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What Boosted Toyota’s Financial Services Profits in Fiscal 2018?

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Toyota Financial Services

So far in this series, we’ve covered how Toyota Motor’s (TM) revenues rose and its profit margins expanded in fiscal 2018. The positive trend in the company’s financials was mainly the result of favorable currency movements, cost-reduction efforts, and stable sales volume.

We should note that a large portion of retail vehicle customers prefer to use vehicle financing services when purchasing vehicles, which is why Toyota provides a variety of financing services through Toyota Financial Services (or TFS). Now, let’s find out how the company’s financial services arm performed in fiscal 2018.

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TFS’s fiscal 2018 performance

In fiscal 2018, TFS’s net revenue stood at 2.0 trillion Japanese yen, ~10.6% higher than its revenue in fiscal 2017.

Similarly, the operating income from Toyota’s financial services arm rose 28.4% on a YoY (year-over-year) basis to 285.5 billion yen in its last fiscal year. The company attributed this increase in operating income to an increase in financing volume and a fall in expenses related to a decrease in credit losses and residual value losses in sales.

Positive impact

After witnessing a YoY fall in the previous fiscal year, TFS’s revenue and operating income rose in fiscal 2018. This positive growth in operating income indicated a solid growth rate in Toyota’s retail sales.

Currently, TFS offers a variety of auto credit services and payment protection products to Toyota dealers and customers. These products include flexible lease and finance plans, vehicle and payment protection, and other insurance products.

Among other mainstream automakers (XLY), Ford Motor Company (F), General Motors (GM), and Volkswagen (VLKAY) also provide financing services to their customers via their own respective financial services subsidiaries.

Next, we’ll take a look at Toyota’s guidance for its fiscal 2019.

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