<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               _________________

                                   FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                                        
For the fiscal year ended December 31, 1998        Commission File No. 33-80055

                 Volkswagen Credit Auto Receivables Corporation
                                  on behalf of
                      Volkswagen Credit Auto Master Trust
                                        
(Issuer of the Volkswagen Credit Auto Master Trust Floating Rate Dealer Loan
Backed Certificates, Series 1996-1 (the "Certificates"))

             (Exact name of registrant as specified in its charter)

                              ------------------
<TABLE>
<S>                                                         <C>
     State of Delaware                                                                38-2748796
     (State or other jurisdiction of                        (I.R.S. Employer Identification No.)
     incorporation or organization)
 
     3800 Hamlin Road                                                                      48326
     Auburn Hills, Michigan                                                           (Zip Code)
     (Address of principal executive offices)
 
     Registrant's telephone number, including area code:  (248) 340-4938
 
</TABLE>

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Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

     Form 8-A was filed with the Securities and Exchange Commission (the
"Commission") registering the Series of Certificates pursuant to Section 12(g)
of the Securities Exchange Act of 1934 (the "Act").

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Act") during the preceding 12 months (or for such period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

     YES           x *       NO     
             --------------         --------------         

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant.  The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked price of
such stock, as of a specific date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405, 17 C.F.R. 230.405):

     NOT APPLICABLE

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     *  On May 9, 1997, the registrant was issued a no-action letter (the "No-
Action Letter") by the commission with respect to certain of the registrant's
reporting requirements pursuant to Section 13 or 15(d) of the Act.  This Form
10-K has been prepared in accordance with the terms of such No-Action Letter.
<PAGE>
 
                    FORM 10-K (Pursuant to No-Action Letter)

                                     PART 1
                                        
Item 1.   Business.

          The Volkswagen Credit Auto Master Trust (the "Trust") was created
     pursuant to the Pooling and Servicing Agreement (the "Pooling Agreement")
     dated February 29, 1996 among Volkswagen Credit Auto Receivables
     Corporation (the (Company") as seller, VW Credit, Inc., as servicer, and
     Citibank, N.A., as trustee (the "Trustee"). The Trust assets include
     wholesale receivables ( the "Receivables") generated from time to time in a
     portfolio of revolving financing arrangements with automobile dealers to
     finance their automobile inventory and collections on the Receivables. Such
     property was obtained by the Company pursuant to the Receivables Purchase
     Agreement dated as of February 26, 1999 between the Company, as purchaser,
     and VW Credit, Inc. as seller.

          The Company has registered with the Securities and Exchange Commission
     under the Securities Act of 1933, as amended, and sold to the general
     public the Series 1996-1, Floating Rate Auto Loan Asset Backed Certificates
     in the initial principal amount of $375,000,000.  The Monthly Certificates
     contain information relating to the Receivables and the accounts from which
     the Receivables arise (the "Accounts") and are prepared by the Servicer and
     delivered to the Trustee pursuant to Section 3.04 of the Pooling Agreement.
     The report issued by PricewaterhouseCoopers L.L.P. in connection with the
     servicing activities of the Servicer is attached hereto as Exhibit 99.2.
     The Monthly Certificates containing information relating to the Receivables
     and the Accounts for the Collection Periods from and including January 1998
     through December 1998 are incorporated by reference from the registrant's
     Current Reports on Form 8-K filed with the Commission on February 27, 1998,
     March 25, 1998, April 29, 1998, May 21, 1998, June 24, 1998, July 22, 1998,
     August 20, 1998, September 23, 1998, October 23, 1998, November 18, 1998,
     December 22, 1998, January 19, 1999, respectively.


Item 2.   Properties.

               For information regarding the property of the Trust, see the
     Pooling and Servicing Agreement and the Current Reports on Form 8-K
     incorporated by reference herein.  For additional information regarding the
     Certificates, see Exhibit 99.

Item 3.   Legal Proceedings.

               Nothing to Report.


Item 4.   Submission of Matters To A Vote Of Security Holders.

               None.

                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

               (a)  To the best knowledge of the registrant, there is no
                    established public trading market for the Certificates.

               (b)  The Certificates are represented by one or more certificates
                    registered in the name of Cede & Co. ("Cede"), the nominee
                    of The Depository Trust Company ("DTC").

               (c)  Omitted pursuant to the No-Action Letter.

Item 6.   Selected Financial Data.

