Toyota Motor Credit Corp · 10-K405 · For 9/30/97

Filed On 12/24/97   ·   SEC File 1-09961   ·   Accession Number 834071-97-31

Annual Report -- [X] Reg. S-K Item 405   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Annual Report -- [X] Reg. S-K Item 405                65    283K 
 2: EX-4        Second Amended and Restated Agency Agreement         130    421K 
 3: EX-10       Ex 10.1c-Operating Agreement Amendment                 2     11K 
 4: EX-10       Ex 10.5f-Three Year Agreement                          6     22K 
 5: EX-10       Ex 10.5g-364 Day Agreement                             6     22K 
 6: EX-12       Fixed Charge Ratio                                     1      9K 
 7: EX-21       Subsidiary List                                        1      5K 
 8: EX-23       Consent of Independent Accountants                     1      6K 
 9: EX-27       Financial Data Schedule                                2±    10K 

10-K405   ·   Annual Report -- [X] Reg. S-K Item 405
Document Table of Contents

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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 [NO FEE REQUIRED]                                

For the fiscal year ended  September 30, 1997                         
  ------------------
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                           
              --------    --------
Commission file number    1-9961                                                
----------                      

TOYOTA MOTOR CREDIT CORPORATION     
---------------------------------------------------------------------------     
(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    
----------------------------------------            -----------------------     
(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
     -------------------                       -----------------------
6.30% Fixed Rate Medium-Term                                        
  Notes due January 25, 1999                   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, 1997, the number of outstanding shares of capital
stock, par value $10,000 per share, of the registrant was 91,500, 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") is a wholly-owned subsidiary of        
Toyota Motor Sales, USA, Inc. ("TMS") and was incorporated in California in     
1982 and commenced operations in 1983.  TMCC provides retail leasing, retail    
and wholesale financing 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)and the Commonwealth of        
Puerto Rico. TMCC has seven wholly-owned subsidiaries, four of which are        
engaged in the insurance business, one limited purpose subsidiary formed        
primarily to acquire and securitize retail finance receivables, one limited     
purpose subsidiary formed primarily to acquire and securitize lease finance     
receivables and one subsidiary which provides retail and wholesale financing    
and certain other financial services to authorized Toyota and Lexus vehicle     
dealers and their customers in the Commonwealth of Puerto Rico. TMCC and its    
subsidiaries are collectively referred to as the "Company".                     

The Company's earnings are primarily impacted by the level of average earning   
assets, comprised primarily of investments in operating leases and finance      
receivables, and asset yields as well as outstanding borrowings and the cost    
of funds.  The Company's business is substantially dependent upon the sale of   
Toyota and Lexus vehicles in the United States.  Changes in the volume of       
sales of such vehicles resulting from governmental action, changes in consumer  
demand, changes in pricing of imported units due to currency fluctuations, or   
other events, could impact 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.                  

An operating agreement between TMCC and TMS (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.  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 1.10 times such fixed charges in any       
fiscal quarter.  Under the Operating Agreement, all loans by TMS to TMCC must   
be subordinated to all other indebtedness of TMCC.  As a result of the          
reorganization of Toyota's manufacturing operations in the United States and    
the accompanying establishment of Toyota Motor Manufacturing North America,     
Inc. ("TMMNA") described below under "Toyota Motor Sales, U.S.A., Inc.", the    
Operating Agreement was amended to require TMMNA, in addition to TMS, to        
provide financial assistance as necessary to maintain TMCC's minimum fixed      
charge coverage ratio and to require that any loans made by TMMNA to TMCC will  
be subordinated at all times to other indebtedness of TMCC. The Operating       
Agreement does not constitute a guarantee by TMS or TMMNA of any obligations    
of TMCC.  The fixed charge 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.                       

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Retail Leasing                                                                  

TMCC purchases primarily new vehicle lease contracts originated by Toyota and   
Lexus dealers.  Lease contracts purchased must first meet TMCC's credit         
standards after which TMCC assumes ownership of the leased vehicles and is      
generally permitted to take possession of vehicles upon lessee default.  TMCC   
is responsible for contract collection and administration during the lease      
period and for the value of the vehicle at lease maturity if the vehicle is     
not purchased by the lessee or dealer. Off-lease vehicles returned to TMCC are  
sold through a network of auction sites located throughout the United States.   
TMCC requires lessees to carry fire, theft, collision and liability insurance   
on leased vehicles covering the interests of both TMCC and the lessee.  In      
recent years, TMS has sponsored special lease programs by supporting reduced    
lease rates.  Leasing revenues contributed 83%, 82% and 78% to total financing  
revenues for the fiscal years ended September 30, 1997, 1996 and 1995,          
respectively.                                                                   

In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust     
(the "Titling Trust"), to act as lessor and to hold title to leased vehicles    
in specified states in connection with a lease securitization program.  TMCC    
acts as the servicer for lease contracts purchased by the Titling Trust from    
Toyota and Lexus dealers and services such lease contracts in the same manner   
as contracts owned directly by TMCC.  TMCC holds an undivided trust interest    
in lease contracts owned by the Titling Trust, and such lease contracts are     
included in TMCC's lease assets, until such time as the beneficial interests    
in such contracts are transferred in connection with a securitization           
transaction.                                                                    

Retail Financing                                                                

TMCC purchases primarily new and used vehicle installment contracts from        
Toyota and Lexus dealers.  Certain of the used vehicle contracts purchased by   
TMCC are "Certified" Toyota and Lexus used vehicle contracts which relate to    
vehicles purchased by dealers, reconditioned and certified to meet certain      
Toyota and Lexus standards, and sold or leased with an extended warranty from   
the manufacturer.  Installment contracts purchased must first meet TMCC's       
credit standards and thereafter TMCC retains responsibility for contract        
collection and administration.  TMCC acquires security interests in the         
vehicles financed and generally can repossess vehicles if customers fail to     
meet contract obligations.  Substantially all of TMCC's retail financings are   
non-recourse which relieves the dealers from financial responsibility in the    
event of repossession.  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 recent years, TMS has sponsored    
special retail programs by supporting reduced interest rates.  Retail           
financing revenues contributed 14%, 14% and 18% to total financing revenues     
for the fiscal years ended September 30, 1997, 1996 and 1995, respectively.     

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A summary of vehicle retail leasing and financing activity follows:             

                                                                · Download Table

                                     Years Ended September 30,             
                          -------------------------------------------------
                             1997      1996      1995      1994      1993  
                          ---------  --------  --------  --------  --------
                                                                           
Contract volume:                                                           
   Lease................    262,000   276,000   179,000   204,000   112,000
   Retail...............    247,000   229,000   170,000   210,000   200,000
                          ---------  --------  --------  --------  --------
      Total.............    509,000   505,000   349,000   414,000   312,000
                          =========  ========  ========  ========  ========
Average amount financed:                                                   
   Lease................    $24,200   $23,300   $24,800   $23,700   $23,400
   Retail...............    $16,500   $16,200   $15,100   $14,000   $12,800

Outstanding portfolio at                                                   
   period end ($Millions):                                                 
      Lease.............    $11,622   $11,917    $9,305    $7,569    $4,604
      Retail............     $5,866    $5,105    $4,489    $5,162    $4,440
      Number of accounts  1,061,000 1,069,000   946,000   929,000   750,000


Retail receivables and interests in lease finance receivables sold, totaling    
$2.4 billion as of September 30, 1997 and $1.1 billion as of September 30,      
1996, which TMCC continues to service, are excluded from the outstanding        
portfolio amounts in the above table.                                           

Wholesale Financing                                                             

TMCC provides wholesale financing primarily to qualified Toyota and Lexus       
vehicle dealers to finance inventories of new Toyota and Lexus vehicles and     
used Toyota, Lexus and other vehicles.  TMCC acquires security interests in     
vehicles financed 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 dealer default, TMCC has the right to   
liquidate any assets acquired and seek legal remedies pursuant to the           
guarantees.  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.                     

A summary of vehicle wholesale financing activity follows:                      

                                                                · Download Table

                                         Years Ended September 30,            
                              ------------------------------------------------
                                1997      1996      1995      1994      1993  
                              --------  --------  --------  --------  --------
                                                                              
Dealer loans ($Millions).....   $8,573    $8,017    $7,626    $7,055    $6,378
Dealer repayments ($Millions)   $8,684    $8,221    $7,444    $7,032    $6,152
Outstanding portfolio at                                                      
   period end ($Millions)....     $563      $668      $886      $727      $703
Average amount financed                                                       
   per vehicle...............  $20,695   $19,926   $18,999   $17,530   $16,500

TMCC also makes term loans to dealers for business acquisitions, facilities     
refurbishment, real estate purchases and working capital requirements.  These   
loans are typically secured with liens on real estate, other dealership assets  
and/or personal guarantees of the dealers.  Wholesale and other dealer          
financing revenues contributed 3%, 4% and 4% to total financing revenues for    
the fiscal years ended September 30, 1997, 1996 and 1995, respectively.         

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Insurance                                                                       

The principal activities of TMCC's insurance subsidiaries include marketing,    
underwriting, claims administration and providing certain coverages related to  
vehicle service agreements and contractual liability agreements sold by or      
through Toyota and Lexus vehicle dealers and affiliates to customers.  In       
addition, the insurance subsidiaries insure and reinsure certain TMS and TMCC   
risks.  Income before income taxes from insurance operations contributed 12%,   
7% and 6% to total income before income taxes for the fiscal years ended        
September 30, 1997, 1996 and 1995, respectively.                                

Servicing                                                                       

TMCC remains as servicer on accounts included in its asset-backed               
securitization transactions and is paid a servicing fee.                        

Funding                                                                         

Funding to support the Company's level of earning assets is provided by access  
to the capital markets as well as earning asset liquidations and funds          
provided by operating activities.  Capital market funding has generally been    
in the form of commercial paper, United States and Euro medium-term notes,      
Eurobonds and transactions through the Company's asset-backed securitization    
programs.                                                                       

The Company uses a variety of derivative financial instruments to manage        
interest rate and currency exchange exposures.  The derivative instruments      
utilized include cross currency and interest rate swap agreements, indexed      
note swap agreements and option-based products.  The Company does not use any   
of these instruments for trading purposes.                                      

Competition and Government Regulations                                          

TMCC's primary competitors for retail leasing and financing are commercial      
banks, savings and loan associations, credit unions, finance companies and      
other captive automobile finance companies.  Commercial banks and other         
captive automobile finance companies also provide wholesale financing for       
Toyota and Lexus dealers.  Competition for the principal products and services  
provided through the insurance operations is primarily from national and        
regional independent service contract providers.  TMCC's strategy is to         
supplement, with competitive financing and insurance programs, the overall      
commitment of TMS to offer a complete package of services to authorized Toyota  
and Lexus dealers and their customers.                                          

The finance and insurance operations of the Company are regulated under both    
federal and state law.  A majority of 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 the Company's operations in these states if the Company were  
unable to pass on increased interest costs to its customers.  In addition,      
state laws differ as to whether anyone suffering injury to person or property   
involving a leased vehicle may bring an action against the owner of the         
vehicle merely by virtue of that ownership.  To the extent that applicable      
state law permits such an action, TMCC may be subject to liability to such an   
injured party.  However, the laws of most states either do not permit such      
suits or limit the lessor's liability to the amount of any liability insurance  
that the lessee was required under applicable law to maintain (or, in some      
states, the lessor was permitted to maintain), but failed to maintain.  TMCC's  
lease contracts contain provisions requiring the lessees to maintain levels of  
insurance satisfying applicable state law and TMCC maintains certain levels of  
contingent liability insurance for protection from catastrophic claims.         

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

Employee Relations                                                              

At November 30, 1997, the Company had approximately 2,400 full-time employees.  
The Company considers its employee relations to be good.                        

Segment Information                                                             

Financial information regarding industry segments is set forth in Note 16 of    
the Notes to Consolidated Financial Statements.                                 

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

TMS was established in 1957 and as of September 30, 1997 is a wholly-owned      
subsidiary of Toyota Motor North America, Inc. ("TMA").  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).  Additionally, TMS exports automobiles and related   
replacement parts and accessories to Europe, Asia and United States             
territories.  Through September 30, 1996, TMS manufactured certain automobiles  
through Toyota Motor Manufacturing, U.S.A., Inc., and manufactured trucks       
through Toyota Auto Body Corporation, Inc. ("TABC"), a wholly owned             
subsidiary.  Effective October 1, 1996, Toyota Motor Manufacturing North        
America, Inc. ("TMMNA") was established to serve as the holding company for     
all manufacturing operations in the United States and to coordinate and         
support numerous manufacturing related administrative functions previously      
carried out independently by various Toyota entities in North America and by    
Toyota Motor Corporation ("TMC") in Japan.  Both TMMNA and TMS are wholly-      
owned subsidiaries of TMA, a holding company owned 100% by TMC which was        
established on September 3, 1996.                                               

TMS's corporate headquarters is located in Torrance, California.  TMS has port  
facilities, regional sales offices and parts distribution centers located       
throughout the United States.  Toyota vehicles are distributed in the United    
States in twelve regional sales areas, ten of which are operated by or through  
TMS and two which are serviced by private distributors who purchase vehicles    
directly from TMS and distribute to Toyota dealers within their respective      
regions.  For the year ended September 30, 1997, these private 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, 1997, TMS sold approximately 1,190,000         
automobiles and light trucks in the United States (excluding Hawaii), of which  
approximately 731,000 were manufactured in the United States; TMS exported      
approximately 39,000 automobiles.  TMS sales represented approximately 27% of   
TMC's worldwide sales volume for the year ended March 31, 1997.  For the years  
ended September 30, 1997 and 1996, Toyota and Lexus vehicles accounted for      
approximately 8.0% and 7.5%, respectively, of all retail automobile and light   
truck sales in the United States.                                               

Total revenues for TMS for the fiscal years ended September 30, 1997, 1996 and  
1995, aggregated approximately $28.8 billion, $27.5 billion and $26.2 billion,  
respectively, of which approximately $25.3 billion, $24.4 billion and           
$23.7 billion, respectively, were attributable to revenues other than those     
associated with financial services.  At September 30, 1997, 1996 and 1995, TMS  
had total assets of approximately $23.6 billion, $25.1 billion and              
$21.1 billion, respectively.  TMS had net worth in excess of $4.1 billion and   
net income in excess of $225 million for each of the fiscal years ended         
September 30, 1997, 1996 and 1995.                                              

Total revenues for TMMNA for the fiscal year ended September 30, 1997           
aggregated approximately $10.6 billion, all of which was attributable to        
revenues other than those associated with financial services.  At               
September 30, 1997, TMMNA had total assets of approximately $3.5 billion, and   
net worth in excess of $2.1 billion.  TMMNA had net income in excess of         
$100 million for the fiscal year ended September 30, 1997.                      

