10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from              to             

Commission File No. 001-11677

PACCAR FINANCIAL CORP.

(Exact name of Registrant as specified in its charter)

Washington	91-6029712
(State of incorporation)	(I.R.S. Employer Identification No.)

777 106^th Avenue N.E., Bellevue, Washington 98004

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code is (425) 468-7100

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

Title of Each Class	Name of Each Exchange on Which Registered
Series M Medium-Term Notes	New York Stock Exchange
$250.0 Million Due June 17, 2013

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes:  x    No:  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes:  ¨    No:  x

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 during the preceding 12 months (or for such shorter 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:  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes:  x    No:  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer:  ¨            Accelerated filer:  ¨            Non-accelerated filer:  x            Smaller reporting company:  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Act).     Yes:  ¨    No:  x

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2012:    None

The number of shares outstanding of the registrant’s classes of common stock as of January 31, 2013:

Common Stock, $100 par value—145,000 shares

THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF PACCAR INC AND MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (I) (1) (a) AND (b) OF FORM 10-K AND IS, THEREFORE, FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

INDEX

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	10
Item 2.	Properties	10
Item 3.	Legal Proceedings	11
Item 4.	Mine Safety Disclosure	11
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6.	Selected Financial Data	12
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	49
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	50
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
Item 14.	Principal Accountant Fees and Services	50
PART IV
Item 15.	Exhibits and Financial Statement Schedules	51

2

PACCAR Financial Corp.

(Millions of Dollars)

PART I

ITEM 1. BUSINESS

GENERAL

PACCAR Financial Corp.

PACCAR Financial Corp. (the “Company”), a Washington corporation, was incorporated in 1961 as a wholly-owned subsidiary of PACCAR Inc (“PACCAR”) to finance the sale of PACCAR products. In 2000, PACCAR transferred the stock of the Company to PACCAR Financial Services Corporation (“PFSC”), a wholly-owned subsidiary of PACCAR. In December 2011, PFSC was dissolved by means of a statutory merger with and into PACCAR Financial Corp. The merger was accounted for using the pooling of interest method because the Company and PFSC were under common control of PACCAR. See Note A for further discussion.

The Company principally provides financing and leasing of PACCAR manufactured trucks and other transportation equipment sold through Kenworth’s and Peterbilt’s independent dealer network in the United States. The Company also finances dealer inventories of new and used transportation equipment. The Company’s PacLease division franchises Kenworth and Peterbilt dealerships to engage in full-service and finance leasing. In selected markets, PacLease directly engages in full-service leasing with its customers through Company-owned stores and on a limited basis through Kenworth and Peterbilt dealerships.

PACCAR

PACCAR is a multinational company operating in three principal segments: (1) the Truck segment includes the design and manufacture of high-quality, light-, medium- and heavy-duty commercial trucks, (2) the Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles and (3) the Financial Services segment derives its earning primarily from financing or leasing PACCAR products in the U.S., Canada, Mexico, Europe and Australia. Light and medium-duty trucks have a gross vehicle weight (GVW) ranging from 16,000 to 33,000 lbs (Class 5 to 7) in North America and 6 to 16 metric tonnes in Europe. Heavy duty trucks have a GVW of over 33,000 lbs (Class 8) in North America and over 16 metric tonnes in Europe. PACCAR’s finance and leasing activities are principally related to PACCAR trucks and associated equipment. Other manufactured products include industrial winches.

PACCAR and its subsidiaries design and manufacture high-quality, light-, medium- and heavy-duty commercial trucks which are marketed under the Kenworth, Peterbilt and DAF nameplates. These trucks, which are built in three plants in the United States, three in Europe and one each in Australia, Canada and Mexico, are used world-wide for over-the-road and off-highway hauling of freight, petroleum, wood products, construction and other materials. PACCAR competes in the North American Class 5 to 7 markets primarily with Kenworth and Peterbilt conventional models. These trucks are assembled at facilities in Ste. Therese, Canada and in Mexicali, Mexico, which are operated by PACCAR’s wholly-owned subsidiaries located in those countries. PACCAR competes in the European light/medium market with DAF cab-over-engine trucks assembled in the United Kingdom by Leyland, one of PACCAR’s wholly-owned subsidiaries. PACCAR has acquired land and has begun construction of a new DAF assembly plant in Ponta Grossa, Brasil. PACCAR expects to begin manufacturing DAF vehicles for sale in Brasil and other South American markets in 2013. A new parts distribution center (PDC) is being constructed in Eindhoven, the Netherlands and will be completed in the first quarter of 2013. Commercial truck manufacturing and related aftermarket parts distribution accounted for 77% and 16% of total 2012 net sales and revenues, respectively.

3

PACCAR Financial Corp.

