Toyota Financial Services
The majority of retail vehicle customers prefer to use vehicle financing services when purchasing vehicles. Toyota Motor Corporation (TM) provides a variety of financing services through its TFS (Toyota Financial Services) division.
In fiscal 2016 (which ended March 31, 2016), TFS’s net revenues stood at 1.9 trillion Japanese yen, or about ~$17.4 billion, which is 14.2% higher than the $1.7 trillion yen, or about $15.6 billion, in fiscal 2015.
However, TFS’s EBIT (earnings before interest and tax) decreased by 6.2% YoY (year-over-year) in fiscal 2016. The company attributed this decrease in operating income to a decrease in valuation gains on interest rate swaps.
Why should investors care?
Notably, in last five fiscal years, TFS’s revenues have grown by 73%. Rising revenues for Toyota Financial Services reflects optimism in Toyota’s overall sales pattern. As long as the company continues to improve its retail vehicle sales, investors can probably expect this positive trend in TFS revenues to continue.
Currently, TFS offers various vehicle and payment protection products to Toyota customers and dealers. These products include flexible lease and finance plans, vehicle and payment protection, and insurance products.
In the next part, we’ll examine why Toyota’s financial results could disappoint investors in fiscal 2017.