toyota auto receivables 2020-a owner trust...2020-a's) class a-1, a-2, a-3, and a-4...

Presale:

Toyota Auto Receivables 2020-A Owner TrustJanuary 30, 2020

Preliminary Ratings

Class(i)Preliminaryrating Type

Interestrate

Preliminaryamount (mil. $)

Upsized preliminaryamount (mil. $)(ii)

Expected legalfinal maturitydate

A-1 AAA (sf) Senior Fixed 315.00 441.00 May 17, 2021

A-2 AAA (sf) Senior Fixed 445.00 622.00 Nov. 15, 2022



B AA+ (sf) Subordinate Fixed(iii) 31.30 43.80 Sept. 15, 2026

Note: This presale report is based on information as of Jan. 30, 2020. The ratings shown are preliminary. Subsequent information may result inthe assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed asevidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)The class B notes andapproximately, but not less than 5.00% (by initial principal amount), of each of the class A-1, A-2, A-3, and A-4 notes will be retained initially byToyota Auto Finance Receivables LLC. (ii)The anticipated bond sizes if the aggregate initial principal balance of the notes is $1.75 billion. (iii)Theclass B notes will have a 0.00% interest rate.

Profile

Expected closing date Feb. 12, 2020.

Collateral Prime fixed-rate auto loan receivables.

Originator, sponsor, administrator, and servicer Toyota Motor Credit Corp. (AA-/Stable/A-1+).

Depositor Toyota Auto Finance Receivables LLC.

Issuer Toyota Auto Receivables 2020-A Owner Trust.

Lead underwriter MUFG Securities Americas Inc.

Indenture trustee U.S. Bank N.A. (AA-/Stable/A-1+).

Owner trustee Wilmington Trust N.A.

Presale:

Toyota Auto Receivables 2020-A Owner TrustJanuary 30, 2020

PRIMARY CREDIT ANALYST

Linda Yeh

New York

(1) 212-438-2520

[email protected]

SECONDARY CONTACT

Jennie P Lam

New York

(1) 212-438-2524

[email protected]

www.standardandpoors.com January 30, 2020 1

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimeron the last page.

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mailto: [email protected]




Credit Enhancement Summary (%)

TAOT 2020-A TAOT 2019-D

Initial(i) Target(i) Floor(i) Initial(i) Target(i) Floor(i)

Class A

Overcollateralization 0.00 0.85 0.85 0.00 0.85 0.85

Reserve account 0.25 0.25 0.25 0.25 0.25 0.25

Subordination 2.50 2.50 2.50 2.50 2.50 2.50

Total 2.75 3.60 3.60 2.75 3.60 3.60

Class B

Overcollateralization 0.00 0.85 0.85 0.00 0.85 0.85

Reserve account 0.25 0.25 0.25 0.25 0.25 0.25

Subordination 0.00 0.00 0.00 0.00 0.00 0.00

Total 0.25 1.10 1.10 0.25 1.10 1.10

Additional enhancement

YSOA (% of initial adjustedpool balance)

6.06 -- -- 7.02 -- --

Estimated annual excessspread(ii)

3.44 -- -- 3.71 -- --

Initial aggregate receivablespool balance ($)

1,325,720,384 -- -- 1,872,859,971 -- --

Initial YSOA ($) 75,707,992 -- -- 122,858,520 -- --

Initial adjusted pool balance($)

1,250,012,392 -- -- 1,750,001,451 -- --

Total securities issued ($) 1,250,000,000 -- -- 1,750,000,000 -- --

(i)Percentage of the initial adjusted pool balance. (ii)Includes the 1.00% servicing fee. Annual excess spread is adjusted for yield supplementovercollateralization. For comparison purposes, the estimated annual excess spread shown here for TAOT 2020-A is pre-pricing, while TAOT2019-D's estimated annual excess spread is post-pricing. (iii)If the series 2020-A issued notes' aggregate initial principal amount is $1.75billion, the initial aggregate receivables pool balance, initial YSOA, and initial adjusted pool balance will be $1,855,904,868, $105,900,324, and$1,750,004,544, respectively. TAOT--Toyota Auto Receivables Owner Trust. YSOA--Yield supplement overcollateralization amount.