(Millions of Dollars)

Substantially all trucks and related aftermarket parts are sold to independent dealers. The Kenworth and Peterbilt nameplates are marketed and distributed by separate divisions in the U.S. and a foreign subsidiary in Canada. The Kenworth nameplate is also marketed and distributed by foreign subsidiaries in Mexico and Australia. The DAF nameplate is marketed and distributed by a foreign subsidiary headquartered in the Netherlands. The decision to operate as a subsidiary or as a division is incidental to PACCAR’s Truck Segment operations and reflects legal, tax and regulatory requirements in the various countries where PACCAR operates.

Aftermarket truck parts are sold and delivered to Kenworth’s, Peterbilt’s and DAF’s independent dealers through PACCAR’s parts distribution network. Parts are both manufactured by PACCAR and purchased from various suppliers. Aftermarket parts inventory levels are determined largely by anticipated customer demand and the need for timely delivery. As a percentage of total consolidated net sales and revenues, parts sales were 15.6% in 2012, 15.8% in 2011 and 21.3% in 2010.

There are four principal competitors in the U.S. and Canada commercial truck market in. PACCAR’s share of the U.S. and Canadian class 8 market was a record 28.9% of retail sales in 2012. In Europe are were six principal competitors in the commercial truck market, including parent companies to two competitors of PACCAR in the United States. In 2012, DAF had a record 16.0% share of the Western and Central European heavy-duty market and a 11.5% share of the light/medium market. These markets are highly competitive in price, quality and service, and PACCAR is not dependent on any single customer for its sales. There are no significant seasonal variations in sales.

In addition to the Company, which provides financing, leasing and full-service truck leasing in the United States, PACCAR offers similar financing programs for PACCAR products through other wholly-owned finance subsidiaries in Mexico, Canada, Australia, the United Kingdom and Continental Europe. PACCAR also conducts full-service leasing operations through wholly-owned subsidiaries in Canada, Mexico and Germany.

PACCAR’s common stock is traded on the NASDAQ Global Select Market under the symbol PCAR. PACCAR and the Company are subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance therewith, file reports and other information with the Securities and Exchange Commission (the “Commission”). All reports, proxy statements and other information filed by PACCAR and the Company with the Commission may be inspected and copied at the public reference facility maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549 or through the Commission’s internet site at www.sec.gov.

BUSINESS OF THE COMPANY

The Company operates primarily in the industry segment of finance and leasing services provided to customers and dealers in the United States for new Kenworth and Peterbilt trucks, used trucks, truck trailers and allied equipment. The Company’s PacLease division franchises Kenworth and Peterbilt dealerships to engage in full-service and finance leasing. In selected markets, PacLease directly engages in full-service leasing with its customers through Company-owned stores and on a limited basis through Kenworth and Peterbilt dealerships.

The Company conducts business with most Kenworth and Peterbilt dealers in the United States. The volume of the Company’s business is significantly affected by PACCAR’s sales of trucks to its dealers and competition from other financing sources.

As of December 31, 2012, the Company employed 399 full-time employees, none of whom are represented by a collective bargaining agent.

4

PACCAR Financial Corp.

(Millions of Dollars)

THE COMPANY’S PRODUCTS

The Company offers the following products to retail customers:

Retail Contracts and Loans The Company purchases contracts from dealers and receives assignments of the contracts and a first lien security interest in the vehicles financed (“Retail Contracts”). Certain Retail Contracts with third party leasing companies may also include an assignment to the Company of the related lease and rental payments due. Retail Contracts purchased by the Company have fixed or floating interest rates.

The Company also makes loans to the end users of the vehicles financed that are secured by a first lien security interest in the vehicles (“Loans”). Loans have fixed or floating interest rates.

Direct Financing Leases The Company offers direct financing lease contracts where it is treated as the owner of the equipment for tax purposes and generally retains the tax depreciation (“Direct Financing Leases”). The lessee is responsible for the payment of property and sales taxes, licenses, maintenance and other operating costs. The lessee is obligated to maintain the equipment and to insure the equipment against physical damage and liability losses.

Most of the Company’s Direct Financing Leases contain a Terminal Rental Adjustment Clause, which requires the lessee to guarantee to the Company a stated residual value upon disposition of the equipment at the end of the direct financing lease term.

Operating Leases The Company offers operating lease contracts (“Operating Leases”) where the Company owns the equipment. The lessee is responsible for the payment of property and sales taxes, licenses, maintenance and other operating costs. The lessee is obligated to maintain the equipment and to insure the equipment against casualty and liability losses.

At the end of the operating lease term, the lessee has the option to return the equipment to the Company or purchase the equipment at its fair market value.

Insurance The Company’s PacLease business offers physical damage and liability insurance on new and used trucks and trailers to its full-service lease customers. To limit its exposure the Company has acquired insurance coverage for losses above specified levels from a third party insurance carrier.

