toyota auto receivables 2020-b owner trust · taot 2020-b is toyota's 18th auto loan...

Presale:

Toyota Auto Receivables 2020-B Owner TrustApril 16, 2020

Preliminary Ratings

Class(i)Preliminaryrating Type

Interestrate

Preliminaryamount (mil. $)

Upsized preliminaryamount (mil. $)(ii)

Expected legalfinal maturitydate

A-1 A-1+ (sf) Senior Fixed 160.00 240.00 May 17, 2021

A-2 AAA (sf) Senior Fixed 300.00 450.00 Dec. 15,2022

A-3 AAA (sf) Senior Fixed 262.02 393.04 Aug. 15, 2024

A-4 AAA (sf) Senior Fixed 57.98 86.96 Sept. 15, 2025

B(iii) NR Subordinate Fixed 20.00 30.00 Nov. 16, 2026

Note: This presale report is based on information as of April 16, 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 note sizes if the aggregate initial principal balance of the notes is $1.20 billion. (iii)Theclass B notes will have a 0.00% interest rate. NR -– Not rated.

Profile

Expected closing date April 29, 2020.

Collateral Prime fixed-rate auto loan receivables.

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

Depositor Toyota Auto Finance Receivables LLC.

Issuer Toyota Auto Receivables 2020-B Owner Trust.

Lead underwriter BofA Securities.

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

Owner trustee Wilmington Trust N.A.

Presale:

Toyota Auto Receivables 2020-B Owner TrustApril 16, 2020

PRIMARY CREDIT ANALYST

Cara Mcgonigle

New York

+1 (212) 438-1792

[email protected]

SECONDARY CONTACT

Jennie P Lam

New York

(1) 212-438-2524

[email protected]

www.standardandpoors.com April 16, 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-B TAOT 2020-A

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 1.00 1.00 1.00 0.25 0.25 0.25

Subordination 2.50 2.50 2.50 2.50 2.50 2.50

Total 3.50 4.35 4.35 2.75 3.60 3.60

Class B

Overcollateralization 0.00 0.85 0.85 0.00 0.85 0.85

Reserve account 1.00 1.00 1.00 0.25 0.25 0.25

Subordination 0.00 0.00 0.00 0.00 0.00 0.00

Total 1.00 1.85 1.85 0.25 1.10 1.10

Additional enhancement

YSOA (% of initial adjusted poolbalance)

6.29 -- -- 6.05 -- --

Estimated annual excessspread(ii)

3.56 -- -- 3.72 -- --

Initial aggregate receivablespool balance ($)

850,284,687 -- -- 1,855,904,868 -- --

Initial YSOA ($) 50,284,659 -- -- 105,900,324 -- --

Initial adjusted pool balance ($) 800,000,029 -- -- 1,750,004,544 -- --

Total securities issued ($) 800,000,000 -- -- 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-B is pre-pricing, while TAOT2020-A's estimated annual excess spread is post-pricing. (iii)If the series 2020-B issued notes' aggregate initial principal amount is $1.20billion, the initial aggregate receivables pool balance, initial YSOA, and initial adjusted pool balance will be $1,275,392,995, $75,391,228 and$1,200,001,768, respectively. TAOT--Toyota Auto Receivables Owner Trust. YSOA--Yield supplement overcollateralization amount.

Rationale

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

- The availability of approximately 8.6% credit support (including excess spread) for the class Anotes based on stress cash flow scenarios. This credit support level provides more than the8.0x our 0.90%-1.10% expected cumulative net loss range for the class A notes and iscommensurate with the assigned preliminary 'A-1+ (sf)' and 'AAA (sf)'ratings (see the S&PGlobal Ratings' Expected Loss and Cash Flow Modeling 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 poolmethod, 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.)



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Presale: Toyota Auto Receivables 2020-B Owner Trust

- 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 (2.0x our expected loss level), allelse being equal, our preliminary 'AAA (sf)' ratings on the class A notes are consistent with thetolerances outlined in our credit stability criteria (see "Methodology: Credit Stability Criteria,"published 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 767 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.