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ITEM 2.   PROPERTIES.                                                           

The headquarters of the Company is located in Torrance, California, with 33     
branch offices in cities throughout the United States and one branch office in  
the Commonwealth of Puerto Rico.  A financial service center is located in      
Cedar Rapids, Iowa.  All premises are occupied under lease.                     

ITEM 3.   LEGAL PROCEEDINGS.                                                    

Various claims and actions are pending against TMCC and its subsidiaries with   
respect to financing activities, taxes and other matters arising from the       
ordinary course of business.  Certain of these actions are or purport to be     
class action suits.  Management and internal and external counsel perform       
periodic reviews of pending claims and actions to determine the probability of  
adverse verdicts and resulting amounts of liability.  The amounts of liability  
on pending claims and actions as of September 30, 1997 were not determinable;   
however, in the opinion of management, the ultimate liability resulting         
therefrom should not have a material adverse effect on TMCC's consolidated      
financial position or results of operations.                                    

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

Not applicable.                                                                 

PART II     

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

TMCC is a wholly-owned subsidiary of TMS and, accordingly, all shares of the    
Company's stock are owned by TMS.  There is no market for TMCC's stock.         

No dividends have been declared or paid to date.                                

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ITEM 6.   SELECTED FINANCIAL DATA.                                              

                                                                · Download Table

                                           Years Ended September 30,         
                                  -------------------------------------------
                                   1997     1996     1995     1994     1993  
                                  -------  -------  -------  -------  -------
                                              (Dollars in Millions)          
                                                                             
INCOME STATEMENT DATA                                                        

Financing Revenues:                                                          

Leasing.......................... $ 2,739  $ 2,454  $ 1,902  $ 1,230  $   751
Retail financing.................     446      415      431      413      468
Wholesale and other                                                          
   dealer financing..............      89      109      121       86       80
                                  -------  -------  -------  -------  -------
Total financing revenues.........   3,274    2,978    2,454    1,729    1,299

Depreciation on leases...........   1,790    1,626    1,230      735      385
Interest expense.................     918      820      716      486      454
                                  -------  -------  -------  -------  -------
Net financing revenues...........     566      532      508      508      460

Other revenues...................     176      136      113       95       80
                                  -------  -------  -------  -------  -------
Net financing revenues                                                       
   and other revenues............     742      668      621      603      540
                                  -------  -------  -------  -------  -------
Expenses:                                                                    

Operating and administrative.....     323      293      255      232      225
Provision for credit losses......     136      115       66       78       60
                                  -------  -------  -------  -------  -------
Total expenses...................     459      408      321      310      285
                                  -------  -------  -------  -------  -------

Income before income taxes.......     283      260      300      293      255

Provision for income taxes.......     121      108      117      118       97
                                  -------  -------  -------  -------  -------
Net Income....................... $   162  $   152  $   183  $   175  $   158
                                  =======  =======  =======  =======  =======

Ratio of earnings to                                                         
   fixed charges.................    1.31     1.32     1.42     1.60     1.56

BALANCE SHEET DATA                                                           

Investments in operating                                                     
  leases, net.................... $10,257  $10,831   $8,148   $6,215   $3,050
Finance receivables, net.........  $8,452   $7,474   $7,227   $7,834   $7,226
Total assets..................... $19,830  $19,309  $16,225  $14,791  $11,179
Notes and loans payable.......... $14,745  $15,014  $12,696  $11,833   $8,833
Capital stock....................    $915     $915     $865     $865     $680
Retained earnings................  $1,159     $997     $844     $662     $487


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

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

FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                   

Net Income                                                                      
----------                                                                      

The following table summarizes TMCC's net income by business segment for the    
fiscal years ended September 30, 1997, 1996 and 1995:                           

                                                                · Download Table

                                             Years Ended September 30,
                                             ------------------------ 
                                             1997      1996      1995 
                                             ----      ----      ---- 
                                                                      
                                              (Dollars in Millions)   
Net income:                                                           
  Financing operations................       $142      $140      $171 
  Insurance operations................         20        12        12 
                                             ----      ----      ---- 
     Total net income.................       $162      $152      $183 
                                             ====      ====      ==== 

The increase in TMCC's consolidated net income in fiscal 1997 is primarily      
attributable to earnings growth in TMCC's insurance operations, while the       
decline in fiscal 1996 net income reflects primarily higher provisions for      
vehicle disposition and credit losses and lower net interest margins in TMCC's  
financing operations.  Net interest margins reflect the difference between      
interest rates implicit in leases and charged on retail, wholesale and other    
finance receivables, and interest rates paid on borrowings.                     

Net income from financing operations increased 1% in fiscal 1997 and decreased  
18% in fiscal 1996.  The increase in fiscal 1997 reflects higher net financing  
revenues attributable to earning asset growth and increased income from asset-  
backed securitization transactions, substantially offset by lower net interest  
margins, higher vehicle disposition and credit losses and increased personnel   
and operating expenses attributable to the increased account base.  The         
decrease in fiscal 1996 reflects higher provisions for credit and vehicle       
disposition losses, lower net interest margins and higher personnel and         
operating expenses partially offset by higher financing revenues from earning   
asset growth and increased income from asset-backed securitization              
transactions.                                                                   

Net income from insurance operations increased 67% in fiscal 1997 and remained  
stable in fiscal 1996.  The increase in fiscal 1997 reflects increased          
underwriting profit from providing coverage under various agreements as well    
as higher investment income.                                                    

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Earning Assets                                                                  
--------------                                                                  

The composition of TMCC's net earning assets (excluding retail receivables and  
interests in lease finance receivables sold through securitization              
transactions), contract volume and finance penetration as of and for the years  
ended September 30, 1997, 1996, and 1995 are as follows:                        

                                                                · Download Table

                                                      September 30,        
                                               --------------------------- 
                                                1997      1996      1995   
                                               -------   -------   ------- 
                                                     (Dollars in Millions) 
                                                                           

Vehicle lease                                                              
  Investment in operating leases, net........  $10,124   $10,745    $8,084 
  Finance leases, net........................    1,498     1,172     1,221 
                                               -------   -------   ------- 
Total vehicle leases.........................   11,622    11,917     9,305 

Vehicle retail finance receivables, net......    5,866     5,105     4,489 
Vehicle wholesale and other receivables......    1,434     1,486     1,752 
Allowance for credit losses..................     (213)     (203)     (171)
                                               -------   -------   ------- 
Total net earning assets.....................  $18,709   $18,305   $15,375 
                                               =======   =======   ======= 


                                                                · Download Table

                                                Years Ended September 30, 
                                               ---------------------------
                                                1997      1996      1995  
                                               -------   -------   -------
                                                                          
Contract volume:                                                          
   Vehicle lease.............................  262,000   276,000   179,000
   Vehicle retail............................  247,000   229,000   170,000
                                               -------   -------   -------
Total........................................  509,000   505,000   349,000
                                               =======   =======   =======

TMS sponsored contract volume:                                            
   Vehicle lease.............................   72,000   190,000   111,000
   Vehicle retail............................   17,000    52,000    48,000
                                               -------   -------   -------
Total........................................   89,000   242,000   159,000
                                               =======   =======   =======

Retail volume:                                                            
   New volume................................  144,000   157,000   125,000
   Used volume...............................  103,000    72,000    45,000
                                               -------   -------   -------
Total........................................  247,000   229,000   170,000
                                               =======   =======   =======

Finance penetration (excluding fleet)........    36.2%     41.2%     31.8%


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TMCC's net earning assets as of September 30, 1997 increased from               
September 30, 1996 due to growth in retail earning assets, partially offset by  
a decline in lease and wholesale earning assets.  Retail earning assets         
increased from 1996 primarily due to a higher level of used vehicle (primarily  
increased Toyota and Lexus Certified used vehicles) financing in 1997,          
partially offset by the sale of finance receivables totaling $784 million in    
April 1997. Lease earning assets, consisting of investment in operating         
leases, net of accumulated depreciation, and lease finance receivables, net of  
unearned income, declined in 1997 from 1996 due to a higher level of lease      
maturities and the sale of $1.3 billion of interests in lease finance           
receivables during September 1997 in connection with a securitization           
transaction.  The decline in wholesale earning assets from 1996 levels is       
attributable primarily to lower dealer inventories as a result of strong        
demand for certain Toyota and Lexus vehicles.  The increase in allowance for    
credit losses reflects asset growth as well as an increased mix of used         
vehicles in the retail portfolio for which loss reserves are provided at        
higher levels than new vehicles.                                                

In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust     
(the "Titling Trust"), to act as a lessor and to hold title to leased vehicles  
in specified states.  The value of the lease contracts purchased by the         
Titling Trust in fiscal 1997 represented approximately 22% of all lease         
contracts purchased by both TMCC and the Titling Trust.  Substantially all      
leases owned by the Titling Trust are classified as finance receivables due to  
certain residual value insurance arrangements in place with respect to such     
leases, while leases of similar nature originated outside of the Titling Trust  
are classified as operating leases.  The continued acquisition of leases by     
the Titling Trust is expected to cause a shift in the composition of earning    
assets from operating leases to finance receivables due to the classification   
differences described above.                                                    

TMCC's net earning assets as of September 30, 1996 increased from               
September 30, 1995 primarily due to growth in lease earning assets due to       
higher lease volume attributable to special lease programs sponsored by TMS.    

TMS sponsors special lease and retail programs which allow TMCC to offer        
reduced monthly payments on certain Toyota and Lexus new vehicles and Toyota    
industrial equipment to qualified lease and retail customers.  Support amounts  
received from TMS approximate the balances required by TMCC to maintain         
revenues at standard program levels and are earned over the expected lease and  
retail installment contract terms.  The level of sponsored program activity     
varies based on TMS marketing strategies and revenues earned vary based on the  
mix of Toyota and Lexus vehicles, timing of programs and the level of support   
provided.  TMCC's revenues earned from TMS sponsored special lease and retail   
contracts outstanding totaled $174 million, $174 million and $134 million for   
fiscal years 1997, 1996 and 1995, respectively.                                 

TMCC's lease contract volume for the year ended September 30, 1997 declined     
from 1996 levels as a result of lower finance penetration attributable to       
reduced levels of lease programs sponsored by TMS.  This decline was            
substantially offset by the strong sales of Toyota and Lexus vehicles as a      
result, in part, of consumer acceptance and competitive pricing of certain new  
and redesigned 1997 Toyota and Lexus models and TMCC's competitive leasing      
programs.                                                                       

TMCC's retail contract volume for the year ended September 30, 1997 increased   
from 1996 levels as a result of higher used contract volume and strong Toyota   
and Lexus sales, partially offset by slightly lower finance penetration         
attributable to reduced TMS sponsored special retail programs.                  

Higher contract volume and finance penetration in 1996 compared to 1995         
reflected increased volume primarily attributable to the TMS sponsored special  
lease programs.                                                                 

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Financing Revenue and Other Revenues                                            
------------------------------------                                            

TMCC's total financing revenues increased 10% in fiscal 1997 and 21% in fiscal  
1996. The increase in fiscal 1997 reflects growth in average retail and lease   
earning assets, partially offset by a decline in average wholesale earning      
assets.  The increase in fiscal 1996 reflects growth in average lease earning   
assets, partially offset by a decline in average retail and wholesale earning   
assets. TMCC's continued use of the Titling Trust to purchase leases, which     
may be sold in connection with securitization transactions, is expected to      
shift the composition of earning assets from operating leases to finance        
receivables, as discussed earlier, and will result in increased revenues from   
finance leases (until such interests in leases are sold in securitization       
transactions) and reduced operating lease revenues and depreciation expense.    

The following table summarizes TMCC's other income for the fiscal years ended   
September 30, 1997, 1996 and 1995:                                              

                                                                · Download Table

                                               Years Ended September 30,
                                              --------------------------
                                              1997       1996       1995
                                              ----       ----       ----
                                                 (Dollars in Millions)  
                                                                        
Insurance operations revenues...............  $130       $110        $98
Gains and servicing fees on assets sold.....    40         23         13
Investment and other income.................     6          3          2
                                              ----       ----       ----
   Total other income.......................  $176       $136       $113
                                              ====       ====       ====

Insurance operations revenues increased 19% in fiscal 1997 due to higher        
underwriting revenues associated with in-force agreements as well as increased  
investment income.  The increase in such revenues in fiscal 1996 is due         
primarily to higher underwriting revenues associated with in-force agreements.  

The increases in gains and servicing fee income in fiscal 1997 and 1996         
reflect an increase in the amount of assets sold through the Company's asset-   
backed securitization programs.  Gains recognized on asset-backed               
securitization transactions generally accelerate the recognition of income on   
lease and retail contracts, net of servicing fees and other related deferrals,  
into the period the assets are sold.  Numerous factors can affect the timing    
and amounts of these gains, such as the type and amount of assets sold, the     
structure of the sale and current financial market conditions.                  

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Lease Depreciation                                                              
------------------                                                              

Included in lease depreciation expense are:  (i) straight-line depreciation     
expense on operating leases to the contractual residual value (ii) provision    
for residual value losses on operating leases and (iii) actual vehicle          
disposition losses and gains.  Operating lease depreciation expense increased   
$164 million and $394 million during fiscal 1997 and fiscal 1996,               
respectively, primarily due to growth in average operating lease assets. The    
provision for losses on returned operating lease vehicles declined $48 million  
in fiscal 1997 and increased $34 million during fiscal 1996.  The reduction in  
the rate of growth of the allowance in 1997 is consistent with the slowing      
rate of growth in lease assets and the Company's determination that the         
overall level of the allowance is appropriate.  The increase in provision in    
1996 was consistent with the high growth in operating lease assets from 1995    
levels.  Vehicle disposition losses increased $61 million and $22 million       
during fiscal 1997 and fiscal 1996, respectively, reflecting primarily          
increased volume of returned units corresponding with a higher level of         
scheduled maturities and a higher vehicle return rate.  TMCC's operating lease  
portfolio includes contracts with terms ranging from 12 to 54 months; the       
average original contract term in TMCC's operating lease portfolio was          
35 months at September 30, 1997 and 36 months at September 30, 1996,            
respectively.  As discussed earlier, the continued acquisition of leases by     
the Titling Trust is expected to shift the composition of earning assets from   
operating leases to finance receivables which will result in increased          
revenues from finance leases (until such interests in leases are sold in        
securitization transactions) and reduced operating lease revenues and           
depreciation expense.                                                           

TMCC is subject to residual value risk in connection with its lease portfolio;  
TMCC's residual value risk is a function of the number of off-lease vehicles    
returned for disposition and any shortfall between the net disposition          
proceeds and the estimated unguaranteed residual values on returned vehicles.   
Total unguaranteed residual values related to TMCC's vehicle lease portfolio    
totaled approximately $9.0 billion and $8.8 billion at September 30, 1997 and   
1996, respectively.  The percentage of lease vehicles returned to and disposed  
of by TMCC which were originally scheduled to mature during fiscal 1997 was     
18% as compared to 14% and 11% during fiscal 1996 and 1995, respectively.       
TMCC maintains an allowance for estimated losses on lease vehicles returned to  
the Company for disposition at lease termination.  The level of allowance       
required to cover future vehicle disposition losses is based upon projected     
vehicle return rates and projected residual value losses on core models         
derived from market information on used vehicle sales, historical factors,      
including lease return trends, and general economic factors.  The provision     
for losses on returned lease vehicles is included in TMCC's depreciation        
expense for operating leases and in leasing revenues for direct finance         
leases.  Actual vehicle disposition losses and gains are included in            
depreciation expense.  As the lease portfolio has matured the level of vehicle  
lease returns have increased; however, the Company actively manages             
disposition of its lease vehicles and believes that its lease earning assets,   
net of the allowance for losses, are recorded at net realizable value.          