The Company offers the following products to Kenworth and Peterbilt dealers and PacLease franchisees:

Master Notes Master note contracts (“Master Notes”) are offered to select dealers for new and used trucks. Retail installment contracts originated by the dealer for new or used trucks which meet the Company’s requirement as to form, terms and creditworthiness for Retail Contracts are pledged to the Company as collateral for direct, full recourse loans by the Company to the dealer. The dealer may pay the loans early or make additional draws up to specified balances of the contracts pledged to the Company. Master Notes have fixed or floating interest rates.

Wholesale Contracts The Company provides wholesale financing for new and used truck inventories for dealers (“Wholesale Contracts”). Wholesale Contracts are secured by the inventories financed. The amount of credit extended by the Company for each truck is generally limited to the invoice price of new equipment and to the wholesale value of used equipment. Wholesale Contracts have floating interest rates.

Dealer Loans The Company makes secured loans to selected Peterbilt and Kenworth dealers (“Dealer Loans”). The purpose of these loans includes the financing of real estate, fixed assets, working capital and dealership acquisitions. Dealer Loans have fixed or floating interest rates.

Full-Service Leasing The Company also conducts full-service leasing operations under the PacLease trade name. Selected dealers are franchised to provide full-service leasing, which includes the equipment, maintenance, parts, taxes and licenses all in a combined contract with the customer. The Company provides the franchisees with equipment financing and managerial support. The Company also operates full-service lease outlets in selected markets on its own behalf.

5

PACCAR Financial Corp.

(Millions of Dollars)

Insurance The Company charges a fee to provide insurance coverage, through an unrelated regulated insurance carrier, on new trucks and used trucks inventory to dealers having Wholesale Contracts with the Company.

CUSTOMER CONCENTRATION, PAST-DUE ACCOUNTS AND LOSS EXPERIENCE

Customer Concentration

The Company’s customers are concentrated in the transportation industry throughout the United States. The Company does not have contractual arrangements with any one party (customers, dealers and/or franchises) that account for 10% or more of Finance and Other Receivables asset balances for the periods ended December 31, 2012, 2011 and 2010.

The Company has contractual arrangements with one customer, Swift Transportation Corporation, that account for 10.8%, 11.6% and 11.4% of total Interest and Other Revenue for the periods ended December 31, 2012, 2011 and 2010, respectively.

Past-Due Receivables and Allowance for Losses

An account is considered past-due by the Company if any portion of an installment is due and unpaid for more than 30 days. In periods of adverse economic conditions, past-due levels, repossessions and credit losses generally increase.

The provision for losses on finance and other receivables is charged to income as necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent in the portfolio. Receivables are charged off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral).

For further discussion of the allowance for losses, see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

COMPETITION AND ECONOMIC FACTORS

The commercial truck and trailer finance and leasing business is highly competitive among banks, commercial finance companies, captive finance companies and leasing companies. Some of these institutions have substantially greater financial resources than the Company and may borrow funds at lower rates.

The dealers are the primary source of contracts acquired by the Company. However, dealers are not required to obtain financing from the Company and they have a variety of other sources that may be used for wholesale and customer financing of trucks. Retail purchasers also have a variety of sources available to finance truck purchases.

The ability of the Company to compete in its market is principally based on the rates, terms and conditions that the Company offers dealers and retail purchasers, as well as the specialized services it provides. Rates, terms and conditions are based on the Company’s desire to provide flexible financing and services to satisfy dealer and customer needs, the ability of the Company to borrow funds at competitive rates and the Company’s need to earn an adequate return on its invested capital. The Company’s business is also affected by changes in market interest rates and used truck values, which in turn are related to general economic conditions, demand for credit, inflation and governmental policies. Seasonality is not a significant factor in the Company’s business.

6

PACCAR Financial Corp.

(Millions of Dollars)

The volume of receivables available to be acquired by the Company from dealers is largely dependent upon the number of Kenworth and Peterbilt trucks sold in the United States. Sales of medium- and heavy-duty trucks depend on the capital equipment requirements of the transportation industry, which in turn are influenced by growth and cyclical variations in the economy. Medium- and heavy-duty truck sales are also sensitive to economic factors such as fuel costs, interest rates, insurance premiums, federal excise and highway use taxes, taxation on the acquisition and use of capital goods, as well as government regulations.

REGULATION AND SIMILAR MATTERS

In certain states, the Company is subject to retail installment sales or installment loan statutes and related regulations, the terms of which vary from state to state. These laws may require the Company to be licensed as a sales finance company and may regulate disclosure of finance charges and other terms of retail installment contracts. The Company is subject to substantive state franchise regulations and federal and state uniform franchise disclosure laws in connection with the offering of PacLease full-service truck leasing and rental franchises to Kenworth and Peterbilt truck dealers. The Company also owns and operates several truck leasing and rental business locations, which are subject to applicable state licensing laws. The Company is also subject to certain provisions of federal law relating to non-discrimination in the granting of credit.