S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peakof the coronavirus outbreak. Some government authorities estimate the pandemic will peak aboutmidyear, and we are using this assumption in assessing the economic and credit implications. Inour view, the measures adopted to contain COVID-19 have pushed the global economy intorecession (see our macroeconomic and credit updates here: www.spglobal.com/ratings). As thesituation evolves, we will update our assumptions and estimates accordingly.

Changes From The Series 2020-A Transaction

The notable structural changes in the series 2020-B pool from the series 2020-A transactioninclude:

- The reserve account as a percentage of the initial adjusted pool balance increased to 1.00%from 0.25%;

- The required YSOA rate increased to 6.25% from 6.00%;

- The initial YSOA amount as a percentage of the initial adjusted pool balance increased to 6.29%(6.28% if upsized) from 6.05%; and

- The estimated excess spread decreased to approximately 3.56% (before pricing) from 3.72%(after pricing), which is largely due to higher note coupon expectations.

The notable collateral composition changes in the series 2020-B pool from the series 2020-Atransaction include:

- The percentage of loans with an original term of 61-72 months increased slightly to 54.61%(54.52% if upsized) from 54.29%;

- The percentage of new vehicles decreased slightly to 79.33% (79.14% if upsized) from 80.06%;

- The weighted average APR increased to 3.25% (3.26% if upsized) from 3.20%; and

- The weighted average seasoning increased to 16.52 (16.47 if upsized) from 15.80.



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Overall, the series 2020-B collateral pool's credit quality is similar to that of series 2020-A, in ourview (see the Pool Analysis section for the collateral pool comparison to 2020-A and prior TAOTpools). However, we expect unemployment levels to increase and, based on the historicalcorrelation between credit performance and unemployment, losses will likely increase as well. Asa result, we increased our expected cumulative net loss for TAOT 2020-B to the 0.90%-1.10%range (see "The Potential Effects Of COVID-19 On U.S. Auto Loan ABS," published March 26, 2020).

To test whether the money market tranche can be repaid by its maturity date, we ran cash flowsusing assumptions to delay the principal collections. We assumed zero defaults and, due to ourcurrent economic outlook and expectation for increased extensions, as well as the resultingtemporary decrease in collections in the near-term, we are not assuming any voluntaryprepayments in our cash flow runs.

Transaction Overview

TAOT 2020-B is Toyota's 18th auto loan securitization to be issued under its Regulation ABII-compliant retail shelf.

Toyota will issue $800.00 million ($1.20 billion, if upsized) of class A and B sequential-pay notes.The class B notes will be retained by Toyota Auto Finance Receivables and will have a 0.00%interest rate. The transaction's first scheduled payment date will be May 15, 2020. The notes'applicable principal and interest are scheduled to be paid on the 15th day of each followingmonth. The class A-1, A-2, A-3, and A-4 notes will all be fixed-rate issuances.

The TAOT 2020-B 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-B, the issuer. TAOT 2020-B will then pledge the rights to the receivables to theindenture trustee for the noteholders' benefit. TAOT 2020-B will issue approximately $780.00million of class A notes and $20.00 million of class B notes; if the initial notes' aggregate balanceis upsized to $1.20 billion, TAOT 2020-B will issue approximately $1.17 billion of class A notes and$30.00 million of class B notes (see chart 1 for the transaction structure).



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

Transaction Structure

The TAOT 2020-B 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 be retained by Toyota Auto Finance Receivables and 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 1.00% of the initial adjusted poolbalance.

- A YSOA that initially will be 6.29% (6.28% if upsized) of the adjusted pool balance (5.91% 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 6.25% 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,6.25%, 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. Annualized repossessions as apercentage of the average number of contracts outstanding dropped slightly to 1.09% from 1.14%for same period in 2018. Toyota's securitizations since 2010, including series 2020-B, generally



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consist of higher-quality loans than those of the overall managed portfolio. Toyota's transactionsare characterized by a minimum FICO score of 620 and exclude any loans with an original termgreater than 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. $)

54.908 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 March 31, 2020, cut-off date, TAOT 2020-B's collateral pool consisted of approximately$850.28 million ($1.28 billion, if upsized) in Toyota-originated auto loans. We compared the series