Interest Expense                                                                
----------------                                                                

Interest expense increased 12% and 15% in fiscal 1997 and 1996, respectively.   
The increase in fiscal 1997 reflects higher average borrowings outstanding      
required to fund the growth in average earning assets, slightly offset by a     
decline in the average cost of borrowings. The increase in fiscal 1996          
reflects higher average borrowings outstanding and an increase in the average   
cost of borrowings.  The weighted average cost of borrowings was 5.87%, 5.90%   
and 5.78% for the years ended September 30, 1997, 1996 and 1995, respectively.  

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Operating and Administrative Expenses                                           
-------------------------------------                                           

Operating and administrative expenses increased 10% and 15% in fiscal 1997 and  
1996, respectively.  The increases reflect primarily additional personnel and   
operating costs required to support TMCC's growing customer base as well as     
growth in the Company's insurance operations.  TMCC anticipates continued       
growth in expenses reflecting increasing headcount and operating costs          
associated with portfolio growth and expanded customer service activities as    
well as costs in connection with computer system and software modifications to  
address year 2000 issues.                                                       

Provision for Credit Losses                                                     
---------------------------                                                     

TMCC's provision for credit losses increased 18% and 74% during fiscal 1997     
and fiscal 1996, respectively.  The increase in fiscal 1997 reflects higher     
credit losses, increasing mix of used vehicles in the retail portfolio and      
earning asset growth.  The increase in fiscal 1996 was primarily related to     
the growth in earning assets and higher credit losses.  Higher credit losses    
in 1997 reflect an increasing number of repossessed vehicles and higher losses  
per repossessed vehicle attributable to greater lease and retail accounts       
outstanding, higher mix of used vehicles in the retail portfolio which          
historically produce higher losses than new business and maturing of the lease  
portfolio.  TMCC has not significantly altered its underwriting standards.      
Allowances for credit losses are evaluated periodically, considering            
historical loss experience and other factors, and are considered adequate to    
cover expected credit losses as of September 30, 1997.                          

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An analysis of credit losses and the related allowance follows, excluding net   
losses on receivables sold subject to limited recourse provisions:              

                                                                · Download Table

                                          Years ended September 30,      
                                    ------------------------------------ 
                                    1997    1996    1995    1994    1993 
                                    ----    ----    ----    ----    ---- 
                                            (Dollars in Millions)        
                                                                         
Allowance for credit losses                                              
   at beginning of period.........  $203    $171    $164    $121    $107 
Provision for credit losses.......   136     115      66      78      60 
Charge-offs.......................  (116)    (81)    (63)    (47)    (51)
Recoveries........................    12      12      12      12      11 
Other Adjustments.................   (22)    (14)     (8)      -      (6)
                                    ----    ----    ----    ----    ---- 
Allowance for credit losses                                              
   at end of period...............  $213    $203    $171    $164    $121 
                                    ====    ====    ====    ====    ==== 
Allowance as a percent of net                                            
   investments in operating                                              
   leases and net receivables                                            
   outstanding....................  1.13%   1.10%   1.10%   1.15%   1.16%

Losses as a percent of average                                           
   net investments in operating                                          
   leases and average net                                                
   receivables outstanding........   .55%    .41%    .34%    .30%    .41%

Aggregate balances at end of                                             
   period for lease rentals                                              
   and installments 60                                                   
   or more days past due..........   $30     $29     $20     $15     $16 

Aggregate balances at end of                                             
   period for lease rentals                                              
   and installments 60 or more                                           
   days past due as a percent                                            
   of net investments in operating                                       
   leases and gross receivables                                          
   outstanding....................   .15%    .15%    .12%    .10%    .14%


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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 and cash provided    
by operating activities as well as transactions through the Company's asset-    
backed securities programs.  Debt issuances have generally been in the form of  
commercial paper, United States and Euro medium-term notes ("MTNs") and         
Eurobonds.  On occasion, this funding has been supplemented by loans and        
equity contributions from TMS.                                                  

Commercial paper issuances are utilized to meet short-term funding needs.       
Commercial paper outstanding under TMCC's commercial paper program ranged from  
approximately $1.2 billion to $3.0 billion during fiscal 1997, with an average  
outstanding balance of $1.9 billion.  For additional liquidity purposes, TMCC   
maintains syndicated bank credit facilities with certain banks which            
aggregated $2.0 billion at September 30, 1997.  No loans were outstanding       
under any of these bank credit facilities during fiscal 1997. TMCC also         
maintains, along with TMS, uncommitted, unsecured lines of credit with banks    
totaling $250 million.  At September 30, 1997, TMCC had issued approximately    
$24 million in letters of credit, primarily related to the Company's insurance  
operations.                                                                     

Long-term funding requirements are met through the issuance of a variety of     
debt securities underwritten in both the United States and international        
capital markets.  United States and Euro MTNs and Eurobonds have provided TMCC  
with significant sources of funding.  During fiscal 1997, TMCC issued           
approximately $4.6 billion of MTNs and Eurobonds of which approximately         
$4.4 billion had original maturities greater than one year.                     

The original maturities of all MTNs and Eurobonds outstanding at September 30,  
1997 ranged from one to eleven years. At September 30, 1997, the amounts        
outstanding under MTNs and Eurobonds, including the effect of foreign currency  
translations at September 30, 1997 spot exchange rates, are as follows:         

                                                                · Download Table

                                        Total                    
                                       U.S. and                  
                                       Foreign         Foreign   
                                       Currency        Currency  
                                     Denominated     Denominated 
                                    -------------   -------------
                                                                 
MTNs..............................  $10.6 billion    $4.5 billion
Eurobonds.........................    2.5 billion     1.5 billion
                                    -------------    ------------
                                    $13.1 billion    $6.0 billion
                                    =============    ============

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TMCC anticipates continued use of MTNs in both the United States and            
international capital markets.  At November 30, 1997, approximately             
$483 million was available for issuance under TMCC's United States public MTN   
program, $15 million of which was committed for issue by the Company.  The      
maximum aggregate principal amount authorized to be outstanding at any time     
under TMCC's Euro MTN program is $16.0 billion, which was increased in July     
1997 from the prior maximum of $12.0 billion.  Approximately $5.6 billion was   
available for issuance under the Euro MTN program as of November 30, 1997, of   
which the Company has committed to issue approximately $21 million.  The        
United States and Euro MTN programs may be expanded from time to time to allow  
for the continued use of these sources of funding.  In addition, approximately  
$700 million of securities registered with the Securities and Exchange          
Commission, excluding MTNs, were available for issuance at November 30, 1997.   

Additionally, TMCC utilizes its asset-backed securitization programs to         
generate funds for investment in earning assets.  During the year ended         
September 30, 1997, TMCC sold retail finance receivables totaling $784 million  
and interests in lease finance receivables totaling $1,283 million as           
described in Note 7 of the Notes to the Consolidated Financial Statements.  On  
October 1, 1996, Toyota Lease Trust was created as a Delaware business trust    
for the purpose of titling leases, originated in certain states, in connection  
with the lease securitization program.  TMCC anticipates that the number and    
principal amount of leases purchased by the Toyota Lease Trust will comprise a  
significant and increasing percentage of what otherwise would have been TMCC's  
lease portfolio; however, until leases are included in a securitization         
transaction, they will continue to be classified as finance receivables on      
TMCC's balance sheet.                                                           

TMCC utilizes a variety of interest rate and currency derivative financial      
instruments to manage interest rate and currency exchange exposures.  The       
derivative instruments utilized include cross currency and interest rate        
swaps, indexed note swaps and option-based products.  TMCC does not use any of  
these instruments for trading purposes.  The total notional amount of TMCC's    
derivative financial instruments at September 30, 1997 and 1996 was             
$20.8 billion and $20.5 billion, respectively.  The notional amounts of         
interest rate and indexed note swap agreements and option-based products do     
not represent amounts exchanged by the parties and, thus, are not a measure of  
the Company's exposure through its use of derivatives.  The only market rate    
risk related to TMCC's portfolio is interest rate risk as foreign currency      
risks are entirely hedged through cross currency interest rate swap             
agreements.                                                                     

TMCC utilizes interest rate swap agreements in managing its exposure to         
interest rate fluctuations.  Interest rate swap agreements are executed as an   
integral part of specific debt transactions or on a portfolio basis. TMCC's     
interest rate swap 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 swap    
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.           

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TMCC also utilizes option-based products in managing its exposure to interest   
rate fluctuations.  Option-based products are executed on a portfolio basis     
and consist primarily of purchased interest rate cap agreements.  Option-based  
products are agreements which either grant TMCC the right to receive or         
require TMCC to make payments at specified interest rate levels.                

TMCC utilizes indexed note swap agreements in managing its exposure in          
connection with 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.                                                                    

TMCC utilizes cross currency interest rate swap agreements to entirely hedge    
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 cross currency        
interest rate swap agreements which involve the exchange of foreign currency    
principal and interest obligations for U.S. dollar obligations at agreed-upon   
currency exchange and interest rates.                                           

Derivative financial instruments utilized by TMCC involve, to varying degrees,  
elements of credit risk in the event a counterparty should default and market   
risk as the instruments are subject to rate and price fluctuations.  Credit     
risk is managed through the use of credit standard guidelines, counterparty     
diversification, monitoring of counterparty financial condition and master      
netting agreements in place with all derivative counterparties.  TMCC does not  
currently anticipate non-performance by any of its counterparties and has no    
reserves related to non-performance as of September 30, 1997; TMCC has not      
experienced any counterparty default during the three years ended               
September 30, 1997.                                                             

Changes in interest rates may impact TMCC's future weighted average interest    
rate on outstanding debt as a result of floating rate liabilities.  As of       
September 30, 1997, an interest rate increase of 1% (100 basis points) would    
raise TMCC's weighted average interest rate, including the effects of interest  
rate swap agreements and option-based products, by .58%, from 5.72% to an       
estimated 6.30%.  Conversely, an interest rate decrease of 1% (100 basis        
points) would lower TMCC's weighted average interest rate, including the        
effects of interest rate swap agreements and option-based products, by .77%,    
from 5.72% to an estimated 4.95% at September 30, 1997.                         

TMCC uses a value-at-risk methodology, in connection with other management      
tools, to assess and manage the interest rate risk of aggregated loan and       
lease assets and financial liabilities, including interest rate derivatives     
and option-based products.  Value-at-risk represents the potential losses for   
a portfolio from adverse changes in market factors for a specified period of    
time and likelihood of occurrence (i.e. level of confidence).  TMCC's value-    
at-risk methodology incorporates the impact from adverse changes in market      
interest rates but does not incorporate any impact from other market changes,   
such as foreign currency exchange rates or commodity prices, which do not       
affect the value of TMCC's portfolio.  The methodology assumes that changes in  
interest rates are lognormally distributed.  For options and instruments with   
non-linear returns, the model uses the Black Scholes method to approximate      
changes in fair value. The value-at-risk methodology excludes changes in fair   
values related to investments in marketable securities as these amounts are     
not significant.  TMCC estimates value-at-risk using historical interest rate   
volatilities for the past two years and a stratified random sampling            
methodology.                                                                    

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The value at risk of TMCC's portfolio as of September 30, 1997, measured as     
the potential 30 day loss in fair value from assumed adverse changes in         
interest rates is as follows:                                                   

                                                                · Download Table


                                                  As of       
                                            September 30, 1997
                                            ------------------
                                                              
Mean portfolio value......................  $3,640.0 million  
Value at risk.............................     $51.8 million  
Percentage of the mean portfolio value....       1.4%         
Confidence level..........................      95.0%         

TMCC's calculated value-at-risk exposure represents an estimate of reasonably   
possible net losses that would be recognized on its portfolio of financial      
instruments assuming hypothetical movements in future market rates and is not   
necessarily indicative of actual results which may occur.  It does not          
represent the maximum possible loss nor any expected loss that may occur,       
since actual future gains and losses will differ from those estimated, based    
upon actual fluctuations in market rates, operating exposures, and the timing   
thereof, and changes in the composition of TMCC's portfolio of financial        
instruments during the year.                                                    

On occasion, TMS has made equity contributions to maintain TMCC's equity        
capitalization at certain levels.  No equity contributions were made during     
fiscal 1997.  Also, on occasion, TMS makes interest-bearing loans to TMCC.      
There were no loans from TMS during fiscal 1997.                                

TMCC's ratio of earnings to fixed charges was 1.31, 1.32 and 1.42 in the years  
ended September 30, 1997, 1996, and 1995, respectively.  The decline in the     
ratio from 1995 levels reflects increased interest expense corresponding with   
higher debt levels to support earning asset growth.  Additionally, earnings     
have declined from 1995 levels due to higher vehicle disposition losses on      
off-lease vehicles, higher credit losses and increased operating expenses       
attributable to TMCC's growing customer base.  TMCC management does not         
believe that the declining ratio of earnings to fixed charges is indicative of  
a material decline in the liquidity of the Company.                             

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, totaling $15.6 billion and $13.6 billion during  
fiscal 1997 and 1996, respectively, was used to purchase additional             
investments in operating leases and finance receivables, totaling               
$19.9 billion and $19.2 billion during fiscal 1997 and 1996, respectively.      
Investing activities resulted in a net use of cash of $2.3 billion and          
$4.8 billion in fiscal 1997 and 1996, respectively, as the purchase of          
additional earning assets, primarily investments in operating leases, exceeded  
cash provided by the liquidation of earning assets.  Net cash provided by       
operating activities totaled $2.0 billion and $2.3 billion during fiscal 1997   
and 1996, respectively, and net cash provided by financing activities totaled   
$0.3 billion and $2.6 billion, during fiscal 1997 and 1996, respectively.  The  
Company believes that cash provided by operating and investing activities as    
well as access to domestic and international capital markets, the issuance of   
commercial paper and asset-backed securitization transactions will provide      
sufficient liquidity to meet its future funding requirements.                   