SOURCES OF FUNDS

The Company’s primary sources of funds are medium-term note borrowings and commercial paper in the public capital markets, collections on loans and leases, retained earnings and to a lesser extent borrowings from PACCAR, bank loans and capital contributions. The Company’s investment in additional receivables is dependent upon its ability to raise funds at competitive rates in the public and private debt markets. The receivables and leases that are financed are either fixed rate or floating rate with terms that generally range from 36 to 60 months.

To reduce the risk of changes in interest rates that could affect interest margins, the Company obtains funds with interest rate characteristics similar to the corresponding assets. Fixed rate assets are primarily funded with fixed and floating rate medium-term notes and commercial paper. Interest rate swaps are combined with commercial paper or floating rate medium-term notes to convert floating rate debt to fixed rate debt to achieve the Company’s match funding objectives. Floating rate assets are funded primarily with commercial paper with maturities of three months or less and floating rate medium-term notes.

As of December 31, 2012, the total notional principal amount of interest rate swap contracts outstanding was $1,249.5, all of which effectively resulted in a net fixed rate payment obligation. These swap contracts are accounted for as cash flow hedges.

During 2012 a portion of the Company’s fixed-rate term notes was converted to variable-rate term notes using fair value hedges for interest rate risk. Fair value is determined using modeling techniques that include market inputs for interest rates. As of December 31, 2012, there were no fair value swap contracts outstanding.

The notional amounts are used to measure the volume of these contracts and do not represent exposure to credit loss. The permitted types of interest rate swap contracts, counterparties’ transaction limits and related approval authorizations have been established by the Company’s senior management and Board of Directors. The interest rate contracts outstanding are regularly reported to, and reviewed by, the Company’s senior management.

The Company participated with PACCAR and certain other PACCAR affiliates in syndicated credit facilities of $3,000.0 at December 31, 2012. Of this amount, $1,000.0 expires in June 2013, $1,000.0 expires in 2016 and $1,000.0 expires in 2017. PACCAR and the Company intend to replace these credit facilities as they expire with facilities of similar amounts. Credit facilities of $2,060.0 are available for use by the Company and/or PACCAR and certain other PACCAR affiliates. The remaining $940.0 is allocated to the following subsidiaries: $323.8 is available for use by PACCAR’s Canadian financial subsidiary, $231.2 is available for use by PACCAR’s Mexican financial subsidiaries, $212.5 is available for use by PACCAR’s United Kingdom financial subsidiary and $172.5 is available for use by PACCAR’s Australian financial subsidiary. These credit facilities are used to provide backup liquidity for the Company’s commercial paper and maturing medium-term notes. The Company is liable only for its own borrowings under these credit facilities. There were no borrowings under these credit facilities in the years ended December 31, 2012 and 2011.

7

PACCAR Financial Corp.

(Millions of Dollars)

As of December 31, 2012, the Company had medium-term notes outstanding of $2,700.0 under shelf registration statements, of which $550.0 were due within 12 months. See “Note F – Borrowings” in the Notes to the Financial Statements for further information on the Company’s medium-term notes.

In November 2012, the Company filed a shelf registration statement under the Securities Act of 1933. In February 2013, the Company issued $500.0 of medium-term notes under this registration. The registration expires in the fourth quarter of 2015 and does not limit the principal amount of debt securities that may be issued during the period.

RELATIONSHIP WITH PACCAR AND AFFILIATES

General

The operations of the Company are dependent on its relationship with PACCAR. Sales of PACCAR products are the Company’s principal source of its financing business. The Company receives administrative support from and pays dividends to its parent company and periodically borrows funds from or lends money to PACCAR and/or its affiliates. The Company’s principal office is located in the corporate headquarters building of PACCAR (owned by PACCAR). The Company also leases office space from one facility owned by PACCAR and five facilities leased by PACCAR. Since the directors of the Company are all executives of PACCAR and PACCAR is the sole owner of the Company’s outstanding voting common stock, PACCAR can determine the course of the Company’s business.

Periodically, the Company makes loans to, borrows from and has intercompany transactions with PACCAR. The Company had $218.0 and $415.0 outstanding in loans due to PACCAR as of December 31, 2012 and 2011, respectively. The Company had $428.4 and $170.1 outstanding in loans due from PACCAR as of December 31, 2012 and 2011, respectively. In addition, the Company periodically loans funds to certain foreign finance and leasing affiliates of PACCAR. The Company had $360.6 and $219.6 outstanding in loans due from foreign finance and leasing affiliates of PACCAR as of December 31, 2012 and 2011, respectively. These various affiliates have Support Agreements with PACCAR, similar to the Company’s Support Agreement with PACCAR described below. The foreign affiliates operate in the United Kingdom, the Netherlands, Mexico, Canada and Australia, and any resulting currency exposure is fully hedged. The foreign affiliates primarily provide financing and leasing of PACCAR-manufactured trucks and related equipment sold through DAF’s, Kenworth’s and Peterbilt’s independent dealer networks in Europe, Mexico, Canada and Australia. The Company will not make loans to the foreign affiliates in excess of the equivalent of $500.0 United States dollars, unless the amount in excess of such limit is guaranteed by PACCAR. The Company periodically reviews the funding alternatives for these affiliates, and these limits may be revised in the future.

