lease earning assets.

Wholesale and other dealer financing revenues increased 8% in fiscal 1994 and
23% in fiscal 1993. The increased revenues in both fiscal 1994 and 1993
resulted primarily from higher average wholesale receivable balances.

-14-

Management of the Company anticipates that yields and revenues will increase
in fiscal 1995 due to rising short-term market interest rates to which such
financing is indexed and due to earning asset growth.

Interest expense increased 7% in fiscal 1994, compared with a 1% increase in
fiscal 1993. The increases in interest expense resulted from higher average
borrowing levels required to fund the growth in earning assets which were
substantially offset by decreases in market interest rates. The weighted
average cost of borrowings was 4.94%, 5.57% and 6.92% for the years ended
September 30, 1994, 1993 and 1992, respectively. Management anticipates that
as a result of rising market interest rates, the weighted average cost of
borrowings will increase in fiscal 1995 as compared to fiscal 1994.

Depreciation on operating leases increased 93% in fiscal 1994, compared with
an increase of 114% in fiscal 1993. Increases in both years were due to the
growth in investments in operating leases. Management anticipates
depreciation on operating leases to increase in fiscal 1995 due to anticipated
growth in lease earning assets.

Uninsured vehicle residual values were approximately $4.8 billion and
$2.6 billion at September 30, 1994 and 1993, respectively. To date, TMCC has
incurred no material losses as a result of residual value risk. Although
TMCC's experience has been limited, management of the Company believes that
the residual values of its leases reflected in the financial statements
represent realizable values.

The Company experienced continued growth in net financing revenues and other
revenues during fiscal 1994 and 1993. Net financing revenues increased 10%
and 25% in fiscal 1994 and 1993, respectively. The increase in fiscal 1994
was primarily attributable to the growth in the level of earning assets which
was partially offset by declining interest margins. The increase in fiscal
1993 was primarily attributable to improved interest margins and growth in the
level of earning assets. [Interest margin is the excess of the combined
interest rate yield on finance receivables and implicit in leases over the
effective interest rate cost of total borrowings.] Lower interest margins in
fiscal 1994 were the result of portfolio yields on retail installment and
lease contracts decreasing more rapidly than the decline in average borrowing
costs. Improved interest margins in fiscal 1993 were the result of borrowing
costs decreasing more rapidly than the decline in portfolio yields on retail
installment and lease contracts. Management anticipates somewhat lower net
financing revenues in fiscal 1995 due to an expected increase in the weighted
average cost of borrowings.

Other revenues increased 23% in fiscal 1994 and 45% in fiscal 1993. The
increase in other revenues in fiscal 1994 resulted from the continued growth
in the Company's insurance operations and from servicing and other income
related to the retail finance receivables sold in fiscal 1993. The increase
in other revenues in fiscal 1993 was primarily due to a $12 million pre-tax
gain resulting from the sale of retail finance receivables in fiscal 1993 and
from growth in the Company's insurance operations.

Operating and administrative expenses increased 2% and 27% in fiscal 1994 and
1993, respectively. These increases reflected costs for additional personnel,
facilities and other resources required to service the Company's growing
customer base and for the growth in the Company's insurance operations.
Increases in fiscal 1993 were also due to the establishment of reserves
related to certain pending legal actions.

-15-

The provision for credit losses is largely a function of changes in the level
and mix of earning assets. The provision for credit losses increased 44% in
fiscal 1994 as a result of the increased growth in the level of earning assets
in fiscal 1994, partially offset by favorable credit loss experience. The
provision for credit losses decreased 21% in fiscal 1993 as the effect of the
increase in the growth in earning assets was more than offset by favorable
credit loss experience and the effect of the sale of retail finance
receivables in fiscal 1993. The limited recourse loss provision for the sold
receivables was excluded from the provision for credit losses and netted
against the gain recognized on such sale. The favorable trend in credit loss
experience is attributable, in part, to enhanced credit granting procedures,
collection efforts and the mix in earning assets. The Company will continue
to place emphasis on controlling its credit loss exposure; however, there are
no assurances that this favorable trend will continue.

Operating profits (reflected as "Income before income taxes") increased 15%
in fiscal 1994 and 46% in fiscal 1993. The increase in operating profits and
net income during fiscal 1994 was primarily the result of the growth in the
level of earning assets, decreases in the average cost of borrowing and
favorable credit loss experience. The increase in operating profits and net
income during fiscal 1993 was primarily due to improved interest margins,
growth in the level of earning assets and favorable credit loss experience.
Management of the Company anticipates that fiscal 1995 operating profits may
be somewhat lower than in fiscal 1994 due to an expected increase in the
weighted average cost of borrowings.

Financial support is provided by TMS, as necessary, to maintain TMCC's minimum
fixed charge coverage at the level specified in the Operating Agreement. As
a result of the favorable operating profits in both fiscal 1994 and 1993, TMCC
did not receive any financial support from TMS. See Item 13.

Liquidity and Capital Resources

The Company requires, in the normal course of business, substantial funding to
support the level of its earning assets. Significant reliance is placed
on the Company's ability to obtain debt funding in the capital markets in
addition to funding provided by earning asset liquidations, cash provided by
operating activities, and growth in retained earnings. Debt funding has been
obtained primarily from the issuance of debt securities in the European and
United States capital markets. Debt issuances have generally been in the form
of commercial paper, medium-term notes ("MTNs") and other debt securities.
From time to time, this funding has been supplemented by loans and equity
contributions from TMS.

Commercial paper issuances and borrowings from TMS are specifically utilized
to meet short-term funding needs. Commercial paper outstanding under TMCC's
commercial paper program ranged from approximately $351 million to
$1.4 billion at any month end during fiscal 1994, with an average outstanding
balance of $894 million. The Company anticipates increased use of commercial
paper during fiscal 1995. To support its commercial paper program, TMCC also
maintains syndicated bank credit facilities with certain banks which
aggregated $1.5 billion at September 30, 1994. No loans were outstanding
under any of these bank credit facilities during fiscal 1994. TMCC also
maintains uncommitted, unsecured lines of credit with banks totalling
$300 million to facilitate issuances of letters of credit. At September 30,
1994, approximately $123 million in letters of credit had been issued,
primarily related to the Company's insurance operations.

-16-

Borrowings from TMS ranged from zero to $161 million during fiscal 1994, with
an average outstanding balance of $6 million. The interest rate charged by
TMS to TMCC for these interest-bearing loans approximates the Federal Reserve
Board's one-month commercial paper composite rate for firms whose bonds are
rated AA.

MTNs, with original terms ranging from nine months to ten years, have been
issued in the European and United States capital markets to meet a portion of
long-term and short-term funding requirements. During fiscal 1994, TMCC
issued approximately $4.6 billion of MTNs of which approximately $3.9 billion
had maturity dates on the date of issuance of more than one year. MTNs
outstanding at September 30, 1994, including the effect of foreign currency
translations at spot rates in effect at September 30, 1994, totaled
approximately $7.0 billion. In March 1994, the Company expanded the maximum
aggregate principal amount available for issuance under its United States
public MTN program by an additional $4.0 billion. At November 30, 1994,
approximately $2.7 billion under TMCC's United States public MTN program was
available for issuance. In July 1994, the Company expanded the maximum
aggregate principal amount authorized to be outstanding at any time under
TMCC's Euro MTN program from $4.0 billion to $6.5 billion. As of November 30,
1994, $2.1 billion was available for issuance under the Euro MTN program, of
which the Company has committed to issue approximately $250 million. The
United States and Euro MTN programs may from time to time be expanded to allow
for the continued use of these sources of funding.

Long-term funding requirements have also been met through the issuance of
other forms of debt securities underwritten in the European and United States
capital markets. At September 30, 1994, approximately $3.5 billion of debt
securities (excluding MTNs), including the effect of foreign currency
translations at spot rates in effect at September 30, 1994, were outstanding
in the European capital markets. At November 30, 1994, the Company has
committed to issue an additional $98 million. Of the $3.5 billion in debt
securities, $2.3 billion was denominated in foreign currencies. Underwritten
debt securities outstanding in the United States public market, excluding
MTNs, totaled approximately $300 million at September 30, 1994. At
November 30, 1994, approximately $700 million of securities registered with
the Securities and Exchange Commission ("SEC"), excluding MTNs, were available
for issuance.

TMCC utilizes a variety of financial instruments to manage its foreign
currency exchange rate risk and interest rate risk. TMCC does not enter into
these instruments for trading purposes. During the years ended September 30,
1994, 1993 and 1992, TMCC held its derivative financial instruments to
maturity of the underlying debt instrument. Debt issued in foreign currencies
is hedged by concurrently executed foreign currency exchange agreements. The
mix of fixed and floating interest rates on TMCC's debt outstanding is
periodically adjusted through the use of interest rate contracts, including
interest rate exchange agreements and option related products. See Item 8--
Notes 2, 8, 9 and 10 to the Consolidated Financial Statements.

From time to time, TMS has made equity contributions to maintain TMCC's equity
capitalization at certain levels. Such levels have been periodically
established by TMS as it deems appropriate. During the years ended
September 30, 1994 and 1993, TMS made equity contributions to TMCC by
purchasing, at par value, all newly issued shares of TMCC's capital stock in
the amount of $185 million and $50 million, respectively.