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Year 2000 Computer Issue                                                        
------------------------                                                        

Several of the computer systems and software packages currently used by TMCC    
will not function properly in the year 2000 without modification; potential     
year 2000 malfunctions include erroneous system calculations and/or complete    
system failure.  The Company has developed an action plan to utilize both       
internal resources and outside contractors to perform the necessary system and  
program modifications.  The Company expects to substantially resolve year 2000  
issues in fiscal year 1998 and 1999 and does not anticipate any related         
business interruptions.                                                         

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the        
Private Securities Litigation Reform Act of 1995                                

The foregoing Business description and Management's Discussion and Analysis     
contain various "forward looking statements" within the meaning of Section 27A  
of the Securities Act of 1933, as amended, and Section 21E of the Securities    
Exchange Act of 1934, as amended, which represent the Company's expectations    
or beliefs concerning future events, including the following: that the Company  
considers its employee relations to be good; that the lease earning assets on   
the Company's books are recorded at net realizable value; that allowances for   
credit losses are considered adequate to cover expected credit losses; that     
the ultimate liability resulting from pending claims and actions should not     
have a material adverse effect on the Company's consolidated financial          
position or results of operations; that TMCC anticipates continued growth in    
operating expenses associated with portfolio growth, expanded customer service  
activities and computer system and software modifications to address year 2000  
issues; that the Company expects to substantially resolve year 2000 issues in   
fiscal year 1998 and 1999 and does not anticipate any related business          
interruptions; that the number and principal amount of leases purchased by the  
Toyota Lease Trust will comprise a significant and increasing percentage of     
what otherwise would have been TMCC's lease portfolio; that the purchase of     
leases by the Titling Trust is expected to cause a shift in the composition of  
earning assets from operating leases to finance receivables, resulting in       
increased revenues from finance leases (until such interests in leases are      
sold in securitization transactions) and reduced operating lease revenues and   
depreciation expense; that the Company does not currently anticipate non-       
performance by any of its counterparties; that TMCC anticipates the continued   
use of the Titling Trust in connection with securitization transactions; the    
Company's continued use of MTNs in the United States and the international      
capital markets; that the declining ratio of earnings to fixed charges is not   
indicative of a material decline in the liquidity of the Company; that cash     
provided by operating and investing activities as well as access to domestic    
and international capital markets, the issuance of commercial paper and asset-  
backed securitization transactions will provide sufficient liquidity to meet    
the Company's future funding requirements.                                      

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The Company cautions that these statements are further qualified by important   
factors that could cause actual results to differ materially from those in the  
forward looking statements, including, without limitation, the following:       
decline in demand for Toyota and Lexus products; the effect of economic         
conditions; a decline in the market acceptability of leasing; the effect of     
competitive pricing on interest margins; increases in prevailing interest       
rates; changes in pricing due to the appreciation of the Japanese yen against   
the United States dollar; the effect of governmental actions; the effect of     
competitive pressures on the used car market and residual values; the           
continuation of, and if continued, the level and type of special programs       
offered by TMS; the ability of the Company to successfully access the United    
States and international capital markets; the failure of the Company's action   
plan to resolve timely year 2000 issues due to non-performance by outside       
contractors or other factors; increased costs associated with the Company's     
debt funding efforts; with respect to the effects of litigation matters, the    
discovery of facts not presently known to the Company or determination by       
judges, juries or other finders of fact which do not accord with the Company's  
evaluation of the possible liability from existing litigation; and the ability  
of the Company's counterparties to perform under interest rate and cross        
currency swap agreements.  Results actually achieved thus may differ            
materially from expected results included in these statements.                  

New Accounting Standards                                                        

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS     
No. 130, "Reporting Comprehensive Income", effective for fiscal years           
beginning after December 15, 1997.  SFAS No. 130 requires that all components   
of comprehensive income be reported in a financial statement that is displayed  
with the same prominence as other financial statements as well as separate      
disclosure of other components of comprehensive income in the equity section    
of the balance sheet.  The Company has not determined the impact that adoption  
of this standard will have on its consolidated financial statement              
disclosures.  The Company plans to adopt this accounting standard by            
October 1, 1998, as required.                                                   

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an   
Enterprise and Related Information", effective for fiscal years beginning       
after December 15, 1997.  SFAS No. 131 establishes standards for reporting      
information about operating segments in annual financial statements and         
requires selected information about operating segments in interim financial     
reports.  It also establishes standards for related disclosures about products  
and services, major customers and geographic areas.  The Company has not        
determined the impact that adoption of this standard will have on its           
consolidated financial statement disclosures.  The Company plans to adopt this  
accounting standard by October 1, 1998, as required.                            

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                          

INDEX TO FINANCIAL STATEMENTS                   

                                                              Page
                                                               -------

Report of Independent Accountants................................     24        

Consolidated Balance Sheet at September 30, 1997 and 1996........     25        

Consolidated Statement of Income for the                                        
years ended September 30, 1997, 1996 and 1995.................     26     

Consolidated Statement of Shareholder's Equity for                              
the years ended September 30, 1997, 1996 and 1995.............     27     

Consolidated Statement of Cash Flows for the                                    
years ended September 30, 1997, 1996 and 1995.................     28     

Notes to Consolidated Financial Statements.......................   29-55       

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

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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, 1997 and 1996, and the      
results of their operations and their cash flows for each of the three years    
in the period ended September 30, 1997, 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, 1997                                                                

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

                                                                · Download Table

                                                       September 30,     
                                                  -----------------------
                                                    1997           1996  
                                                  --------       --------
                                                                         
               ASSETS                                                    
               ------                                                    

Cash and cash equivalents.................         $   177        $   170
Investments in marketable securities......             305            355
Investments in operating leases, net......          10,257         10,831
Finance receivables, net..................           8,452          7,474
Receivable from Parent....................             112             78
Other receivables.........................             137            164
Deferred charges..........................             164            131
Other assets..............................             183            106
Income taxes receivable...................              43              -
                                                   -------        -------

         Total Assets.....................         $19,830        $19,309
                                                   =======        =======

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

Notes and loans payable...................         $14,745        $15,014
Accrued interest..........................             213            226
Accounts payable and accrued expenses.....           1,072            474
Deposits..................................             248            248
Income taxes payable......................               -             16
Deferred income...........................             517            612
Deferred income taxes.....................             954            805
                                                   -------        -------
      Total Liabilities...................          17,749         17,395
                                                   -------        -------
Commitments and Contingencies                                            

Shareholder's Equity:                                                    
   Capital stock, $l0,000 par value                                      
      (100,000 shares authorized; issued                                 
      and outstanding 91,500 in 1997 and                                 
      1996)...............................             915            915
   Retained earnings......................           1,159            997
   Net unrealized gains on marketable                                    
      securities..........................               7              2
                                                   -------        -------
      Total Shareholder's Equity..........           2,081          1,914
                                                   -------        -------
         Total Liabilities and                                           
         Shareholder's Equity.............         $19,830        $19,309
                                                   =======        =======

See Accompanying Notes to Consolidated Financial Statements.                    

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

                                                                · Download Table

                                                  Years ended September 30, 
                                                ----------------------------
                                                 1997       1996       1995 
                                                ------     ------     ------
                                                                            
Financing Revenues:                                                         

   Leasing.................................     $2,739     $2,454     $1,902
   Retail financing........................        446        415        431
   Wholesale and other dealer financing....         89        109        121
                                                ------     ------     ------

Total financing revenues...................      3,274      2,978      2,454

   Depreciation on leases..................      1,790      1,626      1,230
   Interest expense........................        918        820        716
                                                ------     ------     ------
Net financing revenues.....................        566        532        508

Other revenues.............................        176        136        113
                                                ------     ------     ------
Net financing revenues and other revenues..        742        668        621
                                                ------     ------     ------
Expenses:                                                                   

   Operating and administrative............        323        293        255
   Provision for credit losses.............        136        115         66
                                                ------     ------     ------

Total expenses.............................        459        408        321
                                                ------     ------     ------

Income before income taxes.................        283        260        300

Provision for income taxes.................        121        108        117
                                                ------     ------     ------

Net Income.................................     $  162     $  152     $  183
                                                ======     ======     ======

See Accompanying Notes to Consolidated Financial Statements.                    

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

                                                                · Download Table

                                                        Net              
                                  Capital  Retained  Unrealized          
                                   Stock   Earnings  Gain/(Loss)  Total  
                                  -------  --------  ----------  ------- 
                                                                         

Balance at September 30, l994...   $  865   $   662   $       -   $1,527 

Net income in 1995..............        -       183           -      183 

Change in net unrealized gain                                            
   on available-for-sale                                                 
   marketable securities........        -         -          (1)      (1)
                                   ------  --------   ---------  ------- 

Balance at September 30, 1995...      865       845          (1)   1,709 

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

Net income in 1996..............        -       152           -      152 

Change in net unrealized gain                                            
   on available-for-sale                                                 
   marketable securities........        -         -           3        3 
                                   ------  -------    ---------  ------- 

Balance at September 30, 1996...      915      997            2    1,914 

Net income in 1997..............        -      162            -      162 

Change in net unrealized gain                                            
   on available-for-sale                                                 
   marketable securities........        -        -            5        5 
                                   ------  -------    ---------  ------- 

Balance at September 30, 1997...   $  915   $1,159    $       7   $2,081 
                                   ======   ======    =========  ======= 

See Accompanying Notes to Consolidated Financial Statements.                    

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

                                                        · Enlarge/Download Table

                                                             Years ended September 30,     
                                                         --------------------------------- 
                                                          1997         1996          1995  
                                                         ------       ------        ------ 
                                                                                           
Cash flows from operating activities:                                                      

   Net income..........................................  $  162       $  152        $  183 
                                                         ------       ------        ------ 
   Adjustments to reconcile net income to net                                              
      cash provided by operating activities:                                               
        Depreciation and amortization..................   1,835        1,646         1,286 
        Provision for credit losses....................     136          115            66 
        Gain from sale of finance receivables, net.....     (23)         (15)          (11)
        (Decrease) increase in accrued interest........     (13)          36            34 
        Increase in deferred income taxes..............     149          178           241 
        (Increase) decrease in other assets............    (198)         (59)          114 
        (Decrease) increase in other liabilities.......     (74)         220            99 
                                                         ------       ------        ------ 
   Total adjustments...................................   1,812        2,121         1,829 
                                                         ------       ------        ------ 

Net cash provided by operating activities..............   1,974        2,273         2,012 
                                                         ------       ------        ------ 

Cash flows from investing activities:                                                      

   Addition to investments in marketable                                                   
      securities.......................................    (581)        (222)         (116)
   Disposition of investments in marketable                                                
      securities.......................................     638           68            33 
   Addition to investments in operating leases.........  (4,269)      (6,081)       (4,123)
   Disposition of investments in operating leases......   3,044        1,718           927 
   Purchase of finance receivables..................... (15,595)     (13,136)      (11,005)
   Liquidation of finance receivables..................  12,553       11,938        10,913 
   Proceeds from sale of finance receivables...........   1,956          905           650 
                                                         ------       ------        ------ 

Net cash used in investing activities..................  (2,254)      (4,810)       (2,721)
                                                         ------       ------        ------ 
Cash flows from financing activities:                                                      

   Proceeds from issuance of capital stock.............       -           50             - 
   Proceeds from issuance of notes and loans payable...   5,482        5,894         5,733 
   Payments on notes and loans payable.................  (4,510)      (4,587)       (4,989)
   Net (decrease) increase  in commercial paper,                                           
      with original maturities less than 90 days.......    (685)       1,249           (62)
                                                         ------       ------        ------ 

Net cash provided by financing activities..............     287        2,606           682 
                                                         ------       ------        ------ 

Net increase (decrease) in cash and cash equivalents...       7           69           (27)

Cash and cash equivalents at the beginning                                                 
   of the period.......................................     170          101           128 
                                                         ------       ------        ------ 

Cash and cash equivalents at the end of the                                                
   period..............................................  $  177       $  170        $  101 
                                                         ======       ======        ====== 
Supplemental disclosures:                                                                  

   Interest paid.......................................    $906         $778          $643 
   Income taxes paid...................................      $5           $3            $2 


See Accompanying Notes to Consolidated Financial Statements.                    

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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) and Puerto Rico.  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 purchased from Toyota Motor Corporation ("TMC") or    
its affiliates.  TMC restructured its North American organizations with the     
establishment of Toyota Motor Manufacturing North America, Inc. ("TMMNA") on    
October 1, 1996.  TMMNA functions to coordinate and support numerous            
manufacturing related administrative functions previously carried out           
independently by various Toyota entities in North America and by TMC in Japan.  
Both TMMNA and TMS are wholly-owned subsidiaries of Toyota Motor North          
America, Inc., a holding company owned 100% by TMC.                             

TMCC has seven wholly-owned subsidiaries, Toyota Motor Insurance Services,      
Inc. ("TMIS"), Toyota Motor Insurance Corporation of Vermont ("TMICV"), Toyota  
Motor Insurance Company ("TMIC"), Toyota Motor Life Insurance Company           
("TLIC"), Toyota Motor Credit Receivables Corporation ("TMCRC"), Toyota         
Leasing, Inc. ("TLI") and Toyota Credit De Puerto Rico Corp. ("TCPR").  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 in connection with the   
sale and lease of vehicles.  In addition, the insurance subsidiaries insure     
and reinsure certain TMS and TMCC risks.  TMCRC, a limited purpose subsidiary,  
operates primarily to acquire retail finance receivables from TMCC for the      
purpose of securitizing such receivables.  TLI, a limited purpose subsidiary,   
was formed in April 1997 primarily to acquire lease finance receivables from    
TMCC for the purpose of securitizing such leases.  TCPR was established in      
January 1996 to provide retail and wholesale financing and certain other        
financial services to authorized Toyota and Lexus vehicle dealers and their     
customers in Puerto Rico; TCPR commenced operations in October 1996.            

The Company's business is substantially dependent upon the sale of Toyota and   
Lexus vehicles in the United States.  Changes in the volume of sales of such    
vehicles resulting from governmental action, changes in consumer demand,        
changes in pricing of imported units due to currency fluctuations, or other     
events could impact the level of finance and insurance operations of the        
Company.                                                                        

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

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

Use of Estimates                                                    
----------------                                                    

The preparation of financial statements in conformity with generally accepted   
accounting principles requires management to make estimates and assumptions     
that affect the reported amounts of assets and liabilities and disclosure of    
contingent assets and liabilities at the date of the financial statements and   
the reported amounts of revenues and expenses during the reporting period.      
Actual results could differ from those estimates.                               