PACCAR charges the Company for certain administrative services it provides. These costs were charged to the Company based upon the Company’s specific use of the services and PACCAR’s cost. Management considers these charges reasonable and similar to the costs that would be incurred if the Company were on a stand-alone basis. See “Note D – Transactions with PACCAR and Affiliates” in the Notes to the Financial Statements.

Support Agreement

The Company and PACCAR are parties to a Support Agreement that obligates PACCAR to provide, when required, financial assistance to the Company to assure that the Company maintains a ratio of net earnings available for fixed charges to fixed charges (as defined in the Support Agreement) of at least 1.25 to 1 for any fiscal year. The Support Agreement also requires PACCAR to own, directly or indirectly, all outstanding voting stock of the Company. The required ratio for the years ended December 31, 2012, 2011 and 2010 was met without assistance. See “Note D – Transactions with PACCAR and Affiliates” in the Notes to Financial Statements.

8

PACCAR Financial Corp.

(Millions of Dollars)

The Company and PACCAR may amend or terminate any or all of the provisions of the Support Agreement upon 30 days notice, with copies of the notice being sent to all nationally recognized statistical rating organizations (“NRSROs”) which have issued ratings with respect to debt of the Company (“Rated Debt”). Such amendment or termination will be effective only if (i) two NRSROs confirm in writing that their ratings with respect to any Rated Debt would remain the same after such amendment or termination, or (ii) the notice of amendment or termination provides that the Support Agreement will continue in effect with respect to Rated Debt outstanding on the effective date of such amendment or termination unless such debt has been paid or defeased pursuant to the indenture or other agreement applicable to such debt, or (iii) the holders of at least two-thirds of the aggregate principal amount of all outstanding Rated Debt with an original maturity in excess of 270 days consent in writing to such amendment or termination, provided that the holders of Rated Debt having an original maturity of 270 days or less shall continue to have the benefits of the Support Agreement until the maturity of such debt.

The Support Agreement expressly states that PACCAR’s commitments to the Company thereunder do not constitute a PACCAR guarantee of payment of any indebtedness or liability of the Company to others and do not create rights against PACCAR in favor of persons other than the Company. There are no guarantees, direct or indirect, by PACCAR of payment of any indebtedness of the Company.

OTHER DISCLOSURES

The Company’s filings on Forms 10-K, 10-Q and 8-K and any amendments to those reports can be obtained through a link on the Company’s website, www.paccarfinancial.com, or PACCAR’s website, www.paccar.com, free of charge as soon as reasonably practicable after the report is electronically filed with, or furnished to, the Commission. The information on the websites is not incorporated by reference into this report.

ITEM 1A. RISK FACTORS

The Company is exposed to certain risks and uncertainties that could have a material adverse impact to the Company’s financial condition and operating results, including:

Sales of PACCAR Products

The Company’s business is substantially dependent upon the sale of PACCAR products and its ability to offer competitive financing in the United States. Changes in the volume of sales of PACCAR products due to a variety of reasons could impact the level of business of the Company. Refer to the “Relationship with PACCAR and Affiliates” section in “Item 1 – Business” and “Note D – Transactions with PACCAR and Affiliates” in the Notes to the Financial Statements for further discussion regarding the Company’s relationship with PACCAR.

Liquidity Risks, Credit Ratings and Costs of Funds

Disruptions or volatility in U.S. financial markets could limit the Company’s sources of liquidity, or the liquidity of customers and dealers. A lowering of the Company’s credit ratings could increase the cost of borrowing and adversely affect access to capital markets. The Company obtains funds for its operations from commercial paper and medium-term note debt. If the markets for medium-term notes and commercial paper do not provide the necessary liquidity in the future, the Company may experience increased costs or may have to limit its financing of retail and wholesale assets.

Competitive Risk

The Company competes with banks, other commercial finance companies and financial services firms which may have lower costs of borrowing, higher leverage or market share goals that result in a willingness to offer lower interest rates, which may lead to decreased margins, lower market share or both. A decline in PACCAR’s truck unit sales and a decrease in truck residual values due to lower used truck pricing are also factors which may affect the Company.

9

PACCAR Financial Corp.

(Millions of Dollars)

Credit Risk

The Company is exposed to the risk of loss arising from the failure of a customer, dealer or counterparty to meet the terms of the loans, leases and derivative contracts with the Company. Although the financial assets of the Company are secured by underlying equipment collateral, in the event a customer cannot meet its obligations to the Company, there is a risk that the value of the underlying collateral will not be sufficient to recover the amounts owed to the Company, resulting in credit losses.