-17-

Cash flows provided by operating, investing and financing activities have been
used primarily to support earning asset growth. Cash provided by the
liquidation of earning assets, totalling $10.8 billion and $9.4 billion during
fiscal 1994 and 1993, respectively, was used to purchase additional finance
receivables and investments in operating leases. Additionally, in the fourth
quarter of fiscal 1993, the Company generated proceeds of $466 million from
the sale of a pool of retail installment contract receivables. Investing
activities resulted in a net use of cash in fiscal 1994 and 1993 as the growth
in earning assets, primarily from leasing, exceeded the cash provided by the
liquidation of earning assets. Net cash used in investing activities was
$4.5 billion and $2.1 billion in fiscal 1994 and 1993, respectively. The
higher level of cash used in investing activities resulted in a higher level
of net cash required from financing activities to support the growth in
earning assets. Net cash flows provided by financing activities totaled
$3.0 billion in fiscal 1994, representing a $1.4 billion increase over the
prior year. The growth in earning assets was also supported by net cash
provided by operating activities which totaled $1.3 billion in fiscal 1994,
representing a $409 million increase from fiscal 1993.

Management of the Company believes that cash provided by operating, investing
and financing activities will be sufficient to meet the Company's liquidity
and capital resource needs in the future.

Recently Enacted Accounting Standards

In November 1992, the Financial Accounting Standards Board issued Statement
No. 112, "Employers' Accounting for Postemployment Benefits" ("Statement No.
112"). Statement No. 112 requires accrual, during the years that the employee
renders the necessary service or when it is probable that a liability has been
incurred, of the expected cost of providing postemployment benefits to former
or inactive employees, their beneficiaries, and covered dependents after
employment but before retirement. The Company's current practice of
accounting for these benefits is on a cash basis. Statement No. 112 is
effective for fiscal years beginning after December 15, 1993. The Company
plans to adopt Statement No. 112 in the first interim period of fiscal 1995.
The impact of adoption on the financial position or results of operations is
not expected to be material.

The Financial Accounting Standards Board issued Statement No. 114, "Accounting
by Creditors for Impairment of a Loan" ("Statement No. 114") in May 1993 which
was amended by Statement No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures" ("Statement No. 118") in October
1994. Statement No. 114 requires a creditor to evaluate the collectibility
of both contractual interest and principal of certain impaired receivables
when assessing the need for a loss accrual and to measure loans that are
restructured in a troubled debt restructuring to reflect the time value of
money. Statement No. 114 is not applicable to leases and large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment. Statement No. 118, amends Statement No. 114, to allow a creditor
to use existing methods for recognizing interest income on an impaired loan.
Statement No. 118 also amends the disclosure requirements in Statement No. 114
to require information about the recorded investment in certain impaired loans
and about how a creditor recognizes interest income related to those impaired
loans. Statement No. 114, as amended by Statement No. 118, applies to
financial statements for fiscal years beginning after December 15, 1994. The
Company plans to adopt Statement No. 114, as amended by Statement No. 118, in
the first interim period of fiscal 1995. The impact of adoption on the
financial position or results of operations is not expected to be material.

-18-

In May 1993, the Financial Accounting Standards Board issued Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
("Statement No. 115"), which addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values
and for all investments in debt securities. These investments will be
categorized as held-to-maturity securities and reported at amortized cost;
trading securities and reported at fair value, with unrealized gains and
losses included in earnings; or available-for-sale securities and reported at
fair value, with unrealized gains and losses excluded from earnings and
reported in a separate component of shareholders' equity. Statement No. 115
is effective for fiscal years beginning after December 15, 1993. The Company
plans to adopt Statement No. 115 in the first interim period of fiscal 1995.
The estimated impact of adoption on the financial position or results of
operation is not expected to be material.

In October 1994, the Financial Accounting Standards Board issued Statement
No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments" ("Statement No. 119"), which requires disclosures about
derivative financial instruments and amends existing requirements of Statement
No. 105, "Disclosure of Information about Financial Instruments with Off-
Balance-Sheet Risk and Financial Instruments with Concentration of Credit
Risk" ("Statement No. 105") and Statement of Financial Accounting Standards
No. 107, "Disclosures about Fair Value of Financial Instruments" ("Statement
No. 107"). Statement No. 119 applies to financial statements for fiscal years
ending after December 15, 1994. The Company adopted Statement No. 119 in
fiscal 1994.

-19-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

Page
-------

Report of Independent Accountants................................ 21

Consolidated Balance Sheet at September 30, 1994 and 1993........ 22

Consolidated Statement of Income for the
years ended September 30, 1994, 1993 and 1992................. 23

Consolidated Statement of Shareholder's Equity for
the years ended September 30, 1994, 1993 and 1992............. 24

Consolidated Statement of Cash Flows for the
years ended September 30, 1994, 1993 and 1992................. 25

Notes to Consolidated Financial Statements....................... 26 - 46

Report of Independent Accountants
on Financial Statement Schedules.............................. 47

Schedule VII - Guarantees of Securities of Other Issuers......... 48

Schedule IX - Short-term Borrowings.............................. 49

All other schedules have been omitted because they are not required, not
applicable, or the information has been included elsewhere.

-20-

REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------

To the Board of Directors and Shareholder of
Toyota Motor Credit Corporation

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Toyota
Motor Credit Corporation (a wholly owned subsidiary of Toyota Motor Sales,
U.S.A., Inc.) and its subsidiaries at September 30, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Toyota Motor Credit Corporation's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/S/ PRICE WATERHOUSE LLP

Los Angeles, California
October 31, 1994

-21-

TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)

September 30,
-----------------------
1994 1993
-------- --------

ASSETS
------

Cash and cash equivalents................. $ 277 $ 574
Investments in marketable securities...... 102 138
Finance receivables, net.................. 7,776 7,206
Investments in operating leases, net...... 6,215 3,050
Receivable from Parent.................... 37 -
Other receivables......................... 221 105
Deferred charges.......................... 36 44
Other assets.............................. 55 42
------- -------

Total Assets..................... $14,719 $11,159
======= =======

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

Notes and loans payable................... $11,833 $ 8,833
Accrued interest.......................... 156 148
Accounts payable and accrued expenses..... 725 594
Unearned insurance premiums............... 61 74
Payable to Parent......................... - 48
Income taxes payable...................... 31 17
Deferred income taxes..................... 386 278
------- -------
Total liabilities................... 13,192 9,992
------- -------

Shareholder's Equity:
Capital stock, $l0,000 par value
(100,000 shares authorized; issued
and outstanding 86,500 in 1994 and
68,000 in 1993)..................... 865 680
Retained earnings...................... 662 487
------- -------
Total shareholder's equity.......... 1,527 1,167
------- -------
Total Liabilities and
Shareholder's Equity............. $14,719 $11,159
======= =======

See Accompanying Notes to Consolidated Financial Statements.

-22-

TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)

Years ended September 30,
-----------------------------------
1994 1993 1992
------ ------ ------

Financing Revenues:

Retail financing........................ $ 413 $ 468 $485
Leasing................................. 1,230 747 447
Wholesale and other dealer financing.... 86 80 65
------ ------ ----

Total financing revenues................... 1,729 1,295 997

Interest expense........................ 486 454 450
Depreciation on operating leases........ 735 381 178
------ ------ ----

Net financing revenues..................... 508 460 369

Other revenues............................. 95 77 53
------ ------ ----

Net Financing Revenues and Other Revenues.. 603 537 422
------ ------ ----
Expenses:

Operating and administrative............ 232 228 179
Provision for credit losses............. 78 54 68
------ ------ ----

Total Expenses............................. 310 282 247
------ ------ ----

Income before income taxes................. 293 255 175

Provision for income taxes................. 118 97 68
------ ------ ----

Net Income................................. $ 175 $ 158 $107
====== ====== ====

See Accompanying Notes to Consolidated Financial Statements.

-23-

TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(Dollars in Millions)

Capital Retained
Stock Earnings Total
------- -------- -------

Balance at September 30, 1991.......... $550 $222 $ 772

Issuance of capital stock.............. 80 - 80

Net income in 1992..................... - 107 107
---- ---- ------

Balance at September 30, 1992.......... 630 329 959

Issuance of capital stock.............. 50 - 50

Net income in 1993..................... - 158 158
---- ---- ------

Balance at September 30, l993.......... 680 487 1,167

Issuance of capital stock.............. 185 - 185

Net income in 1994..................... - 175 175
---- ---- ------

Balance at September 30, 1994.......... $865 $662 $1,527
==== ==== ======

See Accompanying Notes to Consolidated Financial Statements.

-24-

TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)

Years ended September 30,
---------------------------------
1994 1993 1992
------ ------ ------

Cash flows from operating activities:

Net income.......................................... $ 175 $ 158 $ 107
------ ------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 743 382 184
Provision for credit losses.................... 78 54 68
Gain from sale of finance receivables.......... - (12) -
Increase in accrued interest................... 8 24 11
Increase (decrease) in unearned
insurance premiums.......................... (13) (21) 17
Increase (decrease) in deferred
income taxes................................ 108 (1) 104
(Increase) decrease in other assets............ (24) 47 (22)
Increase in other liabilities.................. 180 215 51
------ ------ ------
Total adjustments................................... 1,080 688 413
------ ------ ------

Net cash provided by operating activities.............. 1,255 846 520
------ ------ ------

Cash flows from investing activities:

Additions to investments in marketable
securities....................................... (86) (174) (142)
Disposition of investments in marketable
securities....................................... 120 139 131
Purchase of finance receivables..................... (10,868) (9,936) (8,343)
Liquidations of finance receivables................. 10,263 9,159 7,380
Proceeds from sale of finance receivables........... - 466 -
Additions to investments in operating leases........ (4,468) (1,974) (1,360)
Disposition of investments in operating leases...... 525 225 79
------ ------ ------

Net cash used in investing activities.................. (4,514) (2,095) (2,255)
------ ------ ------
Cash flows from financing activities:

Proceeds from issuance of capital stock............. 185 50 80
Proceeds from issuance of notes and loans
payable.......................................... 5,150 2,848 3,111
Payments on notes and loans payable................. (2,955) (1,246) (1,336)
Net increase (decrease) in commercial paper......... 582 (40) (52)
------ ------ ------

Net cash provided by financing activities.............. 2,962 1,612 1,803
------ ------ ------

Net increase (decrease) in cash and cash equivalents... (297) 363 68

Cash and cash equivalents at the beginning
of the period....................................... 574 211 143
------ ------ ------

Cash and cash equivalents at the end of the
period.............................................. $ 277 $ 574 $ 211
====== ====== ======

Supplemental disclosures:

Interest paid....................................... $475 $440 $440
Income taxes paid................................... $64 - -

See Accompanying Notes to Consolidated Financial Statements.

