The operation, with $95 billion of assets, handles more of affiliated dealers' direct loans and leases in the United States than any other automaker's captive lender, or wholly owned finance arm. Toyota also uses intense data systems to keep buyers from straying to GM or Ford.
"Our strategy is built around loyalty and retention," said Mike Groff, CEO of the Torrance, Calif.-based finance company. "We've deepened our use of data, and analytics of our data, to take better care of customers to encourage them to go back to Toyota and to go back to the seller of the car that they have."
Competition for U.S. market share has become more intense as Detroit offers its most competitive set of cars in a generation. Toyota's share of the market was unchanged through the year's first nine months at 14.4 percent, short of its 17 percent peak in 2009. This week, Consumer Reports panned the company's redesigned Lexus IS 250.
The health of the company's U.S. finance arm allows it to maintain no-interest loans across its lineup and expand the use of low-cost leases as a strategy to draw both younger and lower-income customers, said Larry Dominique, president of ALG Inc., the company that determines automotive residual values.
"Having an extremely strong captive partner opens up a range of possibilities that aren't open to companies with weak or no captive," Dominique said. "Toyota can definitely be more aggressive on leasing."
U.S. auto leasing is at the highest levels in at least a decade and pacing the industry's best year since 2007, according to J.D. Power & Associates data. Near-record high prices for used cars and low interest rates are supporting the trend because both influence how low lenders can set monthly payments for buyers.
"We've seen now more than ever that consumers are price- sensitive and they'll gravitate toward the best deals out there," said Jeremy Acevedo, an analyst for auto-pricing website Edmunds.com. Toyota will be able to use Toyota Financial "as a point of leverage as far as squeezing these deals out."
The traditional U.S. automakers don't have quite that much flexibility.
The old General Motors Corp. sold 51 percent of its GMAC unit to Cerberus Capital Management LLC in 2006. The U.S. took a 74 percent stake in 2008 in return for financial aid that kept the lender from collapsing under bad loans. In 2010, GM bought AmeriCredit Corp. to form General Motors Financial Co. and make loans to borrowers with less than prime credit.
Cerberus, which also owned the former Chrysler until its 2009 bankruptcy, spun off the automaker's captive, Chrysler Capital. Chrysler this year formed a joint venture with Banco Santander SA called Chrysler Capital.
While Ford financed its own restructuring and kept its profitable Ford Credit Co. unit, it doesn't have as much cash or creditworthiness as Toyota.
The $37 billion in cash that Toyota reported on its balance sheet as of the end of the first quarter of its 2014 fiscal year exceeded Ford's $26 billion and GM's $24 billion.
Toyota is rated Aa3 by Moody's Investors Service and AA- by Standard & Poor's, with stable outlooks on both of those grades. While Ford's credit ratings have been on the rise, they are still six levels below where both Moody's and S&P rank Toyota. GM is seven rungs behind Toyota in Moody's and S&P's ratings.
Toyota Motor Credit, the registered business behind Toyota Financial Services, raised $1.5 billion this week selling 2 percent, five-year notes at a relative yield of 65 basis points, according to data compiled by Bloomberg. Ford Motor Credit paid a 145-basis-point spread on 2.875 percent, five-year securities that it sold on Sept. 26.
The extra yield investors demand to hold bonds of Toyota rather than government debt was 53 basis points, or 0.53 percentage point, as of Oct. 21 on the Bank of America Merrill Lynch U.S. Auto Group Index. That compared with 70 basis points for Honda Motor Co. and 138 for Ford Motor.
The advantage could free up Toyota to keep affordable financing offers in place longer than competitors once the Federal Reserve begins to let off the monetary gas pedal.
"We certainly are in a position where we can withstand rate increases without necessarily passing it on to the consumer," George Borst, an executive adviser to Toyota Financial who led the unit for 16 years, said in a telephone interview. "We're the highest-rated captive. Our funding cost is less than everybody else."
Toyota Financial was an under-the-radar reason that market share for the automaker reached the heights it did four years ago. The captive finance company dug in when credit seized up and continued offering leases and loans. Banks and U.S. automakers' captive lenders were forced to clamp down after piling up billions of dollars in losses.
"When everybody and their brother pulled out of leasing in 2008, we actually increased our presence," Borst said in the interview last month. He called Toyota Financial's treasury team "magicians" and credited them and the parent company's credit rating for arming Toyota with "as much funding as possible."
Since Toyota Financial hung in during the crisis of 2009, when U.S. auto sales plunged to a 27-year low, Toyota dealers have rewarded the unit by financing more of their car and truck sales with the lender.
Industrywide, a number of conditions related to auto financing are flashing warning signs and threaten the industry's newfound pricing discipline, Morgan Stanley said in a report this month.
Credit losses are beginning to rise and carmakers have managed to boost prices because of low interest rates and record length of loan terms, which now average almost 67 months, Adam Jonas, an analyst for New York-based Morgan Stanley, wrote in the report.
"The U.S. auto cyclical recovery may be harder to maintain in the months and quarters ahead," he wrote. "We're watching out for the impact that rising interest rates" may have and "fear this story has a lot of room to get worse."
President Barack Obama this month nominated Janet Yellen to head the Federal Reserve, which under current chairman Ben S. Bernanke introduced unprecedented stimulus to navigate the economy out of the worst recession since the Great Depression.
"Rates will have to go up at some point," Groff said. "Our bigger mission is to make sure we can adapt no matter what happens in the marketplace."
Toyota Financial captured 64 percent of the automaker's U.S. sales through this year's first half, excluding deliveries to fleet customers and buyers in the five Southeast states where it doesn't lend, Borst said. Less than half of sales on that basis went through Toyota Financial in the years before 2008.
"TFS is hands-down the strongest captive that we work with," said Tammy Darvish, vice president of Darcars Automotive Group in Silver Spring, Maryland, which owns eight Toyota, Scion or Lexus stores among its 20 new-car dealerships.
Even before a change in financing conditions, Toyota Financial already is bolstering its parent's loyalty rates, or the portion of buyers who buy the same brand car or truck as the vehicle they already owned.
The Toyota brand's loyalty rate climbed to almost 52 percent this year through September, and Lexus's was 60 percent, according to Edmunds.com data. Both brands topped the 44 percent industry average and have done so in every year since 2010.
"We literally try to take people out of the market before they even think about shopping" another brand, Borst said of Toyota Financial. The unit has about 1,000 employees in three U.S. call centers; about 100 are dedicated to contacting customers whose leases are about to expire and send sales leads to their dealers.
"Before they even realize it's time to get a new car, Toyota's already been there," said Darvish, the Maryland dealer. "We do as much business with them as possible."