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.                                                  

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 and debt     
securities, 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 designated as held-to-maturity are carried at amortized cost    
and are reduced to net realizable value for other than temporary declines in    
market value.  Debt and equity securities designated as available-for-sale are  
carried at fair value with unrealized gains or losses included in               
shareholder's equity, net of applicable taxes.  Realized investment gains and   
losses, which are determined on the specific identification method, are         
reflected in income.                                                            

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

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

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

TMCC acquires retail leases from Toyota and Lexus vehicle and Toyota            
industrial equipment dealers.  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.  Gains or losses on disposal and adjustments   
to the residual value of underlying assets are also included in depreciation    
expense.                                                                        

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

Allowances for credit losses are established during the period in which         
receivables are acquired and are maintained in amounts considered by            
management to be appropriate in relation to receivables outstanding based upon  
historical loss experience and other factors.  Losses are charged to the        
allowance for credit losses when it has been determined that collateral cannot  
be recovered and any shortfall between proceeds received and the carrying cost  
of repossessed collateral is charged to the allowance.  Recoveries are          
credited to the allowance for credit losses.                                    

Allowance for Residual Value Losses                                   
-----------------------------------                                   

Allowances for estimated losses on lease vehicles returned to TMCC for          
disposition at lease termination are established based upon projected vehicle   
return rates and projected residual value losses on core models derived from    
available historical and market information as well as general economic         
factors.  The provision for residual value losses is included in depreciation   
expense for operating leases and in leasing revenues for direct finance         
leases.  Effective January 1997, and at each subsequent quarter end, TMCC       
reevaluated amounts provided for its allowance for estimated residual value     
losses based on recent vehicle return rates and loss experience which resulted  
in increased depreciation expense of $9.7 million and decreased leasing         
revenues of $2.4 million for a combined decrease in net financing revenues of   
$12.1 million for the nine months ended September 30, 1997.                     

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

Deferred charges consist primarily of premiums paid for option-based products,  
underwriters' commissions and other debt issuance costs  which are amortized    
to interest expense over the life of the related instruments on a straight-     
line basis.                                                                     

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

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

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 primarily of commissions and premium taxes,  
are deferred and amortized over the terms of the related policies on the same   
basis as revenues are earned.  The liability for reported losses and the        
estimate of unreported losses are recorded in accounts payable and accrued      
expenses.  Commission and fee income are recognized in relation to the level    
of services performed.                                                          

Derivative Financial Instruments                                      
--------------------------------                                      

TMCC uses a variety of derivative financial instruments to manage funding       
costs and risks associated with changes in interest and foreign currency        
exchange rates.  The derivative instruments used include interest rate, cross   
currency interest rate and indexed note swap agreements and option-based        
products.  TMCC does not use any of these instruments for trading purposes.     
The derivative financial instruments are specifically designated to the         
underlying debt obligations or to portfolio level risks.  Cash flows related    
to these instruments are classified in the same categories as cash flows from   
related borrowing activities.                                                   

Interest Rate Swap Agreements                               
-----------------------------                               
Interest rate swap agreements are executed as an integral part of specific      
debt transactions or on a portfolio basis.  The differential paid or received   
on interest rate swap agreements is recorded on an accrual basis as an          
adjustment to interest expense over the term of the agreements.                 

Cross Currency Interest Rate Swap Agreements                
--------------------------------------------                
Cross currency interest rate swap agreements are executed as an integral part   
of foreign currency debt transactions.  The differential between the contract   
rates and the foreign currency spot exchange rates as of the reporting dates    
is classified in other receivables or accounts payable and accrued expenses;    
the differential paid or received on the interest rate swap portion of the      
agreements is recorded on an accrual basis as an adjustment to interest         
expense over the term of the agreements.                                        

Indexed Note Swap Agreements                                
----------------------------                                
Indexed note swap agreements are executed as an integral part of indexed note   
transactions.  Any differential between contract rates and foreign currency     
spot exchange rates as of the reporting dates is classified in other            
receivables or accounts payable and accrued expenses; the interest              
differential paid or received on indexed note swap agreements is recorded on    
an accrual basis as an adjustment to interest expense over the term of the      
agreements.                                                                     

Option-Based Products                                       
---------------------                                       
Option-based products are executed on a portfolio basis.  Premiums paid for     
option-based products are included in deferred charges and are amortized to     
interest expense over the life of the instruments on a straight-line basis.     
Amounts receivable under option-based products are recorded on an accrual       
basis as a reduction to interest expense.                                       

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

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

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

TMCC uses the liability method of accounting for income taxes under which       
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 provision for income taxes.                             

The Company joins with TMS in filing consolidated federal income tax returns    
and combined or consolidated income tax returns in certain states.  Federal     
and state income tax expense is generally recognized as if the Company filed    
its tax returns on a stand alone basis.  In those states where TMCC joins in    
the filing of consolidated or combined income tax returns, TMCC is allocated    
its share of the total income tax expense based on the Company's income or      
loss which would be allocable to such states if the Company filed separate      
returns.  Based on an informal tax sharing agreement with TMS and other         
members of the TMS group, the Company pays TMS for its share of the             
consolidated federal and consolidated or combined state income tax expense and  
is reimbursed for the benefit of any of its tax basis losses utilized in the    
consolidated federal and consolidated or combined state income tax returns.     

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

Certain 1996 and 1995 amounts have been reclassified to conform with the 1997   
presentation.                                                                   

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 3 - Investments in Marketable Securities                                   
---------------------------------------------                                   

TMCC records its investments in marketable securities which are designated as   
available-for-sale at fair value estimated using quoted market prices or        
discounted cash flow analysis.  Unrealized gains, net of income taxes, related  
to available-for-sale securities are included as a separate component of        
shareholder's equity.  Securities designated as held-to-maturity are recorded   
at amortized cost.                                                              

The estimated fair value and amortized cost of investments in marketable        
securities are as follows:                                                      

                                                                · Download Table

                                                September 30, 1997     
                                            ---------------------------
                                                                Gross  
                                                    Fair     Unrealized
                                            Cost    Value       Gains  
                                            ----    -----    ----------
                                               (Dollars in Millions)   
                                                                       
Available-for-sale securities:                                         
   Equity securities...................     $ 50     $ 58           $ 8
   Asset-backed securities.............      161      164             3
   U.S. debt securities................       46       46             -
   Corporate debt securities...........       21       21             -
                                            ----     ----           ---
Total available-for-sale securities....     $278     $289           $11
                                                                    ===
Held-to-maturity securities:                                           
   U.S. debt securities................       16       16              
                                            ----     ----              
Total marketable securities............     $294     $305              
                                            ====     ====              

                                                                · Download Table

                                                September 30, 1996     
                                            ---------------------------
                                                                Gross  
                                                    Fair     Unrealized
                                            Cost    Value       Gains  
                                            ----    -----    ----------
                                               (Dollars in Millions)   
                                                                       
Available-for-sale securities:                                         
   Equity securities...................     $133     $135           $ 2
   Asset-backed securities.............      206      207             1
   U.S. debt securities................        2        2             -
                                            ----     ----           ---
Total available-for-sale securities....     $341     $344           $ 3
                                                                    ===
Held-to-maturity securities:                                           
   U.S. debt securities................       11       11              
                                            ----     ----              
Total marketable securities............     $352     $355              
                                            ====     ====              

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 3 - Investments in Marketable Securities (Continued)                       
---------------------------------------------                                   

The contractual maturities of investments in marketable securities at           
September 30, 1997 are as follows:                                              

                                                                · Download Table

                                       Available-for-Sale    Held-to-Maturity
                                          Securities            Securities   
                                       ------------------    ----------------
                                                    Fair                Fair 
                                       Cost         Value    Cost       Value
                                       ----         -----    ----       -----
                                                  (Dollars in Millions)      
                                                                             
Within one year......................  $  -          $  -    $ 12       $  12
After one year through five years....    21            21       4           4
After five years through ten years...    29            29       -           -
After ten years......................    17            17       -           -
Mutual funds.........................    50            58       -           -
Asset-backed securities..............   161           164       -           -
                                       ----          ----     ---         ---
   Total.............................  $278          $289    $ 16       $  16
                                       ====          ====    ====       =====

The proceeds from sales of available-for-sale securities were $416 million and  
$3 million for the years ended September 30, 1997 and 1996, respectively.       
Realized gains and losses on sales of available-for-sale securities were        
$5 million and $2 million, respectively, for the year ended September 30,       
1997, and were immaterial for the years ended September 30, 1996 and 1995.      

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 4 - Investments in Operating Leases                                        
----------------------------------------                                        

Investments in operating leases, net consisted of the following:    

                                                                · Download Table
                                                                           
                                                                     
                                                   September 30,     
                                              ---------------------- 
                                               1997            1996  
                                              -------        ------- 
                                               (Dollars in Millions) 
                                                                     
Vehicles.................................     $12,557        $13,252 
Equipment and other......................         338            268 
                                              -------        ------- 
                                               12,895         13,520 
Accumulated depreciation.................      (2,535)        (2,582)
Allowance for credit losses..............        (103)          (107)
                                              -------        ------- 
   Investments in operating leases, net..     $10,257        $10,831 
                                              =======        ======= 
                                                                          
Rental income from operating leases was $2,568 million, $2,292 million and      
$1,734 million for the years ended September 30, 1997, 1996 and 1995,           
respectively.  Future minimum rentals on operating leases for each of the five  
succeeding years ending September 30, are:  1998 - $1,873 million; 1999 -       
$1,114 million; 2000 - $366 million; 2001 - $42 million; and 2002 -             
$4 million.  A substantial portion of TMCC's operating lease contracts have     
historically been terminated prior to maturity; future minimum rentals as       
shown above should not be considered as necessarily indicative of future cash   
collections.                                                                    

Note 5 - Finance Receivables                                                    
----------------------------                                                    

Finance receivables, net consisted of the following:                            

                                                                · Download Table

                                                   September 30,     
                                               --------------------- 
                                                1997           1996  
                                               ------         ------ 
                                               (Dollars in Millions) 
                                                                     
Retail...............................          $6,315         $5,501 
Finance leases.......................           1,938          1,536 
Wholesale and other dealer loans.....             885          1,015 
                                               ------         ------ 
                                                9,138          8,052 
Unearned income......................            (576)          (482)
Allowance for credit losses..........            (110)           (96)
                                               ------         ------ 
   Finance receivables, net..........          $8,452         $7,474 
                                               ======         ====== 
                                                                          
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TOYOTA MOTOR CREDIT CORPORATION   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 5 - Finance Receivables (Continued)                                        
----------------------------                                                    

Contractual maturities are as follows:                                          

                                                                · Download Table

 Due in the                                    Wholesale  
Years Ending                                   and Other  
September 30,                   Retail        Dealer Loans
-------------                   ------        ------------
                                  (Dollars in Millions)   
                                                          
1998..................          $1,907              $  671
1999..................           1,639                  37
2000..................           1,443                  54
2001..................             949                  61
2002..................             358                  50
Thereafter............              19                  12
                                ------              ------
   Total..............          $6,315              $  885
                                ======              ======

Finance leases, net consisted of the following:                                 

                                                                · Download Table

                                                    September 30,     
                                                --------------------- 
                                                 1997           1996  
                                                ------         ------ 
                                                (Dollars in Millions) 
                                                                      
Minimum lease payments..................        $1,260         $  878 
Estimated unguaranteed residual values..           678            658 
                                                ------         ------ 
   Finance leases.......................         1,938          1,536 
Unearned income.........................          (336)          (270)
Allowance for credit losses.............           (24)           (19)
                                                ------         ------ 
   Finance leases, net..................        $1,578         $1,247 
                                                ======         ====== 

The aggregate balances related to finance receivables 60 or more days past due  
totaled $17 million and $20 million at September 30, 1997 and 1996,             
respectively.  Future minimum finance lease payments for each of the five       
succeeding years ending September 30, are:  1998 - $374 million; 1999 -         
$329 million; 2000 - $305 million; 2001 - $174 million and 2002 - $78 million.  
A substantial portion of TMCC's finance receivables have historically been      
repaid prior to contractual maturity dates; 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 do not involve recourse to the dealer in the event of         
customer default.                                                               

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TOYOTA MOTOR CREDIT CORPORATION   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

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

An analysis of the allowance for credit losses follows:               

                                                                · Download Table
                                                                              
                                                                         
                                               Years ended September 30, 
                                              -------------------------- 
                                              1997       1996       1995 
                                              ----       ----       ---- 
                                                (Dollars in Millions)    
                                                                         
Allowance for credit losses                                              
   at beginning of period...........          $203       $171       $164 
Provision for credit losses.........           136        115         66 
Charge-offs.........................          (116)       (81)       (63)
Recoveries..........................            12         12         12 
Other adjustments...................           (22)       (14)        (8)
                                              ----       ----       ---- 

Allowance for credit losses                                              
   at end of period.................          $213       $203       $171 
                                              ====       ====       ==== 
                                                                           
Note 7 - Sale of Retail Receivables and Interests in Lease Finance Receivables  
------------------------------------------------------------------------------  

Effective January 1, 1997, TMCC adopted Statement of Financial Accounting       
Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of          
Financial Assets and Extinguishments of Liabilities."  SFAS No. 125 addresses   
the accounting for transfers and servicing of financial assets and              
extinguishments of liabilities occurring after December 31, 1996 and the        
accounting for and classification of previously recognized excess servicing     
assets.  In accordance with the requirements of this statement, the Company     
has reclassified its previously recognized excess servicing receivables from    
other receivables to investments in marketable securities for all balance       
sheet periods presented.                                                        

In April 1997, and July 1996, TMCC sold retail finance receivables totaling     
$784 million and $782 million, respectively, to TMCRC which in turn sold them   
to a trust; TMCC continues to act as servicer and is paid a servicing fee.      
TMCC holds an undivided trust interest ("UTI") in leases held in a titling      
trust established by TMCC. In September 1997, TMCC identified certain leases    
included in the UTI to be allocated to a separate portfolio represented by a    
special unit of beneficial interest ("SUBI") totaling $1,283 million and sold   
the SUBI to TLI.  TLI in turn contributed substantially all of the SUBI to a    
trust; TMCC continues to act as servicer for all assets represented by the UTI  
and the SUBI and is paid a servicing fee.  TMCRC and TLI retain subordinated    
interests in the excess cash flows of these transactions, certain cash          
deposits and other related amounts which are held as restricted assets subject  
to limited recourse provisions.  None of the retail finance receivables sold    
to TMCRC, the lease assets represented by the SUBI or the restricted assets     
are available to satisfy any obligations of TMCC.                               