-25-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Nature of Operations
- -----------------------------

Toyota Motor Credit Corporation ("TMCC") provides retail and wholesale
financing, retail leasing and certain other financial services to
authorized Toyota and Lexus vehicle and Toyota industrial equipment
dealers and their customers in the United States (excluding Hawaii).
TMCC is a wholly owned subsidiary of Toyota Motor Sales, U.S.A., Inc.
("TMS" or the "Parent"). TMS is primarily engaged in the wholesale
distribution of automobiles, trucks, industrial equipment and related
replacement parts and accessories throughout the United States
(excluding Hawaii). Substantially all of TMS's products are either
manufactured by its subsidiaries or are purchased from Toyota Motor
Corporation (the parent of TMS) or its affiliates.

TMCC has five wholly owned subsidiaries, Toyota Motor Insurance
Services ("TMIS"), Toyota Motor Insurance Corporation of Vermont
("TMICV"), Toyota Motor Insurance Company ("TMIC"), Toyota Motor Life
Insurance Company ("TLIC") and Toyota Motor Credit Receivables
Corporation ("TMCRC"). TMCC and its wholly owned subsidiaries are
collectively referred to as the "Company". The insurance subsidiaries
provide certain insurance services along with certain insurance and
contractual coverages related to the sale of vehicles. In addition,
the insurance subsidiaries insure and reinsure certain TMS risks and
provide insurance for Toyota and Lexus dealers' new vehicle inventories
financed by TMCC. TMCRC, a limited purpose subsidiary, was formed in
June 1993 primarily to acquire retail finance receivables from TMCC for
the purpose of securitizing such receivables.

The Company's business is substantially dependent upon the sale of
Toyota and Lexus vehicles in the United States. Lower levels of sales
of such vehicles resulting from governmental action, decline in demand,
changes in pricing due to the appreciation of the Japanese yen against
the United States dollar, or other events, could result in a reduction
in the level of finance and insurance operations of the Company.

Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of TMCC and
its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

-26-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------

Revenue Recognition
-------------------

Revenue from retail financing contracts and finance leases is
recognized using the effective yield method. Revenue from operating
leases is recognized on a straight-line basis over the lease term.

Cash and Cash Equivalents
-------------------------

Cash equivalents, consisting primarily of money market instruments,
represent highly liquid investments with original maturities of three
months or less.

Investments in Marketable Securities
------------------------------------

Investments in marketable securities consist of debt and equity
securities. Debt securities are carried at amortized cost and equity
securities are carried at fair value.

Investments in Operating Leases
-------------------------------

Vehicle and equipment leases to third parties are originated by dealers
and acquired by TMCC, which assumes ownership of the property. TMCC is
also the lessor on certain property that it acquires directly.
Investments in operating leases are recorded at cost and depreciated,
primarily on a straight-line basis, over the lease term to the
estimated residual value.

Allowance for Credit Losses
---------------------------

Allowances for credit losses are established based primarily on
historical loss experience. Other factors affecting collectibility are
also evaluated in determining the amount to be provided. Upon
repossession of the collateral for a delinquent account, losses are
charged to the allowance for credit losses and the estimated realizable
value of the asset is reclassified to Other Assets. When it has been
determined that the collateral cannot be recovered, losses are charged
to the allowance for credit losses. Recoveries are credited to the
allowance for credit losses.

-27-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------

Deferred Charges
----------------

Deferred charges consist primarily of underwriters' commissions and
other long-term debt issuance expenses, which are amortized over the
life of the related debt instruments on a straight-line basis.

Insurance Operations
--------------------

Revenues from insurance premiums and from providing coverage under
various contractual agreements are earned over the terms of the
respective policies and agreements in proportion to estimated claims
activity. Certain costs of acquiring new business, consisting of
commissions, premium taxes and other costs, are deferred and amortized
over the terms of the related policies on the same bases as revenues are
earned. The liability for reported losses and the estimate of
unreported losses is recorded in Accounts Payable and Accrued Expenses.
Commission income and fee income are recognized in relation to the
level of services performed.

Interest Rate Exchange Agreements
---------------------------------

TMCC utilizes interest rate exchange agreements and to a lesser extent
corridors and other option-based products in managing its exposure to
interest rate fluctuations. Interest rate exchange agreements are
executed as an integral part of specific debt transactions and on a
portfolio basis. The differential paid or received on such agreements
is recorded as an adjustment to Interest Expense over the term of the
underlying debt. Master netting agreements, with all interest rate
exchange agreement counterparties, also exist allowing the net
difference between counterparties to be exchanged in the event of
default.

Foreign Currency Transactions
-----------------------------

TMCC's senior debt issued in foreign currencies is hedged by
concurrently executed currency exchange agreements which convert these
foreign currency obligations into fixed U.S. dollars. TMCC's foreign
currency debt is translated into U.S. dollars in the financial
statements at the various foreign currency spot rates in effect at the
balance sheet date. The receivables or payables, arising as a result
of the differences between the September 30, 1994 foreign currency spot
rates and the contract rates applicable to the foreign currency
exchange agreements, are classified in Other Receivables or Accounts
Payable and Accrued Expenses, respectively.

-28-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------

Income Taxes
------------

Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement
No. 109"). The adoption of Statement No. 109 changed the method of
accounting for income taxes from a deferred method to a liability
method. This method differs from the previously used method in that
deferred tax assets and liabilities are adjusted to reflect changes in
tax rates and laws in the period such changes are enacted resulting in
adjustments to the current period's income statement. The cumulative
effect of the change in accounting principle was not material to the
Company. In addition, there was no material effect on the current
year's income. Prior years' financial statements have not been
restated.

The Company joins with TMS in filing consolidated federal income tax
returns and combined or consolidated income tax returns in certain
states. Federal income tax is provided on a separate return basis.
For states where a combined or consolidated income tax return is filed,
state income taxes are allocated to the Company by TMS based upon the
Company's apportionment factors and income in those states.

Reclassifications
-----------------

Certain 1993 and 1992 accounts have been reclassified to conform with
the 1994 presentation.

Note 3 - Finance Receivables
- ----------------------------

Finance receivables, net consisted of the following:

September 30,
---------------------
1994 1993
------ ------
(Dollars in Millions)

Retail............................... $5,805 $5,103
Finance leases....................... 1,734 2,046
Wholesale and other dealer loans..... 1,054 1,025
------ ------
8,593 8,174
Unearned income...................... (716) (874)
Allowance for credit losses.......... (101) (94)
------ ------
Finance receivables, net.......... $7,776 $7,206
====== ======

-29-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Finance Receivables (Continued)
- ----------------------------

The contractual maturities of retail receivables and wholesale and other
dealer loans and the future minimum lease payments on finance leases at
September 30, 1994 are summarized as follows:

Due in the Wholesale
Years Ending Finance and Other
September 30, Retail Leases Dealer Loans
------------- ---------- ---------- ------------
(Dollars in Millions)

1995.................. $2,005 $ 394 $ 831
1996.................. 1,580 303 76
1997.................. 1,225 215 65
1998.................. 719 108 54
1999.................. 266 20 16
Thereafter............ 10 - 12
------ ------ ------
Total.............. $5,805 $1,040 $1,054
====== ====== ======

Finance leases, net consisted of the following:

September 30,
---------------------
1994 1993
------- -------
(Dollars in Millions)

Minimum lease payments.................. $1,040 $1,337
Estimated unguaranteed residual values.. 694 709
------ ------
Finance leases....................... 1,734 2,046
Unearned income......................... (302) (388)
Allowance for credit losses............. (21) (22)
------ ------
Finance leases, net.................. $1,411 $1,636
====== ======

The aggregate balances related to finance receivables 60 or more days
past due totaled $15 million at September 30, 1994 and 1993.

A substantial portion of TMCC's finance receivables is generally paid
prior to maturity. Contractual maturities and future minimum lease
payments as shown above should not be considered as necessarily
indicative of future cash collections. The majority of retail and
finance lease receivables does not involve recourse to the dealer in
the event of customer default.

-30-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Sale of Finance Receivables
- ------------------------------------

In the fourth quarter of fiscal year 1993, the Company sold retail
finance receivables aggregating $521 million, subject to certain
limited recourse provisions. TMCC sold its receivables to TMCRC which
in turn sold them to a trust. TMCC remains as servicer and is paid a
servicing fee. In a subordinated capacity, TMCRC retains excess
servicing cash flows, a limited interest in the trust and certain cash
deposits.