Rationale

The preliminary ratings assigned to Toyota Auto Receivables 2020-A Owner Trust's (TAOT2020-A's) class A-1, A-2, A-3, and A-4 (collectively, class A) and class B asset-backed notesreflect:

- The availability of approximately 7.7% and 5.6% credit support (including excess spread) for theclass A and B notes, respectively, based on stress cash flow scenarios. These credit supportlevels provide more than 5.0x and 4.5x respective coverage of our expected loss range of0.55%-0.65%. This loss coverage is commensurate with the assigned 'AAA (sf)' and 'AA+ (sf)'ratings on the class A and B notes, respectively (see the S&P Global Ratings' Expected Loss andCash Flow Modeling Assumptions And Results sections).

- The timely interest and full principal payments made under the stressed cash flow modelingscenarios appropriate for the assigned preliminary ratings (see the Cash Flow ModelingAssumptions And Results section). In our modeling approach, we used a bifurcated pool



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Presale: Toyota Auto Receivables 2020-A Owner Trust

method, in which the subvened loans prepay and default at lower rates than the nonsubvenedloans. (For cash flow purposes, "subvened" means loans with annual percentage rates [APRs]of 4.00% or less.)

- The loss performance of Toyota Motor Credit Corp.'s (Toyota's) previous securitizations,origination static pool performance, and managed portfolio performance; its deal-levelcollateral characteristics and comparison with its prime auto finance company peers; and ourforward-looking view of the economy.

- Our expectation that under a moderate ('BBB') stress scenario, all else being equal, the ratingson the class A and B notes would not be lowered over its lifetime. This is consistent with ourratings stability criteria, which describe the outer bounds of credit deterioration within one yearas one rating category in the case of 'AAA' and 'AA+' rated securities (see "Methodology: CreditStability Criteria," May 3, 2010).

- The transaction's credit enhancement in the form of subordinated notes, a nonamortizingreserve account, overcollateralization that is initially 0.00% but is expected to build to a targetlevel, a yield supplement overcollateralization amount (YSOA), and excess spread (see theCredit Enhancement Summary table above).

- Our view of the securitized pool of prime auto loans, which has a weighted average FICO scoreof 766 and weighted average seasoning of approximately 16 months. The collateral poolincludes no loans with original maturity terms greater than 72 months or borrowers with FICOscores below 620.

- Our view of the transaction's payment and legal structures.

Changes From The Series 2019-D Transaction

The notable collateral composition changes in the series 2020-A pool from the series 2019-Dtransaction include:

- The percentage of loans with an original term of 61-72 months decreased slightly to 54.04%(54.29%, if upsized) from 54.33%;

- The weighted average LTV decreased to 97.79% (97.82% if upsized) from 98.37%;

- The percentage of new vehicles increased slightly to 80.14% (80.06% if upsized) from 79.66%;and

- The weighted average APR increased to 3.19% (3.20% if upsized) from 2.98%.

The only structural change to series 2020-A from series 2019-D is the decrease of the requiredYSOA rate to 6.00% from 6.30%.

Overall, the series 2020-A collateral pool's credit quality is similar to that of series 2019-D, in ourview. Approximately 82% of the obligors by balance have FICO scores greater than 700. Whileapproximately 54% of the pool's loans by principal balance have original terms of 61-72 months,only approximately 21% have remaining terms of that duration, due to seasoning. The collateralpool includes no loans with original maturity terms greater than 72 months or borrowers with FICOscores below 620.

Our expected net loss range for the series 2020-A pool is 0.55%-0.65%, unchanged from theseries 2019-D pool. In our view, the pool composition remains generally consistent with Toyota'srecent transactions.



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Transaction Overview

TAOT 2020-A is Toyota's 17th auto loan securitization to be issued under its Regulation ABII-compliant retail shelf.

Toyota will issue $1.25 billion ($1.75 billion, if upsized) of class A and B sequential-pay notes towhich we have assigned preliminary 'AAA (sf)' and 'AA+ (sf)' ratings, respectively. Similar to priorTAOT transactions, the class B notes will have a 0.00% interest rate. The transaction's firstscheduled payment date will be Mar. 16, 2020. The notes' applicable principal and interest arescheduled to be paid on the 15th day of each following month. The class A-1, A-2, A-3, and A-4notes will all be fixed-rate issuances.

