Well-Funded Lending Unit Gives Toyota Competitive Edge

Toyota Motor Corp. can offer customers including higher-risk buyers more loans than its rival because its captive finance arm enjoys superior credit ratings and $95 billion in assets, Bloomberg News reports.

The news service says Toyota Financial Services handles more retail loans and leases in the U.S. than its counterparts at all other carmakers. It adds that TFS's credit rating is six rungs higher than Ford Motor Credit and seven steps above GM Financial.

The gap enables TFS to raise funds at roughly half the basis-point spread of its U.S. rivals. It also allowed Toyota to increase its leasing business in 2008 when the economic crisis prompted other companies to pull back.

Bloomberg says the financial unit's clout helped Toyota increase its U.S. market share during the period. Today, it could permit the company to absorb rate increases rather than pass them along to consumers.

CEO Mike Groff tells the news service that TFS's strategy focuses on customer loyalty and retention. An analyst notes that the unit is offering low-rate leases and no-interest loans across its lineup in part to attract younger and lower-income customers.