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2020-B pool with those of Toyota's previous securitizations (see table 3). Approximately 83% ofthe obligors by balance have FICO scores greater than 700. While approximately 55% of the pool'sloans by principal balance have original terms of 61-72 months, only approximately 20% haveremaining terms of that duration, due to seasoning. The collateral pool includes no loans withoriginal maturity terms greater than 72 months or borrowers with FICO scores below 620. In ourview, the series 2020-B pool's credit characteristics are relatively consistent with Toyota's priorseries. Per Toyota, loans that were extended, as of the March 31, 2020, cutoff date, in connectionwith Toyota's payment relief efforts related to the COVID-19 pandemic are not included in theseries 2020-B collateral pool.

Table 3

Toyota Auto Receivables Owner Trust Collateral Comparison(i)

Series

2020-B($850.28mil pool)

2020-B($1.28

bil. pool) 2020-A 2019-D 2019-C 2019-B 2019-A 2018-D 2018-C 2018-B 2018-A

Receivablesbalance(mil. $)

850.28 1,275.39 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

No. ofreceivables

45,003 67,524 97,464 99,197 72,045 102,324 101,380 73,125 109,467 94,829 105,677

Avg. loanbalance ($)

18,894 18,888 19,042 18,880 18,666 18,639 19,046 19,009 19,197 18,643 18,119

Weightedavg. APR(%)

3.25 3.26 3.20 2.98 2.74 2.56 2.32 2.13 2.14 2.15 2.15

Weightedavg. originalterm (mos.)

65.83 65.81 65.76 65.75 65.86 65.85 65.91 66.07 66.10 65.79 65.28

Weightedavg.remainingterm (mos.)

49.31 49.34 49.96 49.72 49.47 50.05 50.82 51.45 51.70 51.33 50.46

Weightedavg.seasoning(mos.)

16.52 16.47 15.80 16.03 16.39 15.80 15.09 14.62 14.40 14.46 14.82

Weightedavg. FICOscore

767 767 766 766 762 761 762 762 761 761 761

% with FICOgreaterthan 700

82.88 82.65 82.08 82.51 79.02 79.14 79.13 79.20 78.95 78.63 79.11

Originalterm 61-72mos. (%)

54.61 54.52 54.29 54.33 55.30 55.07 55.51 56.17 56.39 54.10 50.29

% of newvehicles

79.33 79.14 80.06 79.66 81.03 81.76 82.36 82.03 80.86 80.02 78.61

% of usedvehicles

20.67 20.86 19.94 20.34 18.97 18.24 17.64 17.97 19.14 19.98 21.39



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Table 3

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

Series

2020-B($850.28mil pool)

2020-B($1.28

bil. pool) 2020-A 2019-D 2019-C 2019-B 2019-A 2018-D 2018-C 2018-B 2018-A

Top five state concentrations (%)(ii)

CA=24.25 CA=24.25 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

TX=14.65 TX=14.77 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

IL=4.75 IL=4.71 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

PA=4.05 PA=4.14 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=3.73 NJ=3.73 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

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

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

Table 4

Collateral Peer Comparison(i)

Issuer

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

Receivables balance (mil. $) 850.28 1,275.39 1,619.44 1,253.01

No. of receivables 45,003 67,524 78,455 39,502

Avg. principal balance ($) 18,894 18,888 20,644 31,720

Avg. APR (%) 3.25 3.26 2.57 3.71

Avg. original term (mos.) 65.83 65.81 61.08 64.30

Avg. remaining term (mos.) 49.31 49.34 49.04 51.96

Avg. seasoning (mos.) 16.52 16.47 12.04 12.34

Loans with original term greater than60 mos. (%)

54.61 54.52 27.68 65.44

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

New vehicles (%) 79.33 79.14 91.51 40.29

Used vehicles (%) 20.67 20.86 8.49 59.71

Weighted avg. FICO 767 767 770 773

Minimum FICO 620 620 -- 651

Top three state concentrations (%)

CA=24.25 CA=24.25 CA=19.99 CA=20.43

TX=14.65 TX=14.77 TX=9.89 TX=12.49

IL=4.75 IL=4.71 FL=5.85 FL=9.66

(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. N/A--Not applicable.