Interest Rate Risk

The Company is subject to interest rate risks, because increases in interest rates can reduce demand for its products, increase borrowing costs and potentially reduce interest margins. The Company uses derivative contracts to mitigate the risk of changing interest rates.

Residual Value Risk

Residual value risk is the risk that the estimated residual value of leased assets established at lease origination, for the Company’s operating leases and certain direct financing leases, will not be recoverable when the leased asset is returned to the Company. When the market value of these leased assets at contract maturity or at early termination is less than its contractual residual value, the Company will be exposed to a greater risk of loss on the sales of the returned equipment. Refer to the Critical Accounting Policy on “Equipment on Operating Leases” in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion regarding the Company’s exposure to residual value risk.

Accounting Estimates

In the preparation of the Company’s financial statements, in accordance with U.S. generally accepted accounting principles, management uses estimates and makes judgments and assumptions that affect asset and liability values and the amounts reported as income and expense during the periods presented. Certain of these estimates, judgments and assumptions, such as residual values on operating leases, the allowance for credit losses and the provision for income taxes, are particularly sensitive. If actual results are different from estimates used by management, they may have a material impact on the financial statements.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The Company’s principal office is located in the corporate headquarters building of PACCAR (owned by PACCAR) at 777 106^th Avenue N.E., Bellevue, Washington 98004. The Company owns three full-service leasing facilities in Texas and leases one in Texas and one in Illinois. The Company owns used truck sales facilities in South Carolina and Utah.

Other offices and leasing facilities of the Company are located in leased premises including one facility owned by PACCAR and five facilities leased by PACCAR. The Company considers all its properties to be suitable for their intended purpose. Annual lease rentals for these premises in the aggregate are not material in relation to expenses as a whole.

10

PACCAR Financial Corp.

(Millions of Dollars)

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to various routine legal proceedings incidental to its business involving the collection of accounts and other matters. The Company does not consider such matters to be material with respect to the business or financial condition of the Company as a whole.

The Company’s parent, PACCAR, received notice on April 24, 2012 that the Securities and Exchange Commission (“SEC”) had initiated a formal investigation relating to PACCAR’s financial reporting from 2008 to 2011. The SEC has requested information concerning PACCAR’s loan loss reserves, troubled debt restructuring and segment reporting. PACCAR is cooperating fully with the SEC’s investigation.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All outstanding common stock is owned by PACCAR; therefore, there is no trading market in the Company’s common stock.

No dividends were declared in 2012 or 2010. Dividends in the amount of $117.0 were declared and paid to PACCAR in 2011.

11

PACCAR Financial Corp.

(Millions of Dollars)

ITEM 6. SELECTED FINANCIAL DATA

The following table summarizes selected financial data for the Company. The information presented from 2010 through 2008 was restated for the merger of PFSC into the Company. See Item 1 “Business”, Item 8 “Financial Statements and Supplementary Data” and Note A “Significant Accounting Policies” for further information.

Balance Sheet Data

	As of December 31
	2012		2011		2010		2009		2008
Total Assets	$	6,537.7	$	5,250.1	$	3,947.9	$	4,208.3	$	5,814.0
Total Liabilities		5,699.8		4,499.1		3,151.9		3,475.0		5,050.6
Total Stockholder’s Equity		837.9		751.0		796.0		733.3		763.4

Income Statement Data

	Year ended December 31
	2012		2011		2010		2009		2008
Total interest and other revenue	$	510.5	$	429.8	$	412.3	$	426.8	$	509.6
Total expenses		376.9		317.4		349.1		382.0		438.0
Income before income taxes		133.6		112.4		63.2		44.8		71.6
Income taxes		49.9		44.4		19.1		16.8		27.4
Net income	$	83.7	$	68.0	$	44.1	$	28.0	$	44.2
Ratio of Earnings to Fixed Charges Pursuant to SEC Reporting Requirements (1)		3.21x		2.72x		1.69x		1.35x		1.44x
Ratio of Earnings to Fixed Charges Pursuant to the Support Agreement		6.18x		4.95x		3.11x		2.30x		2.10x

(1) For the purposes of this ratio, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of interest expense plus a portion of rent expense (which is considered representative of an interest factor). The method of computing the ratio of earnings to fixed charges shown above complies with SEC reporting requirements (see Exhibit 12(a)) but differs from the method called for in the Support Agreement between the Company and PACCAR (see Exhibit 12(b)).

12

PACCAR Financial Corp.

