QUESTION & ANSWER

How Toyota downgrade affects Toyota Financial

Groff: "Even after this downgrade, Toyota and Toyota Motor Credit Corp. are still the highest-rated auto and auto finance companies in the world."
Toyota's recall problems prompted ratings agency Moody's Investor Service to lower Toyota's debt rating in late April. The slide has the potential to increase the cost of funds for Toyota Financial Services.

Moody's downgraded Toyota and its subsidiaries a notch to a rating of Aa2, the third-highest on a scale of 19.

But Michael Groff, Toyota Financial Services' group vice president of sales, product and marketing, told Staff Reporter Donna Harris the downgrade will have little impact on the rates and terms Toyota Financial Services offers dealers and customers.

How does Toyota's recent downgrade affect your cost of funds?

It has had only a minimal impact, as we run a highly diversified funding program.

How do your ratings compare to that of other captives?

Even after this downgrade, Toyota and Toyota Motor Credit Corp. are still the highest-rated auto and auto finance companies in the world, and our access to the dozens of capital markets that were available to us before the announcement are still available to us now. In short, we don't anticipate any immediate significant changes.

Will dealers and consumers see a difference in your rates and terms on retail contracts?

We don't anticipate any immediate significant changes.

TFS has offered some aggressive lease programs. Will the decline in residuals after the recalls have an impact on your ability to offer competitive leases?

We are always evaluating our incentive offers based on market demand. So while the great incentives that consumers have enjoyed in the past few months may or may not change in the coming months, we will continue to always offer attractive leases.

Our forecasts for Toyota residual values continue to remain strong. Our lease end-of-term return rates have fallen each month since December 2009 and continue to fall, demonstrating there is still strong consumer and dealer demand for Toyota and Lexus vehicles coming off lease.

Does the downgrade affect dealer floorplan rates and terms?

Our share of wholesale Toyota and Lexus dealers has continued to grow despite challenging conditions. We do not anticipate any changes in our commitment to support our dealers going forward.

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