The TAOT 2020-A transaction is structured as a true sale of the receivables from Toyota (theoriginator and sponsor) to Toyota Auto Finance Receivables LLC (the depositor and abankruptcy-remote special-purpose entity), which, in turn, will sell the receivables as a true saleto TAOT 2020-A, the issuer. TAOT 2020-A will then pledge the rights to the receivables to theindenture trustee for the noteholders' benefit. TAOT 2020-A will issue approximately $1.22 billionof class A notes and $31.30 million of class B notes; if the initial notes' aggregate balance isupsized to $1.75 billion, TAOT 2020-A will issue approximately $1.71 billion of class A notes and$43.80 million of class B notes (see chart 1 for the transaction structure).



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Chart 1

In rating this transaction, S&P Global Ratings will review the relevant legal matters outlined in itscriteria.

Transaction Structure

The TAOT 2020-A transaction incorporates the following structural features:

- A sequential-pay mechanism that results in increased credit enhancement for the senior notesas the pool amortizes.

- The class B notes will have a 0.00% interest rate.

- Overcollateralization (net of YSOA) that will initially equal zero and is expected to grow to atarget of 0.85% of the initial adjusted pool balance and stay at this level.

- A fully funded nonamortizing reserve fund that will equal 0.25% of the initial adjusted poolbalance.

- A YSOA that initially will be 6.06% (6.05% if upsized) of the adjusted pool balance (5.71% of theaggregate pool balance) and will be calculated each month as the pool amortizes, based on the



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difference between the aggregate receivables balance outstanding and the present value of thereceivables balance, discounted at the greater of 6.00% per year or the receivable's actual APR.The YSOA is sized so that the yield on the contracts with APRs below the YSOA-required rate,6.00%, is raised to the required rate.

- Excess spread, to the extent available after covering net losses, which pays principal on theoutstanding notes to build credit enhancement to the target level.

Payment Structure

Available funds will be distributed according to the priority shown in table 1.

Table 1

Payment Waterfall

Priority Payment

1 Servicing fee of 1.00% of the current pool balance.

2 Transaction fees and expenses to the indenture trustee, the owner trustee, and the asset representationsreviewer in an aggregate amount that doesn't exceed $300,000 in any calendar year.

3 Accrued and unpaid interest, pro rata, to the class A noteholders.

4 Principal payments sequentially in the amount of the first-priority principal distribution, which is the excess ofthe class A notes' outstanding principal over the receivables principal balance minus the YSOA (the adjusted poolbalance) to the class A noteholders.

5 Accrued and unpaid interest to the class B noteholders(i).

6 Principal payments sequentially in the amount of the second-priority principal distribution, which is the excessof the class A and B notes' outstanding principal over the receivables principal balance minus the YSOA (theadjusted pool balance), minus the first-priority principal distribution amount to the class A and B noteholders.

7 Reserve account payments until the specified reserve account balance is reached.

8 Principal payments sequentially in the amount of the regular principal distribution, which is the excess of theoutstanding principal note balances over the adjusted receivables principal balance minus the targetovercollateralization amount minus the sum of the first- and second-priority principal distribution amounts tothe class A and B noteholders.

9 Any unpaid fees, expenses, and indemnification amounts due to the indenture trustee, the owner trustee, andthe asset representations reviewer.

10 Any remaining amounts to the certificateholder.

(i)Similar to prior Toyota Auto Receivables Owner Trust transactions, the class B notes interest rate is 0.00%. YSOA--Yield supplementovercollateralization amount.

Managed Portfolio

As of the nine months ended Dec. 31, 2019, Toyota's retail managed portfolio increased toapproximately $56.58 billion from $53.33 billion a year earlier. In our view, Toyota's managedportfolio demonstrates relatively stable performance. Toyota's total delinquencies as of Dec. 31,2019, were 2.32%, an increase from 2.14% a year earlier. Annualized net losses as a percentage ofthe average principal loan balance outstanding for the nine months ended Dec. 31, 2019, was0.55%, up from 0.49% for the same period a year earlier. Repossessions as a percentage of theaverage number of contracts outstanding dropped slightly to 1.09% from 1.14% for same period in2018. Toyota's securitizations since 2010, including series 2020-A, generally consist of



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higher-quality loans than those of the overall managed portfolio. Toyota's transactions arecharacterized by a minimum FICO score of 620 and exclude any loans with an original term greaterthan 72 months.