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 7 - Sale of Retail Receivables and Interests in Lease Finance Receivables  
------------------------------------------------------------------------------  
(Continued)                                                     

Following is a summary of amounts included in investment in marketable          
securities and other receivables:                                               

                                                                · Download Table

                                                   September 30,     
                                               --------------------- 
                                               1997             1996 
                                               ----             ---- 
                                               (Dollars in Millions) 
                                                                     
Investment in marketable securities                                  
   Excess servicing....................        $ 77             $ 35 
   Allowance for estimated credit and                                
     residual value losses on sold                                   
     receivables.......................         (28)              (5)
                                               ----             ---- 
       Total...........................        $ 49             $ 30 
                                               ====             ==== 
Other receivables                                                    
   Cash deposits.......................        $ 51             $ 20 
   Undivided interest in trust.........          24                2 
                                               ----             ---- 
       Total...........................        $ 75             $ 22 
                                               ====             ==== 

The pretax gain resulting from the sale of retail receivables and interests in  
lease finance receivables totaled $23 million and $15 million in fiscal 1997    
and 1996, respectively, after providing for an allowance for estimated credit   
and residual value losses.                                                      

The outstanding balance of sold retail finance receivables which TMCC           
continues to service at September 30, 1997 and 1996 totaled $1.1 billion for    
both periods.  The outstanding balance of the lease finance receivables         
represented by the sold SUBI which TMCC continues to service at September 30,   
1997 totaled $1.3 billion.                                                      

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TOYOTA MOTOR CREDIT CORPORATION       
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 8 - 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 and that 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 1.10 times such charges in any fiscal      
quarter.  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.  The Operating Agreement does not            
constitute a guarantee by TMS of any obligations of TMCC.                       

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 $12 million,      
$12 million and $8 million for the years ended September 30, 1997, 1996 and     
1995, respectively.  In addition, TMS sponsors special retail and lease         
programs offered by TMCC; for the years ended September 30, 1997, 1996 and      
1995, TMCC recognized revenue of $174 million, $174 million and $134 million,   
respectively, related to TMS sponsored programs.                                

TMCC has an arrangement to borrow and invest funds with TMS at short term       
market rates.  For the years ended September 30, 1997 and 1996, TMCC did not    
borrow from TMS.  For the year ended September 30, 1995, the highest amount of  
borrowings from TMS was $34 million; interest charges related to these          
borrowings were immaterial.  The Operating Agreement provides that borrowings   
from TMS are subordinated to all other indebtedness of TMCC.  For the years     
ended September 30, 1997, 1996 and 1995, the highest amounts of funds invested  
with TMS were $817 million, $224 million and $603 million, respectively;        
interest earned on these investments totaled $5 million, $5 million and         
$16 million for the years ended September 30, 1997, 1996 and 1995,              
respectively.                                                                   

The Company leases its headquarters facility from TMS; rent expense paid to     
TMS for this facility totaled $3 million for each of the years ended            
September 30, 1997, 1996 and 1995.  TMCC leases a corporate aircraft to TMS     
and provides wholesale financing for TMS affiliates; TMCC recognized revenue    
related to these arrangements of $5 million, $3 million and $3 million for the  
years ended September 30, 1997, 1996 and 1995, respectively.                    

TMIS and TMICV provide certain insurance services, and insurance and            
reinsurance coverages, respectively, to TMS. Premiums, commissions and fees     
earned on these services for the years ended September 30, 1997, 1996 and 1995  
totaled $12 million, $7 million and $4 million, respectively.                   

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 9 - Notes and Loans Payable                                                
--------------------------------                                                

Notes and loans payable at September 30, 1997 and 1996, which consisted of      
senior debt, included the following:                                            

                                                                · Download Table

                                                   September 30,    
                                              ----------------------
                                                1997           1996 
                                              -------        -------
                                               (Dollars in Millions)
                                                                    
Commercial paper, net...................       $1,512        $ 2,360
                                              -------        -------
Other senior debt, due in the years                                 
   ending September 30,:                                            
      1997..............................            -          3,211
      1998..............................        2,868          2,760
      1999..............................        1,324          1,384
      2000..............................        2,505          2,137
      2001..............................        2,154          2,216
      2002..............................        2,660            491
      Thereafter........................        1,606            373
                                              -------        -------
                                               13,117         12,572
Unamortized premium.....................          116             82
                                              -------        -------
      Total other senior debt...........       13,233         12,654
                                              -------        -------
         Notes and loans payable........      $14,745        $15,014
                                              =======        =======

Short-term borrowings include commercial paper and certain medium-term notes    
("MTNs").  The weighted average remaining term of commercial paper was 23 days  
and 31 days at September 30, 1997 and 1996, respectively.  The weighted         
average interest rate on commercial paper was 5.58% and 5.41% at September 30,  
1997 and 1996, respectively.  Short-term MTNs with original terms of one year   
or less, included in other senior debt, were $221 million and $559 million at   
September 30, 1997 and 1996, respectively.  The weighted average interest rate  
on these short-term MTNs was 5.46% and 5.19% at September 30, 1997 and 1996,    
respectively, including the effect of interest rate swap agreements.            

The weighted average interest rate on other senior debt was 5.85% and 5.98% at  
September 30, 1997 and 1996, respectively, including the effect of interest     
rate swap agreements and option-based products. The rates have been calculated  
using rates in effect at September 30, 1997 and 1996, some of which are         
floating rates that reset daily.  Approximately 8% of other senior debt at      
September 30, 1997 had interest rates, including the effect of interest rate    
swap agreements, that were fixed for  a period  of more  than  one year.  The   
weighted average of these fixed interest rates was 5.89% at September 30,       
1997.  Approximately 40% of other senior debt at September 30, 1997 had         
floating interest rates that were covered by option-based products. The         
weighted average strike rate on these option-based products was 6.02% at        
September 30, 1997.  TMCC manages interest rate risk via continuous adjustment  
of the mix of fixed and floating rate debt through use of interest rate swap    
agreements and option-based products.                                           

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 9 - Notes and Loans Payable (Continued)                                    
--------------------------------                                                

Included in notes and loans payable at September 30, 1997 and 1996 were         
unsecured notes denominated in various foreign currencies as follows:           

                                                                · Download Table
                                                                             
                                                                        

                                                  September 30,         
                                          ------------------------------
                                             1997                1996   
                                          -----------        -----------
                                                (Amounts in Millions)   
                                                                        
Australian dollar...................              250                250
British pound sterling..............              150                150
Canadian dollar.....................              300                300
Czech koruna........................            2,000                  -
Danish kroner.......................              400                  -
Dutch guilder.......................              500                555
French franc........................            1,545              2,545
German deutsche mark................            2,772              1,052
Hong Kong dollar....................              150                150
Italian lire........................          927,300            493,300
Japanese yen........................          187,502            197,699
Luxembourg franc....................            2,000                  -
New Zealand dollar..................              200                100
South African rand..................              400                250
Swedish kronor......................              670                670
Swiss franc.........................            1,950              1,940

                                                                           
Concurrent with the issuance of these unsecured notes, TMCC entered into cross  
currency interest rate swap agreements to convert these obligations at          
maturity into U.S. dollar obligations which in aggregate total a principal      
amount of $6.8 billion at September 30, 1997.  TMCC's foreign currency debt     
was translated into U.S. dollars in the financial statements at the various     
foreign currency spot exchange rates in effect at September 30, 1997.  The      
receivables or payables arising as a result of the differences between the      
September 30, 1997 foreign currency spot exchange rates and the contract rates  
applicable to the cross currency interest rate swap agreements are classified   
in other receivables or accounts payable and accrued expenses, respectively,    
and would in aggregate total a net payable position of $791 million at          
September 30, 1997.                                                             

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 10 - Fair Value of Financial Instruments                                   
---------------------------------------------                                   

The fair value of financial instruments at September 30, 1997 and 1996, was     
estimated using the valuation methodologies described below.  Considerable      
judgement was employed in interpreting market data to develop 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   
could have a material effect on the estimated fair value amounts.               

The carrying amounts and estimated fair values of the Company's financial       
instruments at September 30, 1997 and 1996 are as follows:                      

                                                        · Enlarge/Download Table


                                                         September 30,                   
                                      ---------------------------------------------------
                                               1997                        1996          
                                      ------------------------   ------------------------
                                       Carrying       Fair        Carrying       Fair    
                                        Amount        Value        Amount        Value   
                                      -----------   ----------   -----------   ----------
                                                     (Dollars in Millions)               
                                                                                         
Balance sheet financial                                                                  
   instruments:                                                                          

Assets:                                                                                  

Cash and cash equivalents...........    $177           $177         $170          $170   
Investments in marketable                                                                
   securities.......................    $305           $305         $355          $355   
Retail finance receivables, net.....  $6,875         $6,724       $6,228        $6,121   
Other receivables...................    $121           $121          $48           $49   
Receivables from cross currency                                                          
   interest rate swap agreements....     $10            $20         $116          $152   

Liabilities:                                                                             

Notes and loans payable............. $14,745        $15,290      $15,014       $15,398   
Payables from cross currency                                                             
   interest rate swap agreements....    $801           $543         $287          $108   
Other payables......................    $271           $271         $187          $187   


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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 10 - Fair Value of Financial Instruments (Continued)                       
---------------------------------------------                                   

                                                                · Download Table

                                            September 30,                    
                           ------------------------------------------------- 
                                     1997                      1996          
                           -----------------------  ------------------------ 
                           Contract or  Unrealized   Contract or  Unrealized 
                            Notional      Gains/      Notional      Gains/   
                             Amount      (Losses)      Amount      (Losses)  
                           -----------  ----------   -----------  ---------- 
                                          (Dollars in Millions)              
                                                                             
Off-balance sheet                                                            
   financial instruments:                                                    

Cross currency interest                                                      
   rate swap agreements.....   $6,534        $(491)       $5,642         $72 
Interest rate swap                                                           
   agreements...............   $6,318         $127        $6,759         $37 
Option-based products.......   $5,600          $16        $6,220         $26 
Indexed note swap                                                            
   agreements...............   $2,340          $(1)       $1,924        $(37)


The fair value estimates presented herein are based on information available    
to management as of September 30, 1997 and 1996.  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, 1997 and 1996 and,            
therefore, current estimates of fair value may differ significantly from the    
amounts presented herein.                                                       

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 or discounted cash flow analysis.                                        

Retail Finance Receivables                                          
--------------------------                                          

The carrying amounts of $800 million and $900 million of variable rate finance  
receivables at September 30, 1997 and 1996, respectively, were assumed to       
approximate fair value as these receivables reprice at prevailing market        
rates.  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 originated as of September 30, 1997 and    
1996.                                                                           

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 10 - Fair Value of Financial Instruments (Continued)                       
---------------------------------------------                                   

Other Receivables and Other Payables                                
------------------------------------                                

The carrying amount and fair value of other receivables and other payables are  
presented separately from the receivables and payables arising from cross       
currency interest rate swap agreements.  The fair value of amounts associated   
with the sale of finance receivables was estimated by discounting expected      
cash flows using quoted market interest rates as of September 30, 1997 and      
1996.  The carrying amount of the remaining other receivables and payables      
approximate market value due to the short maturity of these instruments.        

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

The fair value of notes and loans payable was estimated by discounting          
expected cash flows using the interest rates at which debt of similar credit    
quality and maturity would be issued as of September 30, 1997 and 1996.  The    
carrying amount of commercial paper was assumed to approximate fair value due   
to the short maturity of these instruments.                                     

Cross Currency Interest Rate Swap Agreements                        
--------------------------------------------                        

The estimated fair value of TMCC's outstanding cross currency interest rate     
swap agreements was derived by discounting expected cash flows using quoted     
market exchange rates and quoted market interest rates as of September 30,      
1997 and 1996.                                                                  

Interest Rate Swap Agreements                                       
-----------------------------                                       

The estimated fair value of TMCC's outstanding interest rate swap agreements    
was derived by discounting expected cash flows using quoted market interest     
rates as of September 30, 1997 and 1996.                                        

Option-based Products                                               
-----------------------                                             

The estimated fair value of TMCC's outstanding option-based products was        
derived by discounting expected cash flows using market exchange rates and      
market interest rates as of September 30, 1997 and 1996.                        

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

The estimated fair value of TMCC's outstanding indexed note swap agreements     
was derived using quoted market prices as of September 30, 1997 and 1996.       

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 11 - 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 $1,163 million and $1,119 million at               
September 30, 1997 and 1996, respectively.  Security interests are acquired in  
vehicles and equipment financed and substantially all such financings are       
backed by corporate or individual guarantees from or on behalf of the           
participating dealers.                                                          

Derivative Financial Instruments                                                
--------------------------------                                                

TMCC utilizes a variety of derivative financial instruments to manage its       
currency exchange rate risk arising as a result of borrowings denominated in    
foreign currencies and its interest rate risk as explained in this note.  TMCC  
does not enter into these arrangements for trading purposes.                    