(Millions of Dollars)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Year ended December 31
	2012		2011		% Change
New business volume by product:
Retail loans and direct financing leases	$	1,765.6	$	1,462.6		21%
Equipment on operating leases		463.8		467.7		(1%)
Dealer master notes		279.4		242.7		15%
	$	2,508.8	$	2,173.0		15%
Average earning assets by product:
Retail loans and direct financing leases	$	3,251.4	$	2,572.3		26%
Equipment on operating leases		962.2		799.7		20%
Dealer wholesale financing		785.1		428.8		83%
Dealer master notes		82.6		63.3		30%
	$	5,081.3	$	3,864.1		32%
Revenue by product:
Retail loans and direct financing leases	$	167.7	$	148.4		13%
Equipment on operating leases		258.6		225.9		14%
Dealer wholesale financing		23.7		12.4		91%
Dealer master notes		2.9		2.6		12%
Used truck sales, other revenues and fees		57.6		40.5		42%
	$	510.5	$	429.8		19%
Income before income taxes	$	133.6	$	112.4		19%

Results of Operations

2012 Compared to 2011:

New Business Volume

New business volume in 2012 increased 15% from 2011 due to higher retail sales of PACCAR trucks in 2012. Equipment on operating lease new business volume in 2012 was comparable to 2011. Dealer master notes new business volume in 2012 increased $36.7 from 2011, attributable to higher new truck sales resulting in increased finance volume from dealers.

Income Before Income Taxes

The Company’s income before income taxes was $133.6 in 2012 compared to $112.4 in 2011. The increase in income before income taxes in 2012 was primarily the result of a higher finance margin of $30.9 and a higher operating lease margin of $1.2, partially offset by a higher provision for credit losses of $6.6.

13

PACCAR Financial Corp.

(Millions of Dollars)

Revenue and Expenses

The major factors for the change in interest and fee income, interest and other borrowing costs and finance margin in 2012 compared to 2011 are summarized below:

	Interest   and Fee Income			Interest and Other   Borrowing Costs			Finance Margin
2011	$	172.0		$	68.1		$	103.9
Increase (decrease)
Average finance receivables		50.9						50.9
Average debt balances					21.8			(21.8	)
Yields		(24.4	)					(24.4	)
Borrowing rates					(26.2	)		26.2
Total increase (decrease)		26.5			(4.4	)		30.9
2012	$	198.5		$	63.7		$	134.8

• Average finance receivables in 2012 increased $1,054.7 as a result of higher dealer wholesale financing, as well as retail portfolio new business volume exceeding repayments.

• The increase in average debt balances in 2012 of $1,441.4 reflected funding for higher average portfolio assets in 2012.

• Lower market rates resulted in lower yields (4.8% in 2012 and 5.6% in 2011) and lower borrowing rates (1.5% in 2012 and 2.4% in 2011).

The major factors for the change in operating lease and rental revenues, depreciation and other rental expenses and operating lease margin in 2012 compared to 2011 are summarized below:

	Operating Lease and   Rental Revenues		Depreciation and  Other  Rental Expenses			Operating  Lease Margin
2011	$	225.9	$	180.1		$	45.8
Increase (decrease)
Operating lease impairments				(.1	)		.1
Results on returned lease assets				5.2			(5.2	)
Average operating lease assets		28.1		22.7			5.4
Revenue and cost per asset		4.6		3.7			.9
Total increase		32.7		31.5			1.2
2012	$	258.6	$	211.6		$	47.0

• Results on returned lease assets were lower in 2012 compared to 2011 due to lower gains on used trucks reflecting some softening in used truck prices.

• Average operating lease assets increased due to increased demand for the Company’s operating lease product.

14

PACCAR Financial Corp.

(Millions of Dollars)

Used truck sales and other revenue and cost of used truck sales and other expenses are summarized below for 2012 compared to 2011:

	2012		2011
Used truck sales and other revenues	$	53.4	$	31.9
Cost of used truck sales and other expenses		49.7		24.2
	$	3.7	$	7.7

Used truck sales and other revenue and Cost of used truck sales and other expenses increased due to a higher volume of trucks acquired from PACCAR truck division customers as part of new truck sales packages during 2012. Used trucks gains decreased due to a decline in truck values in the second half of 2012.

The provision for losses on receivables in 2012 increased to $9.1 from $2.5 in 2011 primarily due to higher portfolio growth in 2012.

Allowance for Losses

	Year ended December 31
	2012			2011
Balance at beginning of period	$	58.8		$	61.7
Provision for losses		9.1			2.5
Net Charge offs		(15.1	)		(5.4	)
Balance at end of period	$	52.8		$	58.8
Ratios:
Charge offs, net of recoveries ($15.1 in 2012) to average total portfolio ($4,119.1 in 2012)		.37%			.18%
Allowance for losses ($52.8 in 2012) to year-end total portfolio ($4,311.9 in 2012)		1.22%			1.61%
Year-end retail loan and lease receivables past due over 30 days, ($11.5 in 2012) to year-end retail loan and lease receivables ($3,545.4 in 2012)		.32%			1.34%

Retail loan and lease receivables past due over 30 days at December 31, 2012 was .32%, a decrease from 1.34% at December 31, 2011. Included in December 31, 2011 past-due percentage is 1.04% related to one large customer. Excluding that customer, the past-due percentage would have been .30% at December 31, 2011. The Company continues to focus on maintaining low past-due balances. The allowance for losses as a percentage of the total portfolio decreased to 1.22% at December 31, 2012 from 1.61% as of December 31, 2011, reflecting favorable operating conditions and cash flows for the Company’s customers.