Table 2

Managed Portfolio

Nine months endedDec. 31 Fiscal year ended March 31

2019 2018 2019 2018 2017 2016 2015 2014 2013

Principalamountoutstanding(bil. $)

56.579 53.329 53.236 52.760 50.759 49.717 49.645 48.761 46.933

No. ofcontractsoutstanding

3,156,567 3,115,010 3,097,464 3,158,375 3,181,143 3,163,189 3,209,872 3,220,641 3,156,247

Avg. principalamountoutstanding(bil. $)

54.907 53.044 52.998 51.760 50.238 49.681 49.203 47.847 45.790

Avg. no. ofcontractsoutstanding

3,127,016 3,136,693 3,127,920 3,169,759 3,172,166 3,186,531 3,215,257 3,188,444 3,138,014

Delinquencies (%)(i)

30-59 days 1.55 1.46 1.24 1.17 1.14 1.13 0.97 1.02 1.13

60-89 days 0.41 0.38 0.31 0.30 0.25 0.25 0.20 0.21 0.23

More than89 days

0.36 0.30 0.27 0.26 0.24 0.21 0.17 0.18 0.20

Total30-plusdays

2.32 2.14 1.82 1.73 1.63 1.59 1.35 1.41 1.56

No. ofrepossessionsas a % of theavg. no. ofcontractsoutstanding(ii)

1.09 1.14 1.14 1.22 1.45 1.18 1.08 1.10 1.09

Recoveries(000s $)

38,476 37,776 48,871 49,567 49,474 47,966 59,931 62,714 69,088

Net losses as a% of avg.principalamountoutstanding(ii)

0.55 0.49 0.52 0.58 0.69 0.55 0.42 0.41 0.38

(i)As a percentage of contracts outstanding. (ii)Annualized.

Collateral Pool Analysis

As of the Dec. 31, 2019, cut-off date, TAOT 2020-A's collateral pool consisted of approximately$1.33 billion ($1.86 billion, if upsized) in Toyota-originated auto loans. We compared the series



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2020-A pool with those of Toyota's previous securitizations (see table 3). In our view, the series2020-A pool's credit characteristics are relatively consistent with Toyota's prior series. Ourexpected cumulative net loss (CNL) for the TAOT 2020-A pool is 0.55%-0.65%, unchanged fromTAOT 2019-D (see table 5 for initial and revised lifetime CNL projections for Toyota's outstandingtransactions).

Table 3

Toyota Auto Receivables Owner Trust Collateral Comparison(i)

Series

2020-A($1.25

bil. pool)

2020-A($1.75

bil. pool) 2019-D 2019-C 2019-B 2019-A 2018-D 2018-C 2018-B 2018-A 2017-D

Receivablesbalance(mil. $)

1,325.72 1,855.90 1,872.86 1,344.77 1,907.22 1,930.93 1,390.01 2,101.42 1,767.85 1,914.79 1,903.25

No. ofreceivables

69,725 97,464 99,197 72,045 102,324 101,380 73,125 109,467 94,829 105,677 106,107

Avg. loanbalance ($)

19,014 19,042 18,880 18,666 18,639 19,046 19,009 19,197 18,643 18,119 17,937

Weightedavg. APR(%)

3.19 3.20 2.98 2.74 2.56 2.32 2.13 2.14 2.15 2.15 2.12

Weightedavg. originalterm (mos.)

65.72 65.76 65.75 65.86 65.85 65.91 66.07 66.10 65.79 65.28 64.60

Weightedavg.remainingterm (mos.)

49.89 49.96 49.72 49.47 50.05 50.82 51.45 51.70 51.33 50.46 49.98

Weightedavg.seasoning(mos.)

15.83 15.80 16.03 16.39 15.80 15.09 14.62 14.40 14.46 14.82 14.62

Weightedavg. FICOscore

766 766 766 762 761 762 762 761 761 761 760

% with FICOgreaterthan 700

82.13 82.08 82.51 79.02 79.14 79.13 79.20 78.95 78.63 79.11 79.00

Originalterm 61-72mos. (%)

54.04 54.29 54.33 55.30 55.07 55.51 56.17 56.39 54.10 50.29 45.27

Weightedavg. LTV (%)

97.79 97.82 98.37 98.78 98.93 99.06 99.14 99.05 98.80 98.38 98.34

% of newvehicles

80.14 80.06 79.66 81.03 81.76 82.36 82.03 80.86 80.02 78.61 78.18

% of usedvehicles

19.86 19.94 20.34 18.97 18.24 17.64 17.97 19.14 19.98 21.39 21.82

Top five state concentrations (%)(ii)

CA=24.68 CA=24.70 CA=24.98 CA=24.83 CA=24.68 CA=23.94 CA=23.48 CA=24.67 CA=24.47 CA=24.39 CA=25.77

TX=14.93 TX=15.02 TX=14.91 TX=14.82 TX=14.57 TX=15.33 TX=15.44 TX=15.69 TX=14.68 TX=15.09 TX=10.93



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Table 3

Toyota Auto Receivables Owner Trust Collateral Comparison(i) (cont.)