A reconciliation of the activity of TMCC's derivative financial instruments     
for the years ended September 30, 1997 and 1996 is as follows:                  

                                                        · Enlarge/Download Table


                                                       September 30,                         
                             ----------------------------------------------------------------
                                Cross                                                        
                               Currency                                                      
                               Interest         Interest                           Indexed   
                              Rate Swap        Rate Swap       Option-based       Note Swap  
                              Agreements       Agreements        Products         Agreements 
                             ------------     ------------     -------------     ------------
                             1997    1996     1997    1996     1997     1996     1997    1996
                             ----    ----     ----    ----     ----     ----     ----    ----
                                                (Dollars in Billions)                        
                                                                                             
Beginning Notional Amount... $5.6    $4.8     $6.8    $7.1     $6.2     $3.8     $1.9    $1.7

Add:                                                                                         
   New agreements...........  2.0     1.7      2.0     3.1      2.6      3.4      1.0     1.2

Less:                                                                                        
   Expired agreements.......  1.1     0.9      2.5     3.4      3.2      1.0      0.5     1.0
                             ----    ----     ----    ----     ----     ----     ----    ----
Ending Notional Amount...... $6.5    $5.6     $6.3    $6.8     $5.6     $6.2     $2.4    $1.9
                             ====    ====     ====    ====     ====     ====     ====    ====

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued)         
-----------------------------------------------------------                     

Interest Rate Risk Management                                                   
-----------------------------                                                   

TMCC utilizes interest rate swap agreements in managing its exposure to         
interest rate fluctuations.  Interest rate swap agreements are executed as an   
integral part of specific debt transactions or on a portfolio basis. TMCC's     
interest rate swap 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 swap    
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.  The      
original maturities of interest rate swap agreements ranged from one to seven   
years at September 30, 1997.                                                    

TMCC also utilizes option-based products in managing its exposure to interest   
rate fluctuations.  Option-based products are executed on a portfolio basis     
and consist primarily of purchased interest rate cap agreements.  Option-based  
products are agreements which either grant TMCC the right to receive or         
require TMCC to make payments at specified interest rate levels.                
Approximately 40% of TMCC's other senior debt at September 30, 1997 had         
floating interest rates that were covered by option-based products which had    
an average strike rate of 6.02%.  The premiums paid for option-based products   
are included in deferred charges and are amortized to interest expense over     
the life of the instruments on a straight-line basis.  Amounts receivable       
under option-based products are recorded as a reduction to interest expense.    
The original maturities of option-based products ranged from two to three       
years at September 30, 1997.                                                    

The aggregate notional amounts of interest rate swap agreements and option-     
based products outstanding at September 30, 1997 and 1996 were as follows:      

                                                                · Download Table
                                                                             
                                                                        
                                                       September 30,    
                                                   ---------------------
                                                   1997             1996
                                                   ----             ----
                                                   (Dollars in Billions)
                                                                        
Fixed rate swaps...............................    $1.5             $2.3

Floating rate swaps............................     4.1              3.1

Basis swaps....................................     0.7              1.4
                                                   ----             ----

    Total interest rate swap agreements........    $6.3             $6.8
                                                   ====             ====

Option-based products..........................    $5.6             $6.2
                                                   ====             ====
                                                                         

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued)         
-----------------------------------------------------------                     

Interest Rate Risk Management (Continued)                                       
-----------------------------                                                   

TMCC utilizes indexed note swap agreements in managing its exposure in          
connection with 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.  At September 30, 1997, TMCC was the counterparty to $2.4 billion  
of indexed note swap agreements, of which $0.3 billion was denominated in       
foreign currencies and $2.1 billion was denominated in U.S. dollars.  At        
September 30, 1996, TMCC was the counterparty to $1.9 billion of indexed note   
swap agreements, of which $0.6 billion was denominated in foreign currencies    
and $1.3 billion was denominated in U.S. dollars.  The original maturities of   
indexed note swap agreements ranged from one to eleven years at September 30,   
1997.                                                                           

The notional amounts of interest rate and indexed note swap agreements and      
option-based products do not represent amounts exchanged by the parties and,    
thus, are not a measure of the Company's exposure through its use of            
derivatives.  The amounts exchanged are calculated based on the notional        
amounts and other terms of the derivatives which relate to interest rates or    
financial or other indexes.                                                     

Foreign Exchange Risk Management                                                
--------------------------------                                                

TMCC utilizes cross currency interest rate swap 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 cross currency        
interest rate swap agreements which involve the exchange of foreign currency    
principal and interest obligations for U.S. dollar obligations at agreed-upon   
currency exchange and interest rates.  The aggregate notional amounts of cross  
currency interest rate swap agreements at September 30, 1997 and 1996 were      
$6.5 billion and $5.6 billion, respectively.  The original maturities of cross  
currency interest rate swap agreements ranged from one to seven years at        
September 30, 1997.                                                             

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TOYOTA MOTOR CREDIT CORPORATION         
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued)         
-----------------------------------------------------------                     

Credit Risk Management                                                          
----------------------                                                          

TMCC manages the risk of counterparty default through the use of credit         
standard guidelines, counterparty diversification and monitoring of             
counterparty financial condition.  At September 30, 1997, approximately 90% of  
TMCC's derivative financial instruments, based on notional amounts, were with   
commercial banks and investment banking firms assigned investment grade         
ratings of "AA" or better by national rating agencies.  TMCC does not           
anticipate non-performance by any of its counterparties and has no reserves     
related to non-performance as of September 30, 1997; TMCC has not experienced   
any counterparty default during the three years ended September 30, 1997.       
Additionally, TMCC's loss in the event of counterparty default is partially     
mitigated as a result of master netting agreements in place with all            
derivative counterparties which allow the net difference between TMCC and each  
counterparty to be exchanged in the event of default.                           

Credit exposure of derivative financial instruments is represented by the fair  
value of contracts with a positive fair value at September 30, 1997 reduced by  
the effects of master netting agreements. The credit exposure of TMCC's         
derivative financial instruments at September 30, 1997 was $39 million on an    
aggregate notional amount of $20.8 billion.                                     

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 12 - 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, 1997, 1996 and 1995, the           
Company's pension expense was $4 million, $4 million and $2 million,            
respectively.  At September 30, 1997, 1996 and 1995, 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.                                                                       

Note 13 - Provision for Income Taxes                                            
------------------------------------                                            

The provision for income taxes consisted of the following:            

                                                                · Download Table
                                                                          
                                                                     
                                           Years ended September 30, 
                                          -------------------------- 
                                          1997       1996       1995 
                                          ----       ----       ---- 
                                             (Dollars in Millions)   
                                                                     
Current                                                              
   Federal...........................     $(14)      $(47)      $(97)
   State.............................      (14)       (23)       (27)
                                          ----       ----       ---- 
      Total current .................      (28)       (70)      (124)
                                          ----       ----       ---- 
Deferred                                                             
   Federal...........................      109        129        173 
   State.............................       40         49         68 
                                          ----       ----       ---- 
      Total deferred.................      149        178        241 
                                          ----       ----       ---- 
         Provision for income taxes..     $121       $108       $117 
                                          ====       ====       ==== 
                                                                           
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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 13 - Provision for Income Taxes (Continued)                                
------------------------------------                                            

The deferred federal and state income tax liabilities are as follows:           

                                                                · Download Table
                                                                           
                                                                      
                                                     September 30,    
                                                 ---------------------
                                                 1997             1996
                                                 ----             ----
                                                 (Dollars in Millions)
                                                                      
Federal........................................  $831             $643
State..........................................   123              162
                                                 ----             ----
   Net deferred income tax liability...........  $954             $805
                                                 ====             ====
                                                                           
The Company's deferred tax assets and liabilities consisted of the following:   

                                                                · Download Table
                                                                            
                                                                       
                                                      September 30,    
                                                  ---------------------
                                                  1997             1996
                                                  -----           -----
                                                  (Dollars in Millions)
                                                                       
Assets:                                                                
   Alternative minimum tax.....................   $ 472           $ 436
   Provision for losses........................     148             116
   Deferred administrative fees................      63              54
   NOL carryforwards...........................      56              49
   Deferred acquisition costs..................       8              12
   Unearned insurance premiums.................       3               4
   Revenue recognition.........................       3               2
   Other.......................................       -               3
                                                  -----           -----
      Deferred tax assets......................     753             676
                                                  -----           -----
Liabilities:                                                           
   Lease transactions..........................   1,511           1,330
   State taxes.................................     190             151
   Other.......................................       6               -
                                                  -----           -----
      Deferred tax liabilities.................   1,707           1,481
                                                  -----           -----
      Valuation allowance......................       -               -
                                                  -----           -----
         Net deferred income tax liability.....   $ 954           $ 805
                                                  =====           =====
                                                                           
TMCC has state tax net operating loss carryforwards of $756 million which       
expire beginning in fiscal 1998 through 2010.                                   

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 13 - 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:                                                   

                                                                · Download Table
                                                                          
                                                                    
                                          Years ended September 30, 
                                          ------------------------- 
                                          1997      1996       1995 
                                          ----      ----       ---- 
                                            (Dollars in Millions)   
                                                                    
Provision for income taxes at                                       
   federal statutory tax rate.........    $ 99      $ 91       $105 
State and local taxes (net of                                       
   federal tax benefit)...............      17        17         26 
Other, including changes in                                         
   applicable state tax rates.........       5         -        (14)
                                          ----      ----       ---- 
   Provision for income taxes.........    $121      $108       $117 
                                          ====      ====       ==== 

Effective tax rate....................   42.69%    41.52%     39.12%

                                                                          
Note 14 - Lines of Credit/Standby Letters of Credit                             
---------------------------------------------------                             

To support its commercial paper program, TMCC maintains syndicated bank credit  
facilities with certain banks which aggregated $2.0 billion at                  
September 30, 1997 and 1996. No loans were outstanding under any of these bank  
credit facilities as of September 30, 1997 or 1996.                             

To facilitate and maintain letters of credit, TMCC maintains, along with TMS,   
uncommitted, unsecured lines of credit with banks totaling $250 million as of   
September 30, 1997.  Approximately $24 million in letters of credit had been    
issued, primarily related to the Company's insurance operations as of           
September 30, 1997, compared to $44 million as of September 30, 1996.  The      
letters of credit for the insurance companies are used to satisfy requirements  
of certain insurance carriers and state insurance regulatory agencies.          

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 15 - Commitments and Contingent Liabilities                                
------------------------------------------------                                

At September 30, 1997, the Company was a lessee under lease agreements for      
facilities with minimum future commitments as follows:  years ending            
September 30, 1998 - $9 million; 1999 - $7 million; 2000 - $4 million; 2001 -   
$3 million; 2002 - $2 million; thereafter - $1 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.                                                       

TMCC has guaranteed the obligations of TMIS relating to vehicle service         
insurance agreements issued on or after July 1, 1997, in the Commonwealth of    
Virginia.  This guarantee has been given without regard to any security and     
without any limitation as to duration or amount.  TMCC has also guaranteed the  
obligations of TMIS under an ISDA master agreement relating to swap             
transactions and other financial instruments.                                   

An operating agreement between TMCC and TCPR (the "Agreement"), provides that   
TMCC will make necessary equity contributions or provide other financial        
assistance TMCC deems appropriate to ensure that TCPR maintains a minimum       
coverage on fixed charges of 1.10 times such fixed charges in any fiscal        
quarter.  The Agreement does not constitute a guarantee by TMCC of any          
obligations of TCPR.  The fixed charge coverage provision of the Agreement is   
solely for the benefit of the holders of TCPR's commercial paper, and the       
Agreement may be amended or terminated at any time without notice to, or the    
consent of, holders of other TCPR obligations.                                  

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,    
seeking sizeable damages.  Certain of these actions are similar to suits which  
have been filed against other financial institutions and captive finance        
companies.  The amounts of liability on these claims and actions as of          
September 30, 1997 were not determinable; however, in the opinion of            
management, the ultimate liability resulting therefrom should not materially    
affect TMCC's consolidated financial position or results of operations.         

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 16 - Segment Information                                                   
-----------------------------                                                   

TMCC's business operations include primarily financing and insurance            
activities.  Following are gross revenues, income before taxes, assets and      
other information applicable to financing and insurance operations:             

                                                                · Download Table

                                                   September 30,             
                                           --------------------------------- 
                                               1997      1996         1995   
                                           ---------   ---------   --------- 
                                              (Dollars in Millions)          
                                                                             
Gross revenues:                                                              

  Financing operations.................... $   3,320   $   3,004   $   2,469 
  Insurance operations....................       138         115         102 
  Eliminations (a)........................        (8)         (5)         (4)
                                           ---------   ---------   --------- 
    Total gross revenues.................. $   3,450   $   3,114   $   2,567 
                                           =========   =========   ========= 

Income before income taxes:                                                  

  Financing operations.................... $     250     $   241   $     281 
  Insurance operations....................        33          19          19 
                                           ---------   ---------   --------- 
    Total income before income taxes...... $     283     $   260   $     300 
                                           =========   =========   ========= 

Assets:                                                                      

  Financing operations.................... $  19,519   $  19,052   $  15,990 
  Insurance operations....................       334         275         253 
  Eliminations (b)........................       (23)        (18)        (18)
                                           ---------   ---------   --------- 
    Total assets.......................... $  19,830   $  19,309   $  16,225 
                                           =========   =========   ========= 

Depreciation and amortization:                                               

  Financing operations.................... $   1,834   $   1,645   $   1,285 
  Insurance operations....................         1           1           1 
                                           ---------   ---------   --------- 
    Total depreciation and amortization... $   1,835   $   1,646   $   1,286 
                                           =========   =========   ========= 

Capital expenditures:                                                        

  Financing operations.................... $      14   $       6   $       5 
  Insurance operations....................         1           1           - 
                                           ---------   ---------   --------- 
    Total capital expenditures............ $      15   $       7    $      5 
                                           =========   =========   ========= 

    (a) Intersegment insurance tracking revenues.                            
    (b) Primarily investment in insurance subsidiary.                        


TMCC conducts substantially all of its business in the United States.           

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TOYOTA MOTOR CREDIT CORPORATION     
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

Note 17 - Selected Quarterly Financial Data (Unaudited)                         
-------------------------------------------------------                         

                                                                · Download Table

                                  Total                                       
                                Financing   Interest   Depreciation     Net   
                                Revenues    Expense     on Leases      Income 
                               ----------   --------   ------------   --------
                                             (Dollars in Millions)            
                                                                              
Year Ended September 30, 1997:                                                

   First quarter..............     $  829       $227         $  470       $ 38
   Second quarter.............        829        225            446         47
   Third quarter..............        813        228            439         44
   Fourth quarter.............        803        238            435         33
                                   ------       ----         ------       ----
      Total...................     $3,274       $918         $1,790       $162
                                   ======       ====         ======       ====

Year Ended September 30, 1996:                                                

   First quarter..............     $  688       $193         $  370       $ 41
   Second quarter.............        724        196            394         36
   Third quarter..............        768        210            416         40
   Fourth quarter.............        798        221            446         35
                                   ------       ----         ------       ----
      Total...................     $2,978       $820         $1,626       $152
                                   ======       ====         ======       ====

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

There is nothing to report with regard to this item.                            

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 as of November 30, 1997.                             

Name                Age              Position             
----                ---              --------             
Yoshio Ishizaka...........      57     Director and President, TMCC;            
                          Director and President, TMS;
           Director, TMC

Nobu Shigemi..............      53     Director, Senior Vice President          
                             and Treasurer, TMCC; Group Vice
            President, TMS

George Borst .............      49     Director, Senior Vice President          
                        and General Manager, TMCC;
                        Senior Vice President, TMS

Robert Pitts..............      49     Director and Secretary, TMCC;            
                       Group Vice President, TMS

Yale Gieszl...............      55     Director, TMCC; Director and             
                           Executive Vice President, TMS

Takashi Nishiyama.........      55     Director, TMCC; Senior Vice              
                          President and Treasurer, TMS

Douglas West..............      52     Director, TMCC; Senior Vice              
                          President and Secretary, TMS

Ryuji Araki...............      57     Director, TMCC; Managing Director, 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. Ishizaka was named Director and President of TMCC and TMS in June 1996.     
From January 1990 to May 1996, Mr. Ishizaka was General Manager of the Europe   
Division of TMC, and in September 1992, he was named a Director of TMC.         
Mr. Ishizaka has been employed with TMC, in various positions, since 1964.      