TMCRC's subordinated interests in excess servicing cash flows, limited
interest in the trust, cash deposits and other related amounts are held
as restricted assets which are subject to limited recourse provisions.
These restricted assets are not available to satisfy any obligations of
TMCC. The following is a summary of these amounts included in Other
Receivables:

September 30,
---------------------
1994 1993
---- ----
(Dollars in Millions)

Excess servicing......................... $13 $31
Other restricted amounts:
Limited interest in trust............. 16 29
Cash deposits......................... 4 3
Allowance for estimated credit
losses on sold receivables............ (2) (2)
--- ---
Total.............................. $31 $61
=== ===

A gain on the sale of the finance receivables was recognized in fiscal
year 1993. In determining the gain, the book value of the sold
receivable pool was allocated between the portion sold and the portion
retained based on their relative fair values on the date of the sale.
The pretax gain resulting from the sale totaled $12 million after
providing for an allowance for estimated credit losses.

The outstanding balance of the sold receivables which TMCC continues to
service at September 30, 1994 and 1993 totaled $251 million and
$475 million, respectively.

-31-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Investments in Operating Leases
- -----------------------------------------

Investments in operating leases, net consisted of the following:

September 30,
---------------------
1994 1993
------ ------
(Dollars in Millions)

Vehicles................................. $7,184 $3,494
Equipment, aircraft and other............ 148 107
------ ------
7,332 3,601
Accumulated depreciation................. (1,054) (524)
Allowance for credit losses.............. (63) (27)
------ ------
Investments in operating leases, net.. $6,215 $3,050
====== ======

Rental income from operating leases was $1,056 million, $572 million
and $266 million for the years ended September 30, 1994, 1993 and 1992,
respectively. Future minimum rentals on operating leases are due in
installments as follows: years ending September 30, 1995 -
$1,279 million; 1996 - $1,074 million; 1997 - $524 million; 1998 -
$45 million; and 1999 - $2 million. The future minimum rentals as
shown above should not be considered as necessarily indicative of
future cash collections.

Note 6 - Allowance for Credit Losses
- ------------------------------------

An analysis of the allowance for credit losses follows:

Years ended September 30,
-------------------------
1994 1993 1992
---- ---- ----
(Dollars in Millions)

Allowance for credit losses
at beginning of period......... $121 $107 $ 89
Provision for credit losses....... 78 54 68
Charge-offs, net of recoveries.... (35) (40) (50)
---- ---- ----
Allowance for credit losses
at end of period............... $164 $121 $107
==== ==== ====

-32-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Allowance for Credit Losses (Continued)
- ------------------------------------

The Financial Accounting Standards Board issued Statement No. 114,
"Accounting by Creditors for Impairment of a Loan" ("Statement No.
114") in May 1993 which was amended by Statement No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" ("Statement No. 118") in October 1994. Statement No. 114
requires a creditor to evaluate the collectibility of both contractual
interest and principal of certain impaired receivables when assessing
the need for a loss accrual and to measure loans that are restructured
in a troubled debt restructuring to reflect the time value of money.
Statement No. 114 is not applicable to leases and large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment. Statement No. 118 amends Statement No. 114 to allow a
creditor to use existing methods for recognizing interest income on an
impaired loan. Statement No. 118 also amends the disclosure
requirements in Statement No. 114 to require information about the
recorded investment in certain impaired loans and about how a creditor
recognizes interest income related to those impaired loans. Statement
No. 114, as amended by Statement No. 118, applies to financial
statements for fiscal years beginning after December 15, 1994. The
Company plans to adopt Statement No. 114, as amended by Statement No.
118 in the first interim period of fiscal year 1995. The impact of
adoption on the financial position or results of operations is not
expected to be material.

Note 7 - Transactions with Parent
- ---------------------------------

An operating agreement with TMS (the "Operating Agreement") provides
that 100% ownership of TMCC will be retained by TMS as long as TMCC has
any funded debt outstanding. Additionally, TMS will provide necessary
equity contributions or other financial assistance it deems appropriate
to ensure that TMCC maintains a minimum coverage on fixed charges of
1.25 times such charges in any fiscal quarter. Fixed charges are
primarily interest on borrowed funds. To maintain such coverage,
pursuant to the Operating Agreement, TMS from time to time has made
noninterest-bearing advances and income maintenance payments to TMCC.
No such noninterest-bearing advances and income maintenance payments
were made in fiscal years 1994, 1993 and 1992. The coverage provision
of the Operating Agreement is solely for the benefit of the holders of
TMCC's commercial paper. The Operating Agreement does not constitute
a guarantee by TMS of any obligations of TMCC.

-33-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Transactions with Parent (Continued)
- ---------------------------------

In the second quarter of fiscal 1993, the Company began leasing its
headquarters facility from TMS. The amount of rent expense paid to TMS
totaled $3 million and $2 million for the years ended September 30,
1994 and 1993, respectively.

TMS provides certain technical and administrative services and incurs
certain expenses on the Company's behalf and, accordingly, allocates
these charges to the Company. The charges, reimbursed by TMCC to TMS,
totaled $7 million, $6 million and $5 million for the years ended
September 30, 1994, 1993 and 1992, respectively.

TMCC has an arrangement to borrow funds from TMS at rates which
approximate commercial paper rates. For the years ended
September 30, 1994, 1993 and 1992, the highest amounts of borrowings
from TMS outstanding at any one time were $161 million, $117 million
and $360 million, respectively, and the average amounts of borrowings
from TMS were $6 million, $7 million and $56 million, respectively.
Interest charges related to these interest-bearing borrowings from TMS
amounted to $0.3 million, $0.2 million and $2.3 million for the years
ended September 30, 1994, 1993 and 1992, respectively. The Operating
Agreement provides that borrowings from TMS are subordinated to all
other indebtedness of TMCC.

TMIS and TMICV provide certain insurance services, and insurance and
reinsurance coverages, respectively, to TMS. Insurance premiums,
commissions and fees earned during the years ended September 30, 1994,
1993 and 1992 included $7 million, $9 million and $7 million,
respectively, related to these services and coverages.

TMCC provides financing and leasing services related to various
programs sponsored from time to time by TMS for the sale and lease of
Toyota and Lexus vehicles and Toyota industrial equipment. During the
years ended September 30, 1994, 1993 and 1992, TMCC recognized revenue
of $54 million, $25 million and $16 million, respectively, related to
the amounts received from TMS for these programs.

TMCC provides certain leasing and financing services to TMS. For the
years ended September 30, 1994, 1993 and 1992, TMCC recognized revenue
of $3 million, $3 million and $4 million, respectively, related to
these services.

-34-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Notes and Loans Payable
- --------------------------------

Notes and loans payable at September 30, 1994 and 1993, which consisted
of senior debt, were as follows:

September 30,
----------------------
1994 1993
------- ------
(Dollars in Millions)

Commercial paper, net.................... $ 960 $ 350
------- ------
Other senior debt, due:
1994.................................. - 2,847
1995.................................. 4,010 3,112
1996.................................. 2,405 1,185
1997.................................. 2,014 735
1998.................................. 985 367
1999.................................. 233 -
Thereafter............................ 1,209 202
------- ------
10,856 8,448
Unamortized premium...................... 17 35
------- ------
Other senior debt..................... 10,873 8,483
------- ------
Notes and loans payable............ $11,833 $8,833
======= ======

The weighted average remaining term of commercial paper was 43 days at
September 30, 1994 and 28 days at September 30, 1993. The weighted
average interest rate on commercial paper was 4.43% and 3.14% at
September 30, 1994 and 1993, respectively.

The weighted average interest rate on other senior debt was 4.84% and
4.92% at September 30, 1994 and 1993, respectively, including the
effects of interest rate exchange agreements. The rates have been
calculated on the basis of rates in effect at September 30, 1994 and
1993, some of which are floating rates that reset daily. Approximately
39% of other senior debt at September 30, 1994 had interest rates,
including the effects of interest rate exchange agreements, that were
fixed for a period of more than one year. The weighted average of
these fixed interest rates was 5.02% at September 30, 1994. The mix of
TMCC's fixed and floating rate debt changes from time to time as a
result of interest rate risk management.

-35-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Notes and Loans Payable (Continued)
- --------------------------------

Included in Notes and Loans Payable at September 30, 1994 were
unsecured notes payable in foreign currencies as follows: 190 billion
in Japanese yen, 1 billion in Canadian dollars, 36 million in European
currency units, 785 million in Swiss francs, 55 million in Dutch
guilders, 110 million in Swedish kronor, 485 billion in Italian lire,
4 billion in French francs, 550 million in German deutsche marks and
125 million in Australian dollars. Concurrent with the issuance of
these unsecured notes, TMCC entered into foreign currency exchange
agreements to convert these foreign currency obligations into fixed
U.S. dollar obligations for $4.9 billion. TMCC's foreign currency debt
is translated into U.S. dollars in the financial statements at the
various foreign currency spot rates in effect at September 30, 1994.
The receivables or payables, arising as a result of the differences
between the September 30, 1994 foreign currency spot rates and the
contract rates applicable to the foreign currency exchange agreements,
are classified in Other Receivables or Accounts Payable and Accrued
Expenses, respectively, and would aggregate to a net receivable
position of $37 million at September 30, 1994.

Note 9 - Fair Value of Financial Instruments
- --------------------------------------------

In accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments" ("Statement No. 107"), the Company has provided
the estimated fair value of financial instruments using available market
information at September 30, 1994 and 1993, and the valuation
methodologies as described below. However, considerable judgement was
required in interpreting market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange. The use of different market assumptions or valuation
methodologies may have a material effect on the estimated fair value
amounts of such financial instruments.