Series

2020-A($1.25

bil. pool)

2020-A($1.75

bil. pool) 2019-D 2019-C 2019-B 2019-A 2018-D 2018-C 2018-B 2018-A 2017-D

IL=4.78 IL=4.77 IL=4.92 IL=4.75 IL=4.73 IL=4.59 IL=4.34 IL=4.35 IL=4.58 IL=4.42 IL=4.69

PA=3.96 PA=4.00 PA=3.90 PA=3.96 PA=3.95 PA=4.02 PA=4.14 PA=4.18 PA=4.27 PA=4.24 NJ=4.42

VA=3.78 VA=3.78 VA=3.54 VA=3.55 VA=3.68 VA=3.78 VA=3.75 NJ=3.81 NJ=3.98 NJ=4.04 PA=4.39

(i)All percentages are of the initial receivables balance. (ii)As a percentage of the principal balance. APR--Annual percentage rate. LTV--Loan-to-value.

We also compared the TAOT 2020-A collateral pool with recent transactions from its peers withinthe prime auto loan sector that we have similar expected CNL ranges for (see table 4).

Table 4

Collateral Peer Comparison(i)

Issuer

TAOT 2020-A base TAOT 2020-A upsize HAROT 2019-4 MBART 2019-1

Receivables balance (mil. $) 1,325.72 1,855.90 1,619.44 1,253.01

No. of receivables 69,725 97,464 78,455 39,502

Avg. principal balance ($) 19,014 19,042 20,644 31,720

Avg. APR (%) 3.19 3.20 2.57 3.71

Avg. original term (mos.) 65.72 65.76 61.08 64.30

Avg. remaining term (mos.) 49.89 49.96 49.04 51.96

Avg. seasoning (mos.) 15.83 15.80 12.04 12.34

Loans with original term greater than60 mos. (%)

54.04 54.29 27.68 65.44

Maximum original loan term (mos.) 72 72 72 72

New vehicles (%) 80.14 80.06 91.51 40.29

Used vehicles (%) 19.86 19.94 8.49 59.71

Weighted avg. FICO 766 766 770 773

Minimum FICO 620 620 -- 651

Weighted avg. LTV (%) 97.79 97.82 N/A 105.08

Top three state concentrations (%)

CA=24.68 CA=24.70 CA=19.99 CA=20.43

TX=14.93 TX=15.02 TX=9.89 TX=12.49

IL=4.78 IL=4.77 FL=5.85 FL=9.66

Initial lifetime ECNL (%) 0.55-0.65 0.55-0.65 0.50-0.60 0.55-0.65

(i)All percentages are of the initial gross receivables balance. TAOT--Toyota Auto Receivables Owner Trust. HAROT--Honda Auto ReceivablesOwner Trust. MBART—Mercedes Benz Auto Receivables Trust. APR--Annual percentage rate. ECNL--Expected cumulative net loss. N/A--Notapplicable. LTV--Loan-to-value.

The TAOT 2020-A pool has strong collateral characteristics, in our view. Its average seasoning is



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one of the highest among peers. TAOT 2020-A has shorter remaining terms and a lower usedvehicle percentage than the Mercedes Benz Auto Receivables Trust 2019-1 pool, though it has alower weighted average FICO and a higher used vehicle percentage than the Honda AutoReceivables Owner Trust 2019-4 pool. Our expected loss of 0.55%-0.65% considers these peercollateral comparisons (see the S&P Global Ratings' Expected Loss section).

Securitization Performance

Toyota did not issue any securitizations between 2004 and 2009. Since re-entering thesecuritization market in 2010, Toyota has completed 31 transactions. All have experienced netlosses inline with, or better than, our initial or revised expectations. The paid-off transactions from2010 to 2016 realized CNLs ranging from 0.16% to 0.40%. The series 2016-B through 2018-Dtransactions are projected to incur expected CNLs of 0.40%-0.65% (see charts 2 and 3 and table5).

