Anybody Familiar With Toyota Income Driver Notes? 1.50% APY

  • Toyota Income Driver Notes are currently paying 1.50% per annum. Redeemable at any time, $500 minimum investment, but not FDIC-insured.

  • Global Moderator

    Seems like a lot of risk for low return. I’m still getting 0.5-0.6% on FDIC-backed checking, so an extra point for the default risk seems like a poor deal. But in a low interest rate environment who knows.

  • From what I have read, the IncomeDriver Notes program is a direct investment in senior notes issued by Toyota Motor Credit Corporation (“TMCC”) which does business as Toyota Financial Services. Fitch Ratings, one of the leading credit agencies, has given TMCC a current rating of A+. While ratings can change and company prospects can deteriorate, it seems as though the risk associated with the underlying issuer is relatively low.

  • Global Moderator

    @benlola It’s definitely low. It’s also definitely a low rate.

    You could invest in Vanguard Short-Term Bonds (BSV) and get around 3% on average with full diversification.

    Perhaps this is a good deal for a very narrow slice of investors: 1) Wants a fixed-rate return, 2) Willing to take a very low interest rate in exchange for 3) Relatively low risk where 4) They are willing to invest in a single company to do so.

    I don’t know the liquidity limits, but if there are some that’s something else to give pause. BSV (and similar investments) can be liquidated immediately.

  • Thanks for the suggestion of Vanguard Short-Term Bonds (BSV). I see that the April 1, 2021 dividend paid was $0.089 per share, or $1.068 annualized. With a share price as of the close on April 8, 2021 was $82.25, the effective yield is currently closer to 1.3%. I do recognize that prices of BSV will fluctuate as will the dividend payments based on prevailing conditions.

  • Global Moderator

    @benlola Just FYI, the yield is only part of the return. The long-term return annualizes out to about 2.8% as per Vanguard. Of course, it’s variable and so the additional risk factor is the potential loss of premium. Conversely, unlike Toyota you would not lose 100% in any event and I think the lowest drop ever was something like 2%.

    Bond investing in a very low interest rate environment is incredibly challenging.


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