               Omitted pursuant to the No-Action Letter.
<PAGE>
 
Item 7.   Management's Discussion And Analysis Of Financial Condition And
          Results Of Operation.

                Omitted pursuant to the No-Action Letter.


Item 8.   Financial Statements and Supplementary Data.

                Omitted pursuant to the No-Action Letter.

Item 9.   Changes in and Disagreements On Accounting And Financial Disclosure.

                None.

                                    PART III
                                        
Item 12.   Security Ownership Of Certain Beneficial Owners And Management.

               (a)  The Certificates are represented by one or more certificates
     registered in the name of Cede, the nominee of DTC.  An investor holding an
     interest in the Trust is not entitled to receive a certificate representing
     such interest except in limited circumstances set forth in the Pooling
     Agreement.  Accordingly, Cede is the sole holder of record of Certificates
     which it holds on behalf of brokers, dealers, bank, and other direct
     participants in the DTC system.  Such direct participants may hold
     Certificates for their own accounts or for the accounts of their customers.
     The name and address of Cede is Cede & Co., c/o The Depository Trust
     Company, Seven Hanover Square, New York, NY  10004.

Item 13.   Certain Relationships And Related Transactions.

                Nothing to Report.

                                    PART IV
                                        
Item 14.    Exhibits, Financial Statement Schedules, And Reports On Form 8-K.

                (a)  Omitted pursuant to the No-Action Letter.

                (b)  The registrant has filed Current Reports on Form 8-K
         containing certain financial information with regard to the Trust, the
         Receivables and the Accounts, in accordance with the No-Action Letter,
         on February 27, 1998, March 25, 1998, April 29, 1998, May 21, 1998,
         June 24, 1998, July 22, 1998, August 20, 1998, September 23, 1998,
         October 23, 1998, November 18, 1998, December 22, 1998, January 19,
         1999.

                (c) 3.1  The Articles of Incorporation and By-Laws of the
                         registrant are incorporated by reference from Exhibits
                         3.1 and 3.2, respectively, of the registrant's
                         Registration Statement on Form S-3 (File No. 33-80055).

                    4.1  The Pooling Agreement and the Series 1996-1 Supplement
                         thereto are incorporated by reference from Exhibits 2.2
                         and 2.3, respectively, of the registrant's Form 8A
                         filed with the Commission on September 13, 1996.

                    5.1  The opinion of Cravath, Swaine & Moore with respect to
                         certain matters involving the Certificates is
                         incorporated by reference from Exhibit 5.1 of the
                         registrant's Registration Statement on Form S-3 (File
                         No. 33-80055).

                    8.1  The opinion of Cravath, Swaine & Moore with respect to
                         federal tax matters s incorporated by reference from
                         Exhibit 8.1 of the registrant's Registration Statement
                         on Form S-3 (File No. 33-80055).
<PAGE>
 
                    8.2  The opinion of Honigman, Miller Schwartz & Cohn with
                         respect to Michigan state tax matters is incorporated
                         by reference from Exhibit 8.2 of the registrant's
                         Registration Statement on Form S-3 (File No. 33-80055).

                   23.1  The consent of Cravath, Swaine & Moore is incorporated
                         by reference from Exhibit 23.1 of the registrant's
                         Registration Statement on Form S-3 (File 33-80055).

                   23.2  The Consent of Honigman, Miller, Schwartz & Cohn is
                         incorporated by reference from Exhibit 23.2 of the
                         registrant's Registration Statement on Form S-3 (File
                         No. 33-80055).

                   99.1  The Annual Certificate of VW Credit, Inc., as Servicer
                         is attached hereto as Exhibit 99.1
 
                   99.2  The report on the activities of VW Credit, Inc., as
                         Servicer, prepared by PricewaterhouseCoopers L.L.P.,
                         pursuant to Section 3.06 of the Pooling Agreement is
                         Attached hereto as Exhibit 99.2.

                   99.3  The Monthly Certificates containing information
                         relating to the Receivables and the Accounts for the
                         Collection Periods from and including January 1998
                         through December 1998 are incorporated by reference
                         from the registrant's Current Reports on Form 8-K filed
                         with the Commission on February 27, 1998, March 25,
                         1998, April 29, 1998, May 21, 1998, June 24, 1998, July
                         22, 1998, August 20, 1998, September 23, 1998, October
                         23, 1998, November 18, 1998, December 22, 1998, January
                         19, 1999, respectively.