Chart 2



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Chart 3

Toyota has historically experienced strong recoveries on its securitizations. From 2010-2015,Toyota's cumulative recovery on its securitizations was approximately 60%. However, we haveobserved a gradual decrease in the recovery rate for the 2016-2019 securitizations (see charts 4and 5).

Chart 4



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Chart 5

Surveillance Update

We currently have ratings on 15 TAOT transactions issued between 2016 and 2019. Eachtransaction is trending inline with, or better than, our initial expectation at this time. In December2019, we affirmed 10 ratings on series 2017-C, 2017-D, and 2018-D notes (see "Ten RatingsAffirmed On Three Toyota Auto Receivables Owner Trust Transactions," published Dec. 9, 2019). InAugust 2019, we raised our rating on the series 2016-D class B notes and affirmed our ratings onthe remaining classes of notes for six transactions (see "Twenty-One Rating Actions Taken On SixToyota Auto Receivables Owner Trust Transactions," published Aug. 23, 2019).

In March 2019, we raised our rating on the series 2016-C class B notes and affirmed our ratings onthe remaining classes of notes for three transactions (see "Eleven Rating Actions Taken On ThreeToyota Auto Receivables Owner Trust Transaction," published March 1, 2019).

We will continue to monitor the performance of each outstanding transaction and take ratingactions as we deem appropriate.

Table 5

Collateral Performance

TAOT series surveillance update (as of the January 2020 distribution date)

Series MonthPool factor

(%)Current CNL

(%)60-plus-day

delinquency (%)Original lifetime

expected CNL (%)Revised lifetime

expected CNL (%)(i)

2016-B 44 5.45 0.46 0.76 0.55-0.65 up to 0.55

2016-C 41 7.91 0.44 0.78 0.55-0.65 0.50-0.60



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Table 5

Collateral Performance (cont.)

TAOT series surveillance update (as of the January 2020 distribution date)

Series MonthPool factor

(%)Current CNL

(%)60-plus-day

delinquency (%)Original lifetime

expected CNL (%)Revised lifetime

expected CNL (%)(i)

2016-D 39 9.95 0.43 0.58 0.55-0.65 0.50-0.60

2017-A 34 16.68 0.40 0.40 0.55-0.65 0.50-0.60

2017-B 32 20.30 0.44 0.47 0.55-0.65 0.50-0.60

2017-C 29 25.81 0.37 0.47 0.55-0.65 0.50-0.60

2017-D 26 30.84 0.35 0.35 0.55-0.65 0.50-0.60

2018-A 23 36.75 0.32 0.32 0.55-0.65 0.55-0.65

2018-B 20 43.76 0.29 0.36 0.55-0.65 0.55-0.65

2018-C 17 50.89 0.27 0.34 0.55-0.65 0.55-0.65

2018-D 14 57.58 0.23 0.33 0.55-0.65 0.55-0.65

2019-A 11 64.49 0.17 0.24 0.55-0.65 N/A

2019-B 8 72.01 0.11 0.26 0.55-0.65 N/A

2019-C 5 80.53 0.07 0.20 0.55-0.65 N/A

2019-D 2 90.27 0.01 0.11 0.55-0.65 N/A

(i)Revised lifetime net losses voted in March 2019 for series 2016-B, 2016-C, and 2018-A; in August 2019 for series 2016-D, 2017-A, 2017-B,2018-B, and 2018-C; and in December 2019 for series 2017-C, 2017-D, and 2018-D. CNL--Cumulative net loss. N/A--Not applicable.

S&P Global Ratings' Expected Loss: 0.55%-0.65%

We reviewed Toyota's origination static pool data, as well as the performance of Toyota'ssecuritized pools, to derive our expected loss level for the series 2020-A transaction.

We also reviewed Toyota's managed pool performance and the deal-level collateralcharacteristics. We then compared our expected loss level for the series 2020-A pool with ourprojections for Toyota's peers to verify that the loss range remained appropriate given the relevantdifferences across the issuers and their pools.

In deriving the expected loss for series 2020-A, we considered the pool's relatively high seasoning.The weighted average seasoning of the collateral pool is 15.8 months. As a result, the averagecurrent loan balance has paid down about 32% to $19,014 ($19,042, if upsized) from the averageoriginal loan balance of $28,074 ($28,098, if upsized). Also, because of the high seasoning, onlyabout 21% of both the base and upsized pools' loans have remaining terms of 61-72 months,while about 54% of the pools' loans had original terms of 61-72 months.