Mr. Shigemi was named Director, Senior Vice President and Treasurer of TMCC     
and 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.                                     

Mr. Borst was named Director and Senior Vice President and General Manager of   
TMCC in April 1997 and Senior Vice President of TMS in June 1997.  From         
January 1993 to May 1997, Mr. Borst was Group Vice President of TMS.  From      
April 1989 to December 1992, Mr. Borst was a Vice President of TMS.  Mr. Borst  
has been employed with TMS, in various positions, since 1985.                   

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Mr. Pitts was named Director of TMCC and Group Vice President of TMS in April   
1993 and Secretary of TMCC in April 1997.  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 and 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. West was named Director of TMCC and Senior Vice President and Secretary of  
TMS in June 1996.  From June 1996 to March 1997, Mr. West was also a Senior     
Vice President and Secretary of TMCC.  From April 1993 to May 1996, Mr. West    
was a Group Vice President of TMS.  From April 1989 to March 1993, Mr. West     
was a Vice President of TMS.  Mr. West has been employed with TMS, in various   
positions, since 1982.                                                          

Mr. Araki was named Director of TMCC in September 1995.  He was named Managing  
Director of TMC's Board of Directors in June 1997 and has served on TMC's       
Board of Directors since September 1992.  Mr. Araki has been employed with      
TMC, in various positions, since 1962.                                          

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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        
fiscal years ended September 30, 1997, 1996 and 1995.                           

                                                                · Download Table

                                    Annual Compensation                       
                        --------------------------------------------          
                                                        Other Annual    All   
     Name and           Fiscal                          Compensation   Other  
Principal Position       Year   Salary ($)   Bonus ($)     ($)<F1>    ($)<F2> 
---------------------   ------  ----------   ---------  ------------  ------- 
                                                                              
George Borst            1997     $115,500     $56,700             -   $3,300  
Principal Executive     1996          N/A         N/A           N/A      N/A  
Officer <F3>            1995          N/A         N/A           N/A      N/A  

Wolfgang Jahn           1997     $119,460     $55,000             -   $4,300  
Principal Executive     1996     $233,100     $94,500             -   $8,500  
Officer <F3>            1995     $213,800     $98,700             -   $6,000  

Nobu Shigemi            1997     $415,500     $49,600       $44,000        -  
Senior Vice President   1996     $316,000     $50,900       $51,700        -  
                        1995     $199,000     $40,500       $47,300        -  
<FN>                                                                          
------------                                                                  
<F1> The amounts in this column represent housing allowances and relocation   
costs.                                                                        
<F2> The amounts in this column represent the Company's allocated contribution
under the TMS Savings Plan (the "Plan"), a tax-qualified 401(k) Plan.         
Participants in the Plan may elect, subject to applicable law, to contribute  
up to 6% of their base compensation on a pre-tax basis to which the Company   
adds an amount equal to two-thirds of the employee's contribution.            
Participants are vested 25% each year with respect to the Company's           
contribution and are fully vested after four years.  Subject to the           
limitations of the Plan, employee and Company contributions are invested in   
various investment options at the discretion of the employee.  TMS also       
maintains a 401(k) Excess Plan, a non-qualified deferred compensation plan    
which has similar provisions to the Saving Plan.                              
<F3> Mr. Jahn served as Principal Executive Officer during the current fiscal 
year through March 1997.  Effective April 1, 1997, Mr. Borst was appointed as 
Principal Executive Officer in place of Mr. Jahn.  The compensation presented 
for Mr. Jahn and Mr. Borst reflect amounts earned for services to the Company 
during the partial periods of the fiscal year each served as Principal        
Executive Officer.                                                            
</FN>                                                                         

Employee Benefit Plan                                                           

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.                                                                       

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                                                                · Download Table

                           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
  $450,000         $135,000      $180,000      $225,000
  $500,000         $150,000      $200,000      $250,000


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.                                         

The annual normal retirement benefit under the Pension Plan, 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 that    
has been merged into the TMS Pension Plan.                                      

The TMS Supplemental Executive Retirement Plan (TMS SERP) authorizes a benefit  
to be paid to eligible executives, including Mr. Borst and Mr. Jahn.  Benefits  
under the TMS SERP, expressed as an annuity payable monthly, are based on 2%    
of the executive's compensation recognized under the plan after deducting the   
executive's primary Social Security benefit, multiplied by the years of         
service credited under the plan (up to a maximum of 25), offset by benefits     
payable under the TMS Pension Plan.  A covered participant's compensation may   
include base pay and a percentage (not in excess of 100%) of bonus pay,         
depending on the executive's length of service in certain executive positions.  
Similarly, years of service credited under the plan are determined by           
reference, in part, to the executive's length of service in certain executive   
positions.  No benefit is payable under the TMS SERP to an executive unless     
the executive's termination of employment occurs on a date, after the           
executive reaches age 55, that is agreed in writing by the President of TMS     
and the executive; and the executive is vested in benefits under the TMS        
Pension Plan, or unless the executive accepts an invitation to retire extended  
by the President of TMS.                                                        

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Mr. Borst is a participant in the TMS Pension Plan and the TMS SERP and had     
13 years of total credited service as of September 30, 1997, 6 months of which  
have been allocated to the Company.  Based upon years of credited service       
allocable to the Company, Mr. Borst would be entitled to receive and the        
Company would be required to pay approximately $2,000 in annual pension         
benefits when Mr. Borst reaches age 62.  Mr. Borst would also be entitled to    
receive pension benefits from TMS based upon services to and compensation by    
TMS.                                                                            

Mr. Jahn is a participant in the TMS Pension Plan and the TMS SERP and had      
24 years of total credited service as of September 30, 1997, 8 years of which   
have been allocated to the Company.  Based upon years of credited service       
allocable to the Company, Mr. Jahn would be entitled to receive and the         
Company would be required to pay approximately $34,000 in annual pension        
benefits when Mr. Jahn reaches age 62.  Mr. Jahn would also be entitled to      
receive pension benefits from TMS based upon services to and compensation by    
TMS.                                                                            

Compensation of Directors                                                       

No amounts are paid to members of the TMCC Board of Directors 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. Araki, 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.                   

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 TRANSACTIONS.                               

Transactions between the Company and its parent, TMS, are included in Note 2,   
Note 8, and Note 15 of the Notes to the Consolidated Financial Statements.      
Certain directors and executive officers of TMCC are also directors and         
executive officers of TMS. In addition, see Item 1, Business - General, for a   
description of certain obligations of TMMNA to TMCC.                            

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 on page 23.                            

(2)Exhibits                                                               

      The exhibits listed on the accompanying Exhibit Index, starting on
     page 62, 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, 1997.                           

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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, 1997.                         

                               TOYOTA MOTOR CREDIT CORPORATION

                       By     /S/ GEORGE BORST
                                    ------------------------------
                                  George Borst
                                   Senior 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, 1997.       

Signature                                   Title       
---------                                   -----       
                                     Senior Vice President and General
                                      Manager and Director
/S/ GEORGE BORST                      (Principal Executive Officer) 
------------------------------------                                            
George Borst                                                

                                      Senior Vice President/
                                      Treasurer and Director
/S/ NOBU SHIGEMI                       (Principal Financial Officer)
------------------------------------                                            
Nobu Shigemi                                                

                                      Vice President - Finance
                                      and Administration
 /S/ GREGORY WILLIS                     (Principal Accounting Officer)
------------------------------------                                            
Gregory Willis                                              

/S/ YOSHIO ISHIZAKA                               Director          
------------------------------------                                            
Yoshio Ishizaka                                             

/S/ DOUGLAS WEST                                  Director          
------------------------------------                                            
Douglas West                                                

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

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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.                  (6)      

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

4.2(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,
Commission File number 1-9961.                                        
(3)  Incorporated herein by reference to Exhibit 4.2 filed with TMCC's          
Report on Form 10-K for the year ended September 30, 1990,            
Commission File number 1-9961.                                        
(4)  Incorporated herein by reference to Exhibit 4.1(a), filed with TMCC's      
Registration Statement on Form S-3, File No. 33-52359.                
(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, 1993,
Commission File number 1-9961.                                        

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EXHIBIT INDEX     

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

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

4.3(a)   Second Amended and Restated Agency Agreement dated          Filed      
     July 24, 1997 among TMCC, The Chase Manhattan Bank         Herewith
and Chase Manhattan Bank Luxembourg S.A.                      

4.4      TMCC has outstanding certain long-term debt as set                     
forth in Note 9 of the Notes to Consolidated Financial        
Statements and certain demand notes issued under an           
Indenture dated September 1, 1997.  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 or demand notes, 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(a)  Operating Agreement dated January 16, 1984 between                     
  TMCC and TMS.                                               (16)

10.1(b)  Amendment No. 1 to Operating Agreement dated May 14, 1996              
  between TMCC and TMS.                                       (11)

10.1(c)  Amendment No. 2 to Operating Agreement dated December 1,    Filed      
     1997 between TMCC, TMS and TMMNA                           Herewith

-----------------                                                               
(5)  Incorporated herein by reference to Exhibit 4.1 filed with TMCC's          
Current Report on Form 8-K dated October 16, 1991, Commission File    
No. 1-9961.                                                           
(11) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's         
Report on Form 10-Q for the quarter ended March 31, 1996, Commission  
File No. 1-9961.                                                      
(16) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's         
Registration Statement on Form S-1, File No. 33-22440.                

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EXHIBIT INDEX     

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

10.2     Pooling and Servicing Agreement among TMCRC,                           
as Seller, TMCC, as Servicer, and Bankers Trust Company,      
as Trustee (including forms of Class A and Class B            
  Certificates) dated as of September 1, 1995.                 (7)

10.3     Receivables Purchase Agreement dated as of September 1,                
1995 between TMCC, as Seller, and TMCRC Corporation,          
  as Purchaser.                                                (8)

10.4     Form of Indemnification Agreement between TMCC and                     
  its directors and officers.                                 (12)

10.5(a)  Three-year Credit Agreement (the "Three-year Agreement")               
dated as of September 29, 1994 among TMCC, Morgan             
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.        (13)

10.5(b)  Amendment No. 1 dated September 28, 1995 to the                        
  Three-year Agreement.                                       (14)

10.5(c)  Amendment No. 1 dated September 28, 1995 to the                        
  364-day Agreement.                                          (15)

----------------                                                                
(7)  Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto     
Receivables 1995-A Grantor Trust's Current Report on Form 8-K dated   
November 10, 1995, Commission File No. 33-96006.                      
(8)  Incorporated herein by reference to Exhibit 10.1 filed with Toyota         
Auto Receivables 1995-A Grantor Trust's Current Report on Form 8-K    
dated November 10, 1995, Commission File No. 33-96006.                
(12) Incorporated herein by reference to Exhibit 10.6 filed with TMCC's         
Registration Statement on Form S-1, Commission File No. 33-22440.     
(13) Incorporated herein by reference to Exhibit 10.10 filed with TMCC's        
Report on Form 10-K for the year ended September 30, 1994,            
Commission File No. 1-9961.                                           
(14) Incorporated herein by reference to Exhibit 10.10(a) filed                 
with TMCC's Report on Form 10-K for the year ended September 30, 1995,
Commission File No. 1-9961.                                           
(15) Incorporated herein by reference to Exhibit 10.10(b) filed with TMCC's     
Report on Form 10-K for the year ended September 30, 1995, Commission 
File No. 1-9961.                                                      

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EXHIBIT INDEX     

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

10.5(d)  Amended and Restated Credit Agreement dated                            
   September 24, 1996 to the Three-year Agreement.              (17)

10.5(e)  Amended and Restated Credit Agreement dated                            
   September 24, 1996 to the 364-day Agreement.                 (18)

10.5(f)  Amended and Restated Credit Agreement dated                 Filed      
     September 23, 1997 to the Three-year Agreement.            Herewith

10.5(g)  Amended and Restated Credit Agreement dated                 Filed      
     September 23, 1997 to the 364-day Agreement.               Herewith

10.6     Toyota Motor Sales, U.S.A., Inc. Supplemental                          
  Executive Retirement Plan. *                                 (9)

10.7     Toyota Motor Sales, U.S.A., Inc. 401(k)                                
   Excess Plan. *                                               (10)

10.8     Amended and Restated Trust and Servicing Agreement                     
dated as of October 1, 1996 by and among TMCC,                
TMTT, Inc., as titling trustee and U.S. Bank National         
   Association, as trust agent.                                 (19)

12.1     Calculation of ratio of earnings to fixed charges.          Filed      
                                                                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

----------------                                                                
(9)  Incorporated herein by reference to Exhibit 10.1 filed with TMCC's         
 Report on Form 10-Q for the quarter ended December 31, 1995, Commission
File No. 1-9961.                                                      
(10) Incorporated herein by reference to Exhibit 10.2 filed with TMCC's         
 Report on From 10-Q for the quarter ended December 31, 1995, Commission
File No. 1-9961.                                                      
(17) Incorporated herein by reference to Exhibit 10.9(d) filed with TMCC's      
Report on Form 10-K for the year ended September 30, 1996, Commission 
File No. 1-9961.                                                      
(18) Incorporated herein by reference to Exhibit 10.9(e) filed with TMCC's      
Report on Form 10-K for the year ended September 30, 1996, Commission 
File No. 1-9961.                                                      
(19) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto     
Lease Trust 1997-A's Report on Form 8-A dated December 23, 1997,      
Commission File No. 333-26717                                         
*-   Management contract or compensatory plan or arrangement required to be     
filed as an exhibit pursuant to applicable rules of the Securities and
Exchange Commission.                                                  

-65-

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10-K405 Filing		Date		First		Last			Other Filings
		1/16/93		62
		9/30/93		62
		9/29/94		64
		9/30/94		64					10-K
		9/1/95		64
		9/28/95		64
		9/30/95		3		64			10-K
		11/10/95		64
		12/31/95		65					10-Q
		3/31/96		63					10-Q, 8-K
		5/14/96		63					10-Q
		9/3/96		7
		9/24/96		65
		9/30/96		3		65			10-K
		10/1/96		7		65
		12/31/96		38					10-Q
		1/1/97		38
		3/31/97		7					10-Q, 10-Q/A
		4/1/97		58
		7/1/97		53
		7/24/97		63					424B3
		9/1/97		63
		9/23/97		65
For The Period Ended		9/30/97		1		60
		10/31/97		24
		11/30/97		1		56
		12/15/97		22
		12/23/97		65
Filed On / Filed As Of		12/24/97
		9/30/98		53					S-3, 10-K/A, S-1, 10-K405
		10/1/98		22
		1/25/99		1
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