-36-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Fair Value of Financial Instruments (Continued)
- --------------------------------------------

The carrying amounts and estimated fair values of the Company's
financial instruments at September 30, 1994 and 1993 are as follows:

September 30,
---------------------------------------------------
1994 1993
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ---------- ----------- ----------
(Dollars in Millions)

Balance sheet financial
instruments:

Assets:

Cash and cash equivalents........ $277 $277 $574 $574
Investments in marketable
securities.................... $102 $102 $138 $138
Finance receivables, net......... $6,365 $6,395 $5,570 $5,659
Other receivables................ $39 $40 $70 $71
Receivables from foreign currency
exchange agreements........... $182 $519 $35 $91

Liabilities:

Notes and loans payable.......... $11,833 $12,040 $8,833 $9,074
Payables from foreign currency
exchange agreements........... $145 $241 $226 $317

September 30,
---------------------------------------------------
1994 1993
------------------------ ------------------------
Contract or Unrealized Contract or Unrealized
Notional Gains/ Notional Gains/
Amount (Losses) Amount (Losses)
----------- ---------- ----------- ----------
(Dollars in Millions)

Off-balance sheet financial
instruments:

Inventory lines of credit........ $736 - $640 -
Foreign currency exchange
agreements.................... $4,024 $249 $2,830 $(63)
Interest rate exchange
agreements.................... $8,113 $102 $6,398 $31
Indexed note swap agreements..... $2,407 $(162) $1,431 $60

The fair value estimates presented herein are based on pertinent
information available to management as of September 30, 1994 and 1993.
Although the Company is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts
have not been comprehensively reevaluated for purposes of these
financial statements since September 30, 1994 and 1993 and, therefore,
current estimates of fair value may differ significantly from the
amounts presented herein.

-37-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Fair Value of Financial Instruments (Continued)
- --------------------------------------------

The methods and assumptions used to estimate the fair value of
financial instruments are summarized as follows:

Cash and Cash Equivalents
-------------------------

The carrying amount of cash and cash equivalents approximates market
value due to the short maturity of these investments.

Investments in Marketable Securities
------------------------------------

The fair value of marketable securities was estimated using quoted
market prices as of September 30, 1994 and 1993.

Finance Receivables
-------------------

The carrying amount of finance receivables, net excludes $1.4 billion
and $1.6 billion of direct finance leases at September 30, 1994 and
1993, respectively. The carrying amount of $1.1 billion and
$1.0 billion of variable rate finance receivables was assumed to
approximate fair value as they repriced at prevailing market rates at
September 30, 1994 and 1993, respectively. The fair value of fixed
rate finance receivables was estimated by discounting expected cash
flows using the rates at which loans of similar credit quality and
maturity would be made as of September 30, 1994 and 1993.

Other Receivables
-----------------

Other receivables are presented excluding the receivables arising from
foreign currency exchange agreements. The fair value of excess
servicing and the limited interest in the trust was estimated by
discounting cash flows using quoted market interest rates as of
September 30, 1994 and 1993. The carrying amount of the remaining
other receivables approximates market value due to the short maturity
of these instruments.

-38-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Fair Value of Financial Instruments (Continued)
- --------------------------------------------

Notes and Loans Payable
-----------------------

The fair value of notes and loans payable was estimated using quoted
market prices where available as of September 30, 1994 and 1993. The
fair value of notes and loans payable where market prices were not
available was estimated by discounting cash flows using the interest
rates at which debt of similar credit quality and maturity would be
made as of September 30, 1994 and 1993. The carrying amount of
commercial paper was assumed to approximate fair value due to the short
maturity of these instruments.

Inventory Lines of Credit
-------------------------

The contractual values of the unused portion of extended inventory
floorplan lines of credit approximates market value since they reprice
at prevailing market rates.

Foreign Currency Exchange Agreements
------------------------------------

The estimated fair value of TMCC's existing foreign currency exchange
agreements was derived by discounting expected cash flows over the
remaining term of the agreements using quoted market exchange rates and
quoted market interest rates as of September 30, 1994 and 1993.

Interest Rate Exchange Agreements
---------------------------------

The estimated fair value of TMCC's existing interest rate exchange
agreements was derived by discounting expected cash flows using quoted
market interest rates as of September 30, 1994 and 1993.

Indexed Note Swap Agreements
----------------------------

The estimated fair value of TMCC's existing indexed note swap
agreements was derived by discounting expected cash flows over the
remaining term of the agreements using market exchange rates and market
interest rates as of September 30, 1994 and 1993.

-39-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Financial Instruments with Off-Balance Sheet Risk
- -----------------------------------------------------------

Inventory Lines of Credit
-------------------------

TMCC has extended inventory floorplan lines of credit to dealers, the
unused portion of which amounted to $736 million and $640 million at
September 30, 1994 and 1993, respectively. Security interests are
acquired in the vehicles and equipment financed, and substantially all
such financings are backed by corporate or individual guarantees from
or on behalf of the participating dealers.

Foreign Currency and Interest Rate Exchange Agreements
------------------------------------------------------

TMCC utilizes a variety of financial instruments to manage its foreign
currency exchange rate risk and interest rate risk. TMCC does not
enter into these instruments for trading purposes.

TMCC utilizes foreign currency exchange agreements and interest rate
exchange agreements to manage exposure to exchange rate fluctuations on
principal and interest payments for borrowings denominated in foreign
currencies. Notes and loans payable issued in foreign currencies are
hedged by concurrently executed foreign currency exchange agreements.
These exchange agreements involve agreements to exchange TMCC's foreign
currency principal obligations for U.S. dollar obligations at agreed-
upon currency exchange rates and to exchange fixed and floating
interest rate obligations. The aggregate notional amounts of foreign
currency exchange agreements at September 30, 1994 and 1993 were
$4.0 billion and $2.8 billion, respectively. In the event that a
counterparty fails to perform, TMCC's exposure is limited to the
currency exchange and interest rate differential. TMCC does not
anticipate nonperformance by any of its counterparties.

TMCC utilizes interest rate exchange agreements and to a lesser extent
corridors and other option-based products in managing its exposure to
interest rate fluctuations. TMCC's interest rate exchange agreements
involve agreements to pay fixed and receive a floating rate, or receive
fixed and pay a floating rate, at specified intervals, calculated on an
agreed-upon notional amount. Interest rate exchange agreements may also
involve basis swap contracts, which are agreements to exchange the
difference between certain floating interest amounts, such as the net
payment based on the commercial paper rate and the London Interbank
Offered Rate ("LIBOR"), calculated on an agreed-upon notional amount.
TMCC also enters into corridor contracts where TMCC is a fixed rate
payor when an underlying floating indice is within a prespecified
range, and a floating rate payor otherwise. The underlying notional
amounts are not exchanged and do not represent exposure to credit loss.
In the event that a counterparty fails to perform, TMCC's exposure is
limited to the interest rate differential. TMCC does not anticipate
nonperformance by any of its counterparties. The aggregate notional
amounts of interest rate exchange agreements outstanding at

-40-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------

Foreign Currency and Interest Rate Exchange Agreements (continued)
------------------------------------------------------

September 30, 1994 and 1993, were $8.1 billion and $6.4 billion,
respectively. At September 30, 1994, TMCC was the fixed rate payor on
$4.8 billion of interest rate exchange agreements, floating rate payor
on $1.4 billion of such agreements, counterparty to $1.4 billion of
basis swap contracts, and counterparty to $0.5 billion of corridor
contracts. Interest rate exchange agreements and other option based
products are executed as an integral part of specific debt transactions
and on a portfolio basis. The differential paid or received on such
agreements is recorded as an adjustment to Interest Expense over the
term of the underlying debt. Master netting agreements, with all
interest rate exchange agreement counterparties, also exist allowing
the net difference between counterparties to be exchanged in the event
of default.

TMCC utilizes indexed note swap agreements in managing its exposure to
indexed notes. Indexed notes are debt instruments whose interest rate
and/or principal redemption amounts are derived from other underlying
instruments. Indexed note swap agreements involve agreements to
receive interest and/or principal amounts associated with the indexed
notes, denominated in either U.S. dollars or a foreign currency, and to
pay fixed or floating rates on fixed U.S. dollar liabilities. In the
event that a counterparty fails to perform, TMCC's exposure is limited
to the difference between the indexed amounts that should have been
received and the amounts that should have been paid. TMCC does not
anticipate nonperformance by any of its counterparties. At
September 30, 1994, TMCC was the counterparty to $2.4 billion of
indexed note swap agreements, of which $0.9 billion was denominated in
foreign currencies and $1.5 billion was denominated in U.S. dollars.
At September 30, 1993, TMCC was the counterparty to $1.4 billion of
indexed note swap agreements, of which $0.2 billion was denominated in
foreign currencies and $1.2 billion was denominated in U.S. dollars.

For all of its derivative financial instruments, TMCC manages
counterparty risk through the use of credit standard guidelines,
counterparty diversification and financial condition monitoring.

-41-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 - Pension and Other Benefit Plans
- -----------------------------------------

All full-time employees of the Company are eligible to participate in
the TMS pension plan commencing on the first day of the month following
hire. Benefits payable under this non-contributory defined benefit
pension plan are based upon the employees' years of credited service
and the highest sixty consecutive months' compensation, reduced by a
percentage of social security benefits. For the years ended
September 30, 1994, 1993 and 1992, the Company's pension expense was
$3 million, $3 million and $2 million, respectively. At
September 30, 1994, 1993 and 1992, the accumulated benefit obligation
and plan net assets for employees of the Company were not determined
separately from TMS; however, the plan's net assets available for
benefits exceeded the accumulated benefit obligation. TMS funding
policy is to contribute annually the maximum amount deductible for
federal income tax purposes.

In November 1992, the Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for Postemployment Benefits"
("Statement No. 112"). Statement No. 112 requires accrual, during the
years that the employee renders the necessary service or when it is
probable that a liability has been incurred, of the expected cost of
providing postemployment benefits to former or inactive employees, their
beneficiaries, and covered dependents after employment but before
retirement. The Company's current practice of accounting for these
benefits is on a cash basis. Statement No. 112 is effective for fiscal
years beginning after December 15, 1993. The Company plans to adopt
Statement No. 112 in the first interim period of fiscal year 1995. The
impact of adoption on the financial position or results of operations is
not expected to be material.

