We maintain an allowance for credit losses to cover probable and estimable losses incurred on our finance receivables and investments in operating leases resulting from the failure of customers or dealers to make contractual payments. Management evaluates the allowance at least quarterly, considering a variety of factors and assumptions to determine whether the allowance is considered adequate to cover probable and estimable losses incurred as of the balance sheet date.

Management develops and documents the allowance for credit losses on finance receivables based on two portfolio segments. The determination of portfolio segments is based primarily on the qualitative consideration of the nature of our business operations and the characteristics of the underlying finance receivables, as follows:

We also separately develop and document the allowance for credit losses for investments in operating leases. Investments in operating leases are not within the scope of accounting guidance governing the disclosure of portfolio segments.

The level of credit risk in our retail loan portfolio segment and our investments in operating leases is influenced primarily by two factors: default frequency and loss severity, which in turn are influenced by various factors such as economic conditions, the used vehicle market, purchase quality mix, contract term length, and collection strategies and practices.

We evaluate the retail loan portfolio segment and investments in operating leases using methodologies that include roll rate, credit risk grade/tier, and vintage analysis. We review and analyze external factors, including changes in economic conditions, actual or perceived quality, safety and reliability of Toyota and Lexus vehicles, unemployment levels, the used vehicle market, and consumer behavior. In addition, internal factors, such as purchase quality mix and operational changes are also considered in the analyses.

We utilize a loss emergence period assumption in developing our allowance for credit losses. This assumption represents the average length of time between when a loss event first occurs and when the account is charged off. We apply judgment in estimating the loss emergence period using available credit information and trends.

The level of credit risk in our dealer products portfolio segment is influenced primarily by the financial strength of dealers within our portfolio, dealer concentration, collateral quality, and other economic factors. The financial strength of dealers within our portfolio is influenced by, among other factors, general economic conditions, the overall demand for new and used vehicles and the financial condition of automotive manufacturers.

We evaluate the dealer portfolio by aggregating dealer financing receivables into loan-risk pools, which are determined based on the risk characteristics of the loan (e.g. secured by vehicles, real estate or dealership assets). We analyze the loan-risk pools using internally developed risk ratings for each dealer. We also utilize a loss emergence period assumption in developing our allowance for credit losses. The loss emergence period represents the time period between the date at which the loss event is estimated to have occurred and the ultimate realization of that loss through charge-off. In addition, field operations management and our special assets group are consulted each quarter to determine if any specific dealer loan is considered impaired. If impaired loans are identified, specific reserves are established, as appropriate, and the loan is removed from the loan-risk pool for separate monitoring.

The majority of the allowance for credit losses covers estimated losses on the retail loan portfolio segment and investments in operating leases which are collectively evaluated for impairment. The remainder of the allowance for credit losses covers the estimated losses on the dealer products portfolio segment. Within the dealer products portfolio segment, we establish specific reserves to cover the estimated losses on individual impaired loans (including loans modified in a troubled debt restructuring). The specific reserves are assessed based on discounted cash flows, the loan’s observable market price, or the fair value of the underlying collateral if the loan is collateral dependent.

Increases to the allowance for credit losses are accompanied by corresponding charges to the Provision for credit losses on our Consolidated Statements of Income. The uncollectible portion of finance receivables and investments in operating leases is charged to the allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is greater than 120 days past due. In the event we repossess the collateral, the receivable is charged-off and we record the collateral at its estimated fair value less costs to sell and report it in Other assets in our Consolidated Balance Sheets. Recoveries of finance receivables and investments in operating leases previously charged off as uncollectible are credited to the allowance for credit losses.

The following table provides information related to our allowance for credit losses on finance receivables and investments in operating leases:


	Years Ended March 31,
	2019			2018			2017
Allowance for credit losses at beginning of period	$	597		$	622		$	535
Charge-offs		(464	)		(516	)		(574	)
Recoveries		97			90			79
Provision for credit losses		372			401			582
Allowance for credit losses at end of period	$	602		$	597		$	622

The following tables provide information related to our allowance for credit losses for finance receivables and finance receivables by portfolio segment:


	Year Ended March 31, 2019
	Retail Loan			Dealer Products		Total
Beginning balance, April 1, 2018	$	312		$	151	$	463
Charge-offs		(330	)		-		(330	)
Recoveries		50			-		50
Provision for credit losses		272			44		316
Ending balance, March 31, 2019	$	304		$	195	$	499

Allowance for Credit Losses for Finance Receivables:
Ending balance: Individually evaluated for impairment	$	-		$	99	$	99
Ending balance: Collectively evaluated for impairment	$	304		$	96	$	400

Finance Receivables:
Ending balance, March 31, 2019	$	53,939		$	17,696	$	71,635
Ending balance: Individually evaluated for impairment	$	-		$	623	$	623
Ending balance: Collectively evaluated for impairment	$	53,939		$	17,073	$	71,012

The ending balance of finance receivables collectively evaluated for impairment in the above table includes approximately $231 million of finance receivables within the retail loan portfolio segment that are specifically identified as impaired. These amounts are aggregated within their respective portfolio segment when determining the allowance for credit losses as of March 31, 2019, as they are deemed to be insignificant for individual evaluation and we have determined that the allowance for credit losses is not significant and would not be materially different if the amounts had been individually evaluated for impairment. The ending balance of finance receivables for the dealer products portfolio segment collectively evaluated for impairment as of March 31, 2019 includes $1,091 million in finance receivables that are guaranteed by Toyota Motor North America, Inc. (“TMNA”) and $132 million in finance receivables that are guaranteed by third party private Toyota distributors. These finance receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMNA and third party private Toyota distributors.


	Year Ended March 31, 2018
	Retail Loan			Dealer Products		Total
Beginning balance, April 1, 2017	$	344		$	123	$	467
Charge-offs		(355	)		-		(355	)
Recoveries		50			-		50
Provision for credit losses		273			28		301
Ending balance, March 31, 2018	$	312		$	151	$	463

Allowance for Credit Losses for Finance Receivables:
Ending balance: Individually evaluated for impairment	$	-		$	70	$	70
Ending balance: Collectively evaluated for impairment	$	312		$	81	$	393

Finance Receivables:
Ending balance, March 31, 2018	$	53,395		$	17,420	$	70,815
Ending balance: Individually evaluated for impairment	$	-		$	495	$	495
Ending balance: Collectively evaluated for impairment	$	53,395		$	16,925	$	70,320

The ending balance of finance receivables collectively evaluated for impairment in the above table includes approximately $222 million of finance receivables within the retail loan portfolio segment that are specifically identified as impaired. These amounts are aggregated within their respective portfolio segment when determining the allowance for credit losses as of March 31, 2018, as they are deemed to be insignificant for individual evaluation and we have determined that the allowance for credit losses is not significant and would not be materially different if the amounts had been individually evaluated for impairment. The ending balance of finance receivables for the dealer products portfolio segment collectively evaluated for impairment as of March 31, 2018 includes $1,030 million in finance receivables that are guaranteed by TMNA and $146 million in finance receivables that are guaranteed by third party private Toyota distributors. These finance receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMNA and third party private Toyota distributors.