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The TAOT 2020-B pool has strong collateral characteristics, in our view. Its average seasoning isone of the highest among peers. TAOT 2020-B 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 2020-1 and 2019-4 pools.

Securitization Performance

Toyota did not issue any securitizations between 2004 and 2009. Since re-entering thesecuritization market in 2010, Toyota has completed 32 transactions. All have experienced netlosses in-line with our initial or revised expectations. In our view, all of the classes currently haveadequate credit enhancement at their current rating levels. We will continue to monitor theperformance of the outstanding transactions, especially in light of the current recessionaryenvironment resulting from the COVID-19 pandemic, to ensure that the credit enhancementremain sufficient, in our view to cover our revised cumulative net loss expectations under ourstress scenarios for each of the rated classes.

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 60.00%. 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

Table 5

Collateral Performance

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

Series MonthPool factor

(%)Current CNL

(%)60-plus-day

delinquency (%)Original lifetime

expected CNL (%)Revised lifetime

expected CNL (%)(i)

2016-C 44 5.54 0.43 0.75 0.55-0.65 0.50-0.60

2016-D 42 7.23 0.43 0.83 0.55-0.65 0.50-0.60

2017-A 37 13.03 0.41 0.40 0.55-0.65 0.50-0.60

2017-B 35 16.30 0.44 0.44 0.55-0.65 0.50-0.60

2017-C 32 21.21 0.39 0.45 0.55-0.65 0.50-0.60

2017-D 29 25.72 0.36 0.41 0.55-0.65 0.50-0.60

2018-A 26 31.14 0.34 0.37 0.55-0.65 0.55-0.65

2018-B 23 37.56 0.34 0.34 0.55-0.65 0.55-0.65

2018-C 20 44.26 0.31 0.27 0.55-0.65 0.55-0.65

2018-D 17 50.45 0.27 0.29 0.55-0.65 0.55-0.65

2019-A 14 56.87 0.22 0.23 0.55-0.65 N/A

2019-B 11 63.72 0.21 0.26 0.55-0.65 N/A

2019-C 8 71.69 0.13 0.20 0.55-0.65 N/A

2019-D 5 80.79 0.07 0.17 0.55-0.65 N/A



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Table 5

Collateral Performance (cont.)

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

Series MonthPool factor

(%)Current CNL

(%)60-plus-day

delinquency (%)Original lifetime

expected CNL (%)Revised lifetime

expected CNL (%)(i)

2020-A 2 90.13 0.00 0.09 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: 0.90%-1.10%

We reviewed Toyota's origination static pool data, as well as the performance of Toyota'ssecuritized pools, to derive our base-case expected loss level for the series 2020-B 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-B 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-B, we considered the pool's relatively high seasoning.The weighted average seasoning of the collateral pool is 16 months. As a result, the averagecurrent loan balance has paid down about 33% to $18,894 ($18,888, if upsized) from the averageoriginal loan balance of $28,196 ($28,145, if upsized). Also, because of the high seasoning, onlyabout 20% of both the base and upsized pools' loans have remaining terms of 61-72 months,while about 55% of the pools' loans had original terms of 61-72 months.

We expect the series 2020-B pool to experience cumulative net losses in the 0.90%-1.10% range.This is based on our view of Toyota's securitizations, origination static pool, and managed portfolioperformance, as well as the credit quality of the receivables pool, and our forward-looking view ofthe economy given the measures taken to contain the COVID-19 pandemic.

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-B transaction to withstand a 'AAA(sf)' stress scenarios for the class Anotes (see table 6). Historical performance data indicates that loans with lower APRs tend toprepay and default less frequently than loans with higher APRs. When this occurs within a pool ofloans, the lower-APR loans remain outstanding longer. We stressed the excess spread in our cashflow modeling scenarios accordingly by using a bifurcated-pool method under which thehigher-APR nonsubvened loans prepay faster and default at a disproportionately higher rate thanthe lower-APR subvened loans.