-42-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 - Provision for Income Taxes
- ------------------------------------

The provision for income taxes consisted of the following:

Years ended September 30,
--------------------------
1994 1993 1992
---- ---- ----
(Dollars in Millions)

Current
Federal........................... $ 6 $ 94 $(38)
State............................. 4 4 2
---- ---- ----
Total current ................. 10 98 (36)
---- ---- ----
Deferred
Federal........................... 86 (9) 97
State............................. 22 8 7
---- ---- ----
Total deferred................. 108 (1) 104
---- ---- ----
Provision for income taxes.. $118 $ 97 $ 68
==== ==== ====

The deferred income tax liabilities by jurisdictions are as follows:

September 30, 1994
---------------------
(Dollars in Millions)

Federal........................................ $340
State.......................................... 46
----
Net deferred income tax liability........... $386
====

-43-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 - Provision for Income Taxes (Continued)
- ------------------------------------

The Company's deferred tax assets and liabilities consisted of the
following:

September 30, 1994
--------------------
(Dollars in Millions)

Assets:
Alternative minimum tax....................... $248
Provision for losses.......................... 76
Deferred administrative fees.................. 41
NOL carryforwards............................. 27
Deferred acquisition costs.................... 10
Unearned insurance premiums................... 4
Revenue recognition........................... 3
Other......................................... 2
----
411
Valuation allowance........................... 0
----
Deferred tax assets........................ 411
----
Liabilities:
Lease transactions............................ 740
State taxes................................... 57
----
Deferred tax liabilities................... 797
----
Net deferred income tax liability....... $386
====

TMCC has state tax net operating loss carryforwards of $423 million
expiring between fiscal years 1995 and 2008.

-44-

TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 - Provision for Income Taxes (Continued)
- ------------------------------------

A reconciliation between the provision for income taxes computed by
applying the federal statutory tax rate to income before income taxes
and actual income taxes provided is as follows:

Years ended September 30,
-------------------------
1994 1993 1992
---- ---- ----
(Dollars in Millions)

Provision for income taxes at
federal statutory tax rate......... $103 $88 $60
State and local taxes (net of
federal tax benefit)............... 17 8 6
Other................................. (2) 1 2
---- --- ---
Provision for income taxes......... $118 $97 $68
==== === ===

Effective tax rate.................... 40.24% 38.01% 38.97%

Note 13 - Lines of Credit/Standby Letters of Credit
- ---------------------------------------------------

To support its commercial paper program, TMCC maintains syndicated bank
credit facilities with certain banks which aggregated $1.5 billion at
September 30, 1994. Interest is charged at certain market rates, at the
option of TMCC. No loans were outstanding under any of these bank
credit facilities.

To facilitate and maintain letters of credit, TMCC maintains
uncommitted, unsecured lines of credit with banks totalling
$300 million. At September 30, 1994, approximately $123 million in
letters of credit had been issued, primarily related to the Company's
insurance operations. The letters of credit for the insurance
companies are used to satisfy requirements of certain insurance
carriers and state insurance regulatory agencies, consistent with
insurance industry practices.

-45-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14 - Commitments and Contingent Liabilities
- ------------------------------------------------

At September 30, 1994, the Company was a lessee under lease agreements
for facilities which provide minimum annual rental as follows: years
ending September 30, 1995 - $8 million; 1996 - $7 million; 1997 -
$6 million; 1998 - $5 million; 1999 - $3 million; and thereafter -
$8 million.

TMCC has guaranteed payments of principal and interest on $58 million
principal amount of flexible rate demand pollution control revenue
bonds maturing in 2006, issued in connection with the Kentucky
manufacturing facility of an affiliate.

Various legal actions, governmental proceedings and other claims are
pending or may be instituted or asserted in the future against TMCC and
its subsidiaries with respect to matters arising from the ordinary
course of business. Certain of these actions are or purport to be
class action suits. Two such suits involve collateral protection
practices and are similar to suits which have been filed against other
financial institutions and captive finance companies. Court approval of
a settlement agreement is pending as to both collateral protection
practices suits. At this time, the Company believes any resulting
liability from the above legal actions, proceedings and other claims
will not materially affect the financial position or results of
operations.

Note 15 - Selected Quarterly Financial Data (Unaudited)
- -------------------------------------------------------

Total Depreciation
Financing Interest on Operating Net
Revenues Expense Leases Income
---------- -------- ------------ --------
(Dollars in Millions)

Year Ended September 30, 1994:

First quarter............... $ 370 $110 $139 $ 46
Second quarter.............. 396 112 159 45
Third quarter............... 446 125 196 39
Fourth quarter.............. 517 139 241 45
------ ---- ---- ----
Total.................... $1,729 $486 $735 $175
====== ==== ==== ====

Year Ended September 30, 1993:

First quarter............... $ 298 $114 $ 76 $ 35
Second quarter.............. 316 111 86 36
Third quarter............... 335 116 101 40
Fourth quarter.............. 346 113 118 47
------ ---- ---- ----
Total.................... $1,295 $454 $381 $158
====== ==== ==== ====

-46-

REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Shareholder
of Toyota Motor Credit Corporation

Our audits of the consolidated financial statements referred to in our report
dated October 31, 1994 appearing on page 21 of this Form 10-K also included
an audit of the Financial Statement Schedules listed in Item 14(a)(2) of this
Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.

/S/ PRICE WATERHOUSE LLP

Los Angeles, California
October 31, 1994

-47-

SCHEDULE VII

GUARANTEES OF SECURITIES OF OTHER ISSUERS

Column A Column B Column C Column D Column E Column F Column G
-------- -------- -------- -------- -------- -------- --------
Nature of any
default by
issuer of
securities
guaranteed in
principal,
Name of issuer of interest,
securities Amount owned by Amount in sinking fund
guaranteed by Title of issue of person or persons treasury of or redemption
person for which each class of Total amount for which issuer of provisions, or
statement is securities guaranteed and statement is securities Nature of payment of
filed guaranteed outstanding filed guaranteed guarantee dividends
----------------- ----------------- -------------- ----------------- ------------ ------------- --------------

Kentucky Flexible Rate $58,000,000 $0 $0 Guarantee of None
Pollution Demand Pollution principal and applicable
Abatement and Control Revenue interest
Water Resources Bonds
Finance Authority

-48-

SCHEDULE IX

SHORT-TERM BORROWINGS

Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------

Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest
Category of aggregate at end interest during the during the rate during
short-term borrowings of period rate period period the period
--------------------------------- --------- -------- ----------- ----------- -----------
(Dollars in Millions)

Fiscal 1994:
Commercial paper program........ $962 4.43% $1,372 $894 3.84%
Medium-term notes............... $622 4.77% $850 $691 3.77%
Fiscal 1993:
Commercial paper program........ $351 3.14% $531 $372 3.19%
Medium-term notes............... $516 3.02% $536 $392 3.07%
Fiscal 1992:
Commercial paper program........ $390 3.38% $502 $395 4.21%
Medium-term notes............... $205 3.35% $602 $353 5.34%
Commercial paper-other.......... - - $250 $44 4.69%

The commercial paper program and commercial paper-other are comprised of short-term, unsecured
promissory notes with original maturities ranging from one day to nine months. The balance is shown
gross of unamortized discount. Medium-term notes, shown at face value, have original maturities no
less than nine months.
The maximum amount outstanding at any month end during the period.
The average amount outstanding during the period represents the daily average outstanding.
The weighted average interest rate represents the effective rate based on a 360 day money market
yield.
The weighted average interest rate represents total actual short-term interest expense divided by the
daily average debt outstanding.

-49-

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There is nothing to report with regard to this item.

-50-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth certain information regarding the directors and
executive officers of TMCC.

Name Age Position
---- --- --------

Shinji Sakai.............. 57 Director and President, TMCC;
Director and President, TMS;
Director, TMC

Nobu Shigemi.............. 50 Director, Senior Vice President
and Treasurer, TMCC; Group Vice
President, TMS

John McGovern............. 54 Director, Senior Vice President
and Secretary, TMCC; Senior Vice
President and Secretary, TMS

Wolfgang Jahn............. 55 Director, Group Vice President
and General Manager, TMCC;
Group Vice President, TMS

Robert Pitts.............. 46 Director and Assistant Secretary,
TMCC; Group Vice President, TMS

Yale Gieszl............... 52 Director, TMCC; Director and
Executive Vice President, TMS

Takashi Nishiyama......... 51 Director, TMCC; Senior Vice
President and Treasurer, TMS

Hiroshi Okuda............. 61 Director, TMCC; Director, TMS;
Director and Executive Vice
President, TMC

All directors of TMCC are elected annually and hold office until their
successors are elected and qualified. Officers are elected annually and serve
at the pleasure of the Board of Directors.

Mr. Sakai was named Director and President of TMCC in June 1992. He is also a
Director and President of TMS, positions he has held since June 1992. In
September 1988, Mr. Sakai was named a Director of TMC, and from September 1988
to May 1992, he was General Manager of the North American Division of TMC.
Mr. Sakai has been employed with TMC, in various positions, since 1961.

Mr. Shigemi was named Director, Senior Vice President and Treasurer of TMCC
and a Group Vice President of TMS in September 1994. From January 1994 to
August 1994, Mr. Shigemi was General Manager of TMC's Finance Division. From
January 1993 to December 1993, he was the Project General Manager of the
Accounting Division of TMC. From February 1982 to December 1992, he worked
in the Tokyo Secretarial Division having been named a manager in February 1983
and Deputy General Manager in February 1990. Mr. Shigemi has been employed
with TMC, in various positions, since 1968.

