Fitch Ratings has assigned ratings and Rating Outlooks to the class A notes issued by Toyota Auto Receivables 2022-C Owner Trust (TAOT 2022-C).

Fitch used 2008-2009 recessionary vintage performance along with the more recent 2015-2017 vintage performance data as base periods to derive and forecast the base case cumulative net loss (CNL) proxy. The sensitivity of the ratings to scenarios more severe than currently expected is provided in the Rating Sensitivities section below.

RATING ACTIONS

Entity / Debt

Rating

Prior

Toyota Auto Receivables 2022-C Owner Trust

A-1

ST

F1+sf

New Rating

F1+(EXP)sf

A-2a

LT

AAAsf

New Rating

AAA(EXP)sf

A-2b

LT

AAAsf

New Rating

AAA(EXP)sf

A-3

LT

AAAsf

New Rating

AAA(EXP)sf

A-4

LT

AAAsf

New Rating

AAA(EXP)sf

B

LT

NRsf

New Rating

NR(EXP)sf

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Collateral Performance-Stable Credit Quality: The 2022-C pool has a weighted average (WA) FICO score of 765, slightly down from 766 in 2022-B. However, the pool has a higher concentration of extended-term loans (61 months-72 months) at 65.1%, compared with 55.0% in the 2022-B pool. The concentration of new vehicles is 77.2%, comparable with 76.7% in 2022-B. Overall, the pool is generally consistent with the 2022-B pool and prior TAOT transactions, and strong relative to prime peer transactions.

Forward-Looking Approach to Derive Base Case Loss Proxy: Fitch considered economic conditions and future expectations by assessing key macroeconomic and wholesale market conditions when deriving the series loss proxy. Toyota Motor Credit Corporation's (TMCC) managed portfolio and securitization performance has been strong over the past 10 years. However, weakening trends have been observed in recent years, including slowly rising losses, which is consistent with the broader market but well below 2008 peak levels.

Fitch's initial base case CNL proxy was derived utilizing 2008-2009 and 2015-2017 vintage ranges, including recessionary static managed portfolio data and more recent performance. Fitch arrived at a forward-looking base case CNL proxy of 0.90%, consistent with 2022-A, the last transaction rated by Fitch.

Payment Structure-Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for the class A notes totals 2.75%, comprising 2.50% subordination and a 0.25% non-declining reserve, consistent with the recent transactions. Initial CE is sufficient to withstand Fitch's base case CNL proxy of 0.90% for the class A notes at the 'AAAsf' loss coverage multiple. The yield supplement overcollateralization amount increases the effective WA APR, resulting in excess spread of 3.57% per annum, up from 3.43% in 2022-B.

Seller/Servicer Operational Review-Consistent Origination/Underwriting/Servicing: Fitch affirmed TMCC's Long-Term Issuer Default Rating at 'A+' with a Stable Outlook on Nov. 24, 2021. TMCC demonstrates solid capabilities as an originator, underwriter and servicer, evidenced by its historical portfolio and securitization performance. Fitch deems TMCC as capable of adequately servicing this series.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Unanticipated increases in the frequency of defaults could produce CNL levels higher than the base case and would likely result in declines of CE and remaining net loss coverage levels available to the notes. Additionally, unanticipated declines in recoveries could also result in lower net loss coverage, which may make certain note ratings susceptible to potential negative rating actions depending on the extent of the decline in coverage.

Fitch conducts sensitivity analyses by stressing both a transaction's initial base case CNL and recovery rate assumptions and examining the rating implications on all classes of issued notes. The CNL sensitivity stresses the CNL proxy to the level necessary to reduce each rating by one full category, to non-investment grade (BBsf) and to 'CCCsf', based on the break-even loss coverage provided by the CE structure.

Additionally, Fitch conducts 1.5x and 2.0x increases to the CNL proxy, representing both moderate and severe stresses, respectively. Fitch also evaluates the impact of stressed recovery rates on the transaction structure and rating impact with a 50% haircut. These analyses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.

Fitch has revised global economic outlook forecasts as a result of the Ukraine War and related economic sanctions. Downside risks have increased and we have published an assessment of the potential rating and asset performance impact of a plausible, but worse-than-expected, adverse stagflation scenario on Fitch's major SF and CVB sub-sectors (see 'What a Stagflation Scenario Would Mean for Global Structured Finance' at www.fitchratings.com).

Fitch expects the North American Prime Auto ABS sector in the assumed adverse scenario to experience 'Virtually No Impact' on ratings performance, indicating very few (less than 5%) rating or Outlook changes. Fitch expects 'Virtually No Impact' on asset performance, indicating asset performance to remain broadly unaffected, and less than a 10% likelihood of sector outlook revision by YE 2023. Fitch expects the asset performance impact of the adverse case scenario to be more modest than the scenarios shown above that increase the default expectations by 2.0x.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Given that Fitch only rated the class A notes at 'AAAsf', up stresses were not considered. However, if CNL is 20% less than the projected proxy, the ratings would be maintained for class A notes.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by PricewaterhouseCoopers LLP. The third-party due diligence described in Form 15E focused on a comparison and re-computation of certain characteristics with respect to 150 sample contracts. Fitch considered this information in its analysis, and it did not have an effect on Fitch's analysis or conclusions.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.

ESG Considerations

The concentration in the collateral pool of 20.8% of electric vehicles or hybrid vehicles did not have an impact on Fitch's ratings analysis or conclusion on this transaction and has no impact on Fitch's ESG Relevance Score.

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

Additional information is available on www.fitchratings.com

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