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Table 6

Cash Flow Assumptions/Results

Class A

Preliminary rating AAA (sf)

Subvened loans (% of pool)(i) 69

Nonsubvened loans (% of pool) 31

Cumulative net loss timing (% of losses per year)

Total loans 45/81/93/100

Subvened loans 39/75/89/100

Nonsubvened loans 56/91/100

Loss allocation (% of total losses)

Subvened loans 60

Nonsubvened loans 40

Voluntary ABS (%)

Subvened loans 0.25

Nonsubvened loans 1.80

Recovery rate (%) 50

Recovery lag (mos.) 4

Approximate breakeven net loss rate (%)(ii) 8.6

(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 notes.ABS--Absolute prepayment speed. APRs--Annual percentage rates.

In our break-even scenarios, while the nonsubvened loans constitute approximately 31% of theseries 2020-B 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' stress scenario. We used relatively front-loaded loss timingcurves to account for the highly seasoned collateral.

The break-even cash flow results show that the class A notes have more than sufficient creditenhancement to withstand a stressed net loss level consistent with the assigned preliminaryratings of 'AAA (sf)'.

Sensitivity Analysis

In addition to running break-even cash flow scenarios, we ran sensitivity scenarios to see whetherunder a moderate ('BBB') stress scenario, all else being equal, our preliminary ratings wouldremain within the tolerances outlined in our credit stability criteria (see "Methodology: CreditStability Criteria," published May 3, 2010). We found that our preliminary 'AAA (sf)' ratings on theclass A notes are consistent with the tolerance outlined in our credit stability criteria. Thisindicates that we would not assign 'AAA' ratings if, under moderate stress conditions, the ratingswould be lowered by more than one category within the first year.

Under the 2.00% moderate stress loss scenario (2.0x our base-case ECNL), we again ran a



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bifurcated-pool assumption, under which the nonsubvened collateral defaulted at a higher rateand prepaid at a faster rate than the subvened collateral. In addition, the nonsubvened collateralwas allocated a higher proportion of the total losses than its representative proportion of the totalloan pool balance (see table 7).

Table 7

Scenario Analysis Summary: Moderate Stress Loss Scenario

Class A

Cumulative net loss level (% of initial pool balance) 2.00

Cumulative net loss timing (% of losses per year)

Total loans 45/81/93

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

Nonsubvened loans 56/91/100

Loss allocation (% of total losses)

Subvened loans 60

Nonsubvened loans 40

Voluntary ABS (%)

Subvened loans 0.25

Nonsubvened loans 1.50

Recovery rate (%) 50

Recovery lag (mos.) 4

(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.

Chart 6



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Amid the COVD-19 pandemic, we ran additional liquidity sensitivity runs. The sensitivity runstested potential cash flow reductions early in the transaction's lifespan due to higher extensions,forbearance, and delinquencies; reduced collection activity due to the collection disruptions; anddelays in disposition of collateral recoveries. In this analysis, we confirmed that the notes werepaid timely interest and principal by the final maturity date.

Money Market Tranche Sizing

The proposed money market tranche's (class A-1) legal final maturity date is May 17, 2021. To testwhether the money market tranche can be repaid by its maturity date, we ran cash flows usingassumptions to delay the principal collections. Due to our current economic outlook andexpectation for increased extensions that may result in a temporary decrease of collections in thenear-term, we are assuming that there will be no voluntary prepayments in our money marketstress. (We typically assume a voluntary absolute prepayment speed of 0.5% for nonsubvenedloans and 0.0% for subvened loans.) In this analysis, we confirmed that the tranche would pay offby the final maturity date.

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), 12 months was added 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.

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

- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017

- 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



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- 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

- U.S. Jobs Market Buckles Under the Coronavirus Pandemic, April 2, 2020

- It's Game Over For the Record U.S. Run; The Timing Of a Restart Remains Uncertain, March 27,2020

- The Potential Effects Of COVID-19 On U.S. Auto Loan ABS, March 26, 2020

- Toyota Motor 'AA-/A-1+' Ratings Placed On CreditWatch Negative On COVID-19 Pandemic,March 26, 2020

- Global Structured Finance Outlook 2020: Another $1 Trillion-Plus Year On Tap, Jan. 6, 2020

- 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'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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