We expect the series 2020-A pool to experience CNLs of 0.55%-0.65%, unchanged from the series2019-D transaction. This is based on our view of Toyota's securitizations, origination static pool,and managed portfolio performance, as well as consistent TAOT pool composition and collateralcharacteristics, credit quality of the receivables pool, and our forward-looking view of theeconomy.



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Cash Flow Modeling Assumptions And Results

We used cash flow modeling to determine the availability and timing of excess spread and thetransaction's ability to pay timely interest and ultimate principal to the rated classes under stressscenarios that we believe are consistent with the assigned preliminary ratings. Excess spread,which is an important component of a transaction's overall credit enhancement, can be affectedby many factors, such as the absolute level and timing of defaults, prepayment speeds, paymenttiming lags, and the collateral's APR and term.

We modeled the series 2020-A transaction to withstand our 'AAA' and 'AA+' stress scenarios forthe class A and B notes, respectively (see table 6). Historical performance data indicates thatloans with lower APRs tend to prepay and default less frequently than loans with higher APRs.When this occurs within a pool of loans, the lower-APR loans remain outstanding longer. Westressed the excess spread in our cash flow modeling scenarios accordingly by using abifurcated-pool method under which the higher-APR nonsubvened loans prepay faster anddefault at a disproportionately higher rate than the lower-APR subvened loans.

Table 6

Cash Flow Assumptions/Results

Class A Class B

Preliminary rating AAA (sf) AA+ (sf)

Subvened loans (% of pool)(i) 69 69

Nonsubvened loans (% of pool) 31 31

Cumulative net loss timing (% of losses per year)

Total loans 45/81/93/100 45/81/93/100

Subvened loans 39/75/89/100 39/75/89/100

Nonsubvened loans 56/91/100 56/91/100

Loss allocation (% of total losses)

Subvened loans 60 60

Nonsubvened loans 40 40

Voluntary ABS (%)

Subvened loans 0.25 0.25

Nonsubvened loans 1.80 1.75

Recovery rate (%) 50 50

Recovery lag (mos.) 4 4

Approximate breakeven net loss rate (%)(ii) 7.7 5.6

(i)Subvened loans are loans with APRs lower than 4.00%, and nonsubvened loans are loans with APRs greater than or equal to 4.00%. (ii)Themaximum cumulative net losses on the pool that the transaction can withstand without triggering a payment default on the class A or B notes.ABS--Absolute prepayment speed. APRs--Annual percentage rates.

In our break-even scenarios, while the nonsubvened loans constitute approximately 31% of theseries 2020-A pool, they were allocated 40% of the losses; conversely, the subvened loansaccount for about 69% of the pool and were allocated only 60% of the losses. This additionalstress reduced the break-even losses that the transaction's credit enhancement could absorb butremained consistent with our 'AAA' and 'AA+' stress scenarios. In both scenarios, we used



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relatively front-loaded loss timing curves to account for the highly seasoned collateral.

The break-even cash flow results show that the class A and B notes have more than sufficientcredit enhancement to withstand a stressed net loss level consistent with the assignedpreliminary ratings of 'AAA (sf)' and 'AA+ (sf)', respectively.

Sensitivity Analysis

In addition to running break-even cash flow scenarios, we ran sensitivity scenarios to see how theratings on the notes could be affected by losses that are moderately higher than what we expect.

Moderate loss scenario: 1.60% (2.0x our minimum 'B' credit enhancementlevel)

Under the 1.60% moderate stress loss scenario (2.0x our minimum 'B' credit enhancement level,based on 0.80% expected CNL), we ran a bifurcated-pool assumption, under which thenonsubvened collateral defaulted at a higher rate and prepaid at a faster rate than the subvenedcollateral. In addition, the nonsubvened collateral was allocated a higher proportion of the totallosses than its representative proportion of the total loan pool balance (see table 7). The 0.80%implied expected CNL is based on our 4.00% minimum credit enhancement level for a 'AAA (sf)'rating, as outlined in our U.S. auto loan criteria (see "General Methodology And Assumptions ForRating U.S. Auto Loan Securitizations," published Jan. 11, 2011.