-51-

Mr. McGovern was named Director, Senior Vice President, and Secretary of TMCC
in January 1993. He is also a Senior Vice President and Secretary of TMS,
positions he has held since January 1993. From January 1987 to November 1989,
he was a Vice President and a General Manager of TMS, and from December 1989
to December 1992, he was a Group Vice President of TMS. Mr. McGovern has been
employed with TMS, in various positions, since 1970.

Mr. Jahn was named Director and Group Vice President of TMCC in April 1993.
In December 1994, Mr. Jahn was also named General Manager of TMCC and a Group
Vice President of TMS. From January 1985 to March 1993, he was a Vice
President of TMCC, and from September 1988 to March 1993, he was also the
Assistant Secretary of TMCC. From January 1987 to March 1993, he held the
position of Vice President of TMS. Mr. Jahn has been employed with TMS and
TMCC, in various positions, since 1973.

Mr. Pitts was named Director and Assistant Secretary of TMCC in April 1993.
He is also a Group Vice President of TMS, a position he has held since April
1993. From January 1984 to March 1993, he was an executive with TMCC having
been named General Manager in January 1984 and Vice President in April 1989.
Mr. Pitts has been employed with TMS and TMCC, in various positions, since
1971.

Mr. Gieszl was named Director of TMCC in September 1988. He is also a
Director and Executive Vice President of TMS, positions he has held since
December 1989 and June 1992, respectively. From January 1982 to May 1992, he
was a Senior Vice President of TMS. From October 1982 to May 1992, he held
the position of Senior Vice President of TMCC, and from September 1988 to May
1992, he also held the position of Secretary of TMCC. Mr. Gieszl has been
employed with TMS, in various positions, since 1970.

Mr. Nishiyama was named Director of TMCC in January 1994. He was also named
a Senior Vice President and Treasurer of TMS in January 1994. From February
1989 to December 1993, he was General Manager of the Europe and Africa Project
Division of TMC. From February 1986 to January 1989, he was Executive Vice
President of Salvador Caetano S.A. Portugal. Mr. Nishiyama has been employed
with TMC, in various positions, since 1965.

Mr. Okuda was named Director of TMCC in March 1989 and Director of TMS in
December 1988. He has served on TMC's Board of Directors since July 1982,
named Managing Director in September 1987, Senior Managing Director in
September 1988 and Executive Vice President in September 1992. Mr. Okuda has
been employed with TMC, in various positions, since 1955.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

The following table sets forth all compensation awarded to, earned by, or paid
to the Company's principal executive officer and the most highly compensated
executive officers whose salary and bonus for the latest fiscal year exceeded
$100,000, for services rendered in all capacities to the Company for the three
years ended September 30, 1994, 1993 and 1992.

-52-

Annual Compensation
-------------------------------------------- All
Other Annual Other
Name and Fiscal Compensation
Principal Position Year Salary ($) Bonus ($) ($) <$>
- --------------------- ------ ---------- --------- ------------ ------------

Wolfgang Jahn 1994 $199,800 $91,300 $7,500
Group Vice President 1993 $123,900 $57,700 $7,000
1992 $57,400 $26,900

Takafumi Murai 1994 $124,900 $26,500 $22,500
Senior Vice President 1993 $126,700 $24,300 $28,600
1992 $129,700 $22,900

- ------------

Mr. Jahn has worked full-time for the Company since April 1993. Mr. Jahn's cash
compensation for the periods prior to April 1993, included in the above table, represents
an allocated amount of his total compensation based on his time spent working for the
Company. Mr. Murai also worked for TMS, and the cash compensation included in the above
table represents an allocated amount of his total compensation based on time spent working
for the Company. Mr. Murai was transferred to TMC in September 1994.
Under the SEC transition provisions in connection with adoption of the revised rules on
disclosure of executive compensation, no disclosure is required with respect to Other
Annual Compensation and All Other Compensation for fiscal 1992.
This amount represents a housing allowance.
The amounts in this column represent the Company's allocated contribution under the TMS
Savings Plan. Mr. Jahn also receive contributions from TMS, no portion of which is
attributable to the Company. Under the TMS Savings Plan, which is open to all eligible
employees, eligible participants may elect, subject to applicable law, to have up to 6% of
their base compensation paid to the plan on a pre-tax basis and the Company will make a
matching contribution equal to two-thirds of the employee's contribution. Participants
are vested 25% each year with respect to the Company's contribution. Participants are
fully vested after four years. Subject to the limitations of the TMS Savings Plan,
employee and Company contributions are invested at the discretion of the employee in
various investment options.

Employee Benefit Plan

All full-time employees of the Company are eligible to participate in the TMS
Pension Plan commencing on the first day of the month following hire.
Benefits payable under this non-contributory defined benefit pension plan are
based upon final average compensation, final average bonus and years of
credited service. Final average compensation is defined as the average of the
participant's base rate of pay, plus overtime, during the highest-paid 60
consecutive months prior to the earlier of termination or normal retirement.
Final average bonus is defined as the highest average of the participant's
fiscal year bonus, and basic seniority-based cash bonus for non-managerial
personnel, over a period of 60 consecutive months prior to the earlier of
termination or normal retirement. A participant generally becomes eligible
for the normal retirement benefit at age 62, and may be eligible for early
retirement benefits starting at age 55.

-53-

The annual normal retirement benefit, payable monthly, is an amount equal to
the number of years of credited service (up to 25 years) multiplied by the sum
of (i) 2% of the participant's final average compensation less 2% of the
estimated annual Social Security benefit payable to the participant at normal
retirement and (ii) 1% of the participant's final average bonus. The normal
retirement benefit is subject to reduction for certain benefits under any
union-sponsored retirement plan and benefits attributable to employer
contributions under any defined-contribution retirement plan maintained by TMS
and its subsidiaries or any affiliate.

The following pension plan table presents typical annual retirement benefits
under the TMS Pension Plan for various combinations of compensation and years
of credited service for participants who retire at age 62, assuming no final
average bonus and excluding Social Security offset amounts. The amounts are
subject to Federal statutory limitations governing pension calculations and
benefits.

Annual Benefits for
Final Average Years of Credited Service
Annual --------------------------------------
Compensation 15 20 25
------------ -------- -------- --------

$50,000 $15,000 $20,000 $25,000
$100,000 $30,000 $40,000 $50,000
$150,000 $45,000 $60,000 $75,000
$200,000 $60,000 $80,000 $100,000
$250,000 $75,000 $100,000 $125,000
$300,000 $90,000 $120,000 $150,000
$350,000 $105,000 $140,000 $175,000
$400,000 $120,000 $160,000 $200,000

Mr. Jahn is a participant in the TMS Pension Plan and has 21 years of credited
service as of September 30, 1994. Based upon years of credited service and
the portion of earnings allocable to the Company, Mr. Jahn would be entitled
to receive approximately $19,000 in annual pension benefit payments at age 62.
Mr. Jahn would also be entitled to receive pension benefits from TMS based
upon services to and compensation by TMS, no portion of which is attributable
to the Company.

Compensation of Directors

No fees are paid to members of the Board of Directors of TMCC for their
services as directors.

Compensation Committee Interlocks and Insider Participation

Members of the Executive Committee of the Board of Directors, which consists
of the directors of the Company other than Mr. Okuda, participate in decisions
regarding the compensation of the executive officers of the Company. Certain
of the members of the Executive Committee are current or former executive
officers of the Company. Certain of the members of the Executive Committee
are also current executive officers and directors of TMS and its affiliates
and participate in compensation decisions for those entities.

-54-

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

As of the date hereof, all of TMCC's capital stock is owned by TMS.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company enters into various transactions with TMS as described below.
Certain of the directors and executive officers of TMCC are also directors and
executive officers of TMS.

To maintain fixed charge coverage at the level specified in the Operating
Agreement, TMS from time to time has made noninterest-bearing advances and
income maintenance payments to TMCC. TMS also provides certain technical and
administrative services and incurs certain expenses on the Company's behalf
and, accordingly, allocates these charges to the Company. The following table
summarizes all such support.

Years Ended September 30,
--------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Dollars in Millions)

Total technical and administrative
expenses incurred by Parent............ $ 7 $ 6 $ 5 $ 4 $ 2
Total technical and administrative
expenses reimbursed to Parent........... (7) (6) (5) (4) (2)
Imputed interest on noninterest-bearing
advances from Parent................... - - - - 1
Income maintenance payments from Parent.. - - - - -
--- --- --- --- ---
Parent adjustment........................ $ - $ - $ - $ - $ 1
=== === === === ===

The Operating Agreement provides that TMCC will establish its own financing
rates and is under no obligation to TMS to finance wholesale obligations from
any dealers or retail obligations of any customers. TMCC may extend, reduce
or cancel credit to dealers and to customers based upon TMCC's own credit
criteria. Pursuant to the Operating Agreement, TMS will arrange for the
repurchase of new Toyota and Lexus vehicles financed at wholesale by TMCC at
the aggregate cost financed in the event of a dealer default.

TMS made equity contributions to TMCC by purchasing at par value all of the
newly issued shares of TMCC's capital stock in the amount of $185 million,
$50 million, $80 million and $75 million for the years ended September 30,
1994, 1993, 1992 and 1990, respectively. TMS made no equity contributions to
TMCC during fiscal 1991.

TMCC has an arrangement to borrow funds from TMS at rates which approximate
the Federal Reserve Board's one-month commercial paper composite rate for
firms whose bonds are rated AA. For the years ended September 30, 1994, 1993,
1992, 1991 and 1990, the highest amounts of borrowings from TMS outstanding at
any one time, including non-interest bearing advances, were $161 million,
$117 million, $360 million, $81 million and $167 million, respectively and the
average amount of borrowings from TMS, including noninterest-bearing advances,

-55-

were $6 million, $7 million, $56 million, $6 million and $42 million,
respectively. Interest charges related to these interest-bearing borrowings
from TMS for fiscal 1994, 1993, 1992, 1991 and 1990 were $0.3 million,
$0.2 million, $2.3 million, $0.4 million and $3.2 million, respectively. The
Operating Agreement provides that borrowings from TMS are subordinated to all
other indebtedness of TMCC.

In the second quarter of fiscal 1993, the Company began leasing its
headquarters facility from TMS. The amount of rent expense paid to TMS
totaled $3 million and $2 million for the years ended September 30, 1994 and
1993, respectively.

TMIS and TMICV provide certain insurance services, and insurance and
reinsurance coverages, respectively, to TMS. Insurance premiums, commissions
and fees earned during the years ended September 30, 1994, 1993, 1992, 1991
and 1990 included $7 million, $9 million, $7 million, $5 million and
$3 million, respectively, related to these services and coverages.

TMCC provides financing and leasing services related to various programs
sponsored from time to time by TMS for the sale and lease of Toyota and Lexus
vehicles and Toyota industrial equipment. During the years ended
September 30, 1994, 1993, 1992, 1991 and 1990, TMCC recognized revenue of
$54 million, $25 million, $16 million, $7 million and $5 million,
respectively, related to the amounts received from TMS for these programs.

TMCC provides certain leasing and financing services to TMS. For the years
ended September 30, 1994, 1993, 1992, 1991 and 1990, TMCC recognized revenue
of $3 million, $3 million, $4 million, $7 million and $3 million,
respectively, related to these services.

TMCC has guaranteed payments of principal and interest on $58 million
principal amount of flexible rate demand pollution control revenue bonds
maturing in 2006, issued in connection with the Kentucky manufacturing
facility of an affiliate.

The Company joins with TMS in filing consolidated federal income tax returns
and combined or consolidated income tax returns in certain states. See
Item 8, Note 2.

From time to time, the Company enters into various other transactions with
TMS. Management of the Company believes that the terms of such transactions
have been established as if negotiated on an "arms-length" basis, and that all
such transactions are not, in the aggregate, material to either TMS or the
Company.

-56-

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1)Financial Statements

Included in Part II, Item 8 of this Form 10-K. See Index to
Financial Statements and Schedules on page 20.

(2)Financial Statement Schedules

Included in Part II, Item 8 of this Form 10-K. See Index to
Financial Statements and Schedules on page 20.

(3)Exhibits

The exhibits listed on the accompanying Exhibit Index, starting on
page 59, are filed as part of, or incorporated by reference into,
this Report.

(b)Reports on Form 8-K

There were no reports on Form 8-K filed by the registrant during the
quarter ended September 30, 1994.

-57-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Torrance,
State of California, on the 22nd day of December, 1994.

TOYOTA MOTOR CREDIT CORPORATION

By /S/ WOLFGANG JAHN
------------------------------
Wolfgang Jahn
Group Vice President and
General Manager

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on the 22nd day of December, 1994.

Signature Title
--------- -----
Group Vice President and General
Manager and Director
/S/ WOLFGANG JAHN (principal executive officer)
- ------------------------------------
Wolfgang Jahn

Senior Vice President/
Treasurer and Director
/S/ NOBU SHIGEMI (principal financial officer)
- ------------------------------------
Nobu Shigemi

Corporate Manager - Finance
and Administration
/S/ PATRICK BREENE (principal accounting officer)
- ------------------------------------
Patrick Breene

/S/ SHINJI SAKAI Director
- ------------------------------------
Shinji Sakai

/S/ JOHN MCGOVERN Director
- ------------------------------------
John McGovern

/S/ TAKASHI NISHIYAMA Director
- ------------------------------------
Takashi Nishiyama

-58-

EXHIBIT INDEX

Method
Exhibit of
Number Description Filing
- ------- ----------- --------

3.1(a) Articles of Incorporation filed with the California
Secretary of State on October 4, 1982. (1)

3.1(b) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
January 24, 1984. (1)

3.1(c) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
January 25, 1985. (1)

3.1(d) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
September 6, 1985. (1)

3.1(e) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
February 28, 1986. (1)

3.1(f) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
December 3, 1986. (1)

3.1(g) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
March 9, 1987. (1)

3.1(h) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
December 20, 1989. (2)

3.2 Bylaws as amended through January 16, 1993. (11)

4.2 Issuing and Paying Agency Agreement dated August 1,
1990 between TMCC and Bankers Trust Company. (3)

4.3(a) Indenture dated as of August 1, 1991 between TMCC and
The Chase Manhattan Bank, N.A. (4)

- -----------------
(1) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Registration Statement on Form S-1, File No. 33-22440.
(2) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1989.
(3) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1990.
(4) Incorporated herein by reference to Exhibit 4.1(a), filed with TMCC's
Registration Statement on Form S-3, File No. 33-52359.
(11) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1993.

-59-

EXHIBIT INDEX

Method
Exhibit of
Number Description Filing
- ------- ----------- ------

4.3(b) First Supplemental Indenture dated as of
October 1, 1991 among TMCC, Bankers Trust Company
and The Chase Manhattan Bank, N.A. (5)

4.4 Amended and Restated Agency Agreement dated as of Filed
July 28, 1994, among TMCC, The Chase Manhattan Bank, Herewith
N.A. and Chase Manhattan Bank Luxembourg S.A.

4.5 TMCC has outstanding certain long-term debt as
set forth in Note 8 of the Notes to Consolidated Financial
Statements. Not filed herein as an exhibit, pursuant to
Item 601(b) (4)-(iii)(A) of Regulation S-K under the
Securities Act of 1933, is any instrument which defines
the rights of holders of such long-term debt where the
total amount of securities authorized thereunder does
not exceed 10% of the total assets of TMCC and its
subsidiaries on a consolidated basis. TMCC agrees to
furnish copies of all such instruments to the Securities
and Exchange Commission upon request.

10.1 Operating Agreement dated January 16, 1984 between
TMCC and TMS. (1)

10.2 Financial Service Agreement dated December 21, 1984
between TMCC and World Omni Financial Corporation,
as amended June 6, 1988. (1)

10.2(a) Addendum to Financial Services Agreement dated
January 1, 1991, between TMCC and World Omni Financial
Corporation. (6)

10.2(b) Amendment to Financial Services Agreement dated
March 1, 1992, between TMCC and World Omni Financial
Corporation. (7)

10.2(c) Amendment to Financial Services Agreement dated Filed
March 1, 1994, between TMCC and World Omni Financial Herewith
Corporation

- -----------------
(1) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Registration Statement on Form S-1, File No. 33-22440.
(5) Incorporated herein by reference to Exhibit 4.1 filed with TMCC's
Current Report on Form 8-K dated October 16, 1991.
(6) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1991.
(7) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1992.

-60-

EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------

10.4 TMS Pension Plan 1987 Restatement. (1)

10.5 TMS Savings Plan 1987 Restatement. (1)

10.6 Form of Indemnification Agreement between TMCC and
its directors and officers. (1)

10.7 Form of Pooling and Servicing Agreement among Toyota
Motor Credit Receivables Corporation, as Seller,
Toyota Motor Credit Corporation as Servicer, and
the Chase Manhattan Bank N.A. as Trustee (including
forms of Class A and Class B Certificates). (8)

10.8 Form of Standard Terms and Conditions of Pooling and
Servicing Agreement. (9)

10.9 Form of Receivables Purchase Agreement. (10)

10.10 Three-year Credit Agreement (the "Three-year Agreement") Filed
dated as of September 29, 1994 among TMCC, Morgan Herewith
Guaranty Trust Company of New York, as agent, and
Bank of America National Trust and Savings Association,
The Bank of Tokyo, Ltd., The Chase Manhattan Bank, N.A.,
Citicorp USA, Inc. and Credit Suisse, as Co-Agents.
Not filed herein as an exhibit, pursuant to Instruction 2
to Item 601 of Regulation S-K under the Securities Act of
1933, is the 364-day Credit Agreement (the "364-day
Agreement") among TMCC and the banks who are party to the
Three-year Agreement. Filed herewith is a
Schedule identifying the 364-day Agreement and setting
forth the material details in which the 364-day
Agreement differs from the Three-year Agreement. TMCC
agrees to furnish a copy of the 364-day Agreement to
the Securities and Exchange Commission upon request.

- ----------------
(1) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Registration Statement on Form S-1, File No. 33-22440.
(8) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto
Receivables 1993-A Grantor Trust's Registration Statement on Form S-1,
File No. 33-65348.
(9) Incorporated herein by reference to Exhibit 4.2 filed with Toyota Auto
Receivables 1993-A Grantor Trust's Registration Statement on Form S-1,
File No. 33-65348.
(10) Incorporated herein by reference to Exhibit 10.1 filed with Toyota
Auto Receivables 1993-A Grantor Trust's Registration Statement on Form
S-1, File No. 33-65348.

-61-

EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------

12.1 Calculation of ratio of earnings to fixed charges. Filed
Herewith

12.2 Calculation of ratio of earnings to fixed charges Filed
excluding parent adjustment. Herewith

21.1 TMCC's list of subsidiaries. Filed
Herewith

23.1 Consent of Independent Accountants Filed
Herewith

27.1 Financial Data Schedule Filed
Herewith

-62-