Table 7

Scenario Analysis Summary: Moderate Stress Loss Scenario –

Class A Class B

Cumulative net loss level (% of initial pool balance) 1.60 1.60

Cumulative net loss timing (% of losses per year)

Total loans 45/81/93/100 45/81/93/100

Subvened loans(i) 39/75/89/100 39/75/89/100

Nonsubvened loans 56/91/100 56/91/100

Loss allocation (% of total losses)

Subvened loans 60 60

Nonsubvened loans 40 40

Voluntary ABS (%)

Subvened loans 0.25 0.25

Nonsubvened loans 1.50 1.50

Recovery rate (%) 50 50

Recovery lag (mos.) 4 4

Potential rating decline No rating decline expected No rating decline expected

(i)Subvened loans are loans with APRs that are 4.00% or lower, and nonsubvened loans are loans with APRs greater than 4.00%. ABS--Absoluteprepayment speed. APRs--Annual percentage rates.



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Chart 6

Under our moderate stress loss scenario, overcollateralization reaches its 0.85% target level bymonth two by using excess spread to pay the class A note principal after class A note interest andrelated transaction fees and expenses are paid. The reserve account amount is maintained at itsrequisite level until all of the notes are paid off. Interest is paid to the class A notes on a timelybasis, and the class A-1, A-2, A-3, A-4, and B notes are paid in full by months eight, 24, 42, 51, and58, respectively.

Under the 2.0x stress scenario, all else being equal, we would not expect to lower our ratings onthe class A and B notes over the transaction's lifetime. This is consistent with our credit stabilitycriteria for 'AAA' and 'AA+' ratings, which express a theoretical outer bound for the projectedcredit deterioration of any given security under specific hypothetical stress scenarios (see"Methodology: Credit Stability Criteria," published May 3, 2010).

Legal Final Maturity

To test the legal final maturity dates proposed for the class A-1, A-2, A-3, and A-4 notes, wedetermined the dates on which the respective notes were fully amortized in a zero-loss,zero-prepayment scenario, and then added three months to the result. For the longest-datedsecurity (class B), we added 12 months to the tenor of the longest receivable in the pool toaccommodate potential extensions on the receivables. Furthermore, in our break-even cash flowscenario for each respective preliminary rating level, we confirmed that there was sufficient creditenhancement to both cover losses and repay the related notes in full by the legal final maturitydate.



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Toyota

Toyota was incorporated in California in 1982 and began operating in 1983. It is owned by ToyotaFinancial Services International Corp., a California corporation that is a wholly owned subsidiary ofToyota Financial Services Corp., a Japanese corporation that is a wholly owned subsidiary ofToyota Motor Corp., another Japanese corporation. Toyota Financial Services manages ToyotaMotor Corp.'s worldwide finance operations.

Related Criteria

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation AndSpecial-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating StructuredFinance Securities: Methodology And Assumptions, Jan. 30, 2019

- Criteria | Structured Finance | General: Methodology: Criteria For Global Structured FinanceTransactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon ANonmonetary EOD, March 2, 2015

- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, AndIndemnifications, July 12, 2012

- General Criteria: Global Investment Criteria For Temporary Investments In TransactionAccounts, May 31, 2012

- Criteria | Structured Finance | ABS: General Methodology And Assumptions For Rating U.S. AutoLoan Securitizations, Jan. 11, 2011

- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28,2009

Related Research

- Ten Ratings Affirmed On Three Toyota Auto Receivables Owner Trust Transactions, Dec. 9, 2019

- Twenty-One Rating Actions Taken On Six Toyota Auto Receivables Owner Trust Transactions,Aug. 23, 2019

- Toyota Motor Corp., May 31, 2019

- Eleven Rating Actions Taken On Three Toyota Auto Receivables Owner Trust Transactions,March 1, 2019

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top FiveMacroeconomic Factors, Dec. 16, 2016

In addition to the criteria specific to this type of security (listed above), the following criteriaarticles, which are generally applicable to all ratings, may have affected this rating action:"Counterparty Risk Framework: Methodology And Assumptions," March 8, 2019; "Post-DefaultRatings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23,2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions,"Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D'



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And 'SD' Ratings," Oct. 24, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings,"Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch AndOutlooks," Sept. 14, 2009.



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toyota auto receivables 2020-a owner trust...2020-a's) class a-1, a-2, a-3, and a-4...

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