In 2012, charge offs, net of recoveries, increased $9.7 to $15.1 from $5.4 in 2011 due to lower used truck values and the charge off of one large customer. The Company modified this customer contract in a troubled debt restructuring which included a partial satisfaction of this customer’s account and modification of the remaining receivable.

15

PACCAR Financial Corp.

(Millions of Dollars)

When the Company modifies a 30+ days past-due account, the customer is then generally considered current under the revised contractual terms. The Company modified $3.2 of accounts during the fourth quarter of 2012 and $.2 of accounts during the fourth quarter of 2011 that were 30+ days past due and became current at the time of modification. Had these accounts not been modified and had they continued to not make payments, the pro forma percentage of retail loan and lease accounts 30+ days past due would have been as follows:

	As of December 31
	2012		2011
Pro forma percentage of retail loan and lease accounts 30+ days past due		.41%		1.35%

Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are included in past dues if they were not performing under the modified terms at December 31, 2012 and 2011. The effect on the allowance for credit losses from such modifications was not significant at December 31, 2012 and 2011. See “Critical Accounting Policies”, “Note A – Significant Accounting Policies” and “Note B – Finance and Other Receivables” for additional discussion regarding the Allowance for Losses.

The Company modifies loans and finance leases as a normal part of operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant delays are modifications extending terms up to three months for customers experiencing some short term financial stress but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms. When the Company modifies loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings.

The post modification balances of accounts modified during 2012 and 2011 are summarized below:

	Year ended December 31
	2012				2011
	Recorded Investment		% of Total Portfolio*		Recorded Investment		% of Total Portfolio*
Commercial	$	154.1		3.6%	$	112.8		3.1%
Insignificant Delay		44.1		1.0%		44.8		1.2%
Credit - No Concession		3.0		.1%		17.3		.5%
Credit - Troubled Debt Restructuring		21.3		.5%		12.9		.4%
	$	222.5		5.2%	$	187.8		5.2%

* Recorded investment immediately after modification as a percentage of ending portfolio

Total modification activity increased in 2012 compared to 2011 primarily due to higher commercial modifications. Commercial modifications increased to $154.1 in 2012 from $112.8 in 2011 due to higher volume of end-of-contract refinancing in 2012. This was partially offset by lower total credit modifications due to improved portfolio performance. Credit – Troubled Debt Restructuring modifications increased to $21.3 in 2012 from $12.9 in 2011 due to a contract modification of a large customer.

16

PACCAR Financial Corp.

(Millions of Dollars)

The Company’s portfolio is concentrated with customers in the heavy- and medium-duty truck transportation industry. The portfolio is comprised of retail loans and leases, dealer wholesale financing and dealer master notes as follows:

	As of December 31
	2012			2011
Retail loans	$	2,242.1	52%	$	1,807.2	49%
Retail leases		1,303.3	30%		1,120.4	31%
Dealer wholesale financing		641.7	15%		576.5	16%
Dealer master notes		92.4	2%		104.2	3%
Other*		32.4	1%		33.0	1%
Total portfolio	$	4,311.9	100%	$	3,641.3	100%

* Operating lease and other trade receivables.

Retail loans and retail leases increased to $2,242.1 and $1,303.3 compared to $1,807.2 and $1,120.4 at December 31, 2012 and 2011, respectively, due to new business volume exceeding collections.

Dealer wholesale financing balances increased to $641.7 at December 31, 2012 compared to $576.5 at December 31, 2011, as dealers increased new truck inventory to meet greater market demand.

Dealer master notes decreased to $92.4 compared to $104.2 at December 31, 2012 and 2011, respectively, due to repayments exceeding new business volume. The dealer may pay the loans early or make additional draws up to specified balances of the contracts pledged to the Company. As of December 31, 2012, the underlying pledged contracts were $201.7 upon which the dealers have available $109.3 as a potential additional borrowing capacity.

The estimation methods and factors considered for determining the allowance during the periods included in this filing have been consistently applied and are discussed further under “Critical Accounting Policies”. There have been no significant changes in customer contract terms during the periods.

The Company’s effective income tax rate was 37.4% for 2012 compared to 39.5% for 2011. The 2011 effective tax rate reflected increased state tax expenses.

During 2012, the Company’s deferred income tax provision was $46.1 compared to $207.8 for 2011 due to lower benefits from accelerated depreciation. The Company’s net deferred tax liability increased to $728.2 at December 31, 2012 from $681.4 at December 31, 2011. The increase in the deferred tax liability primarily relates to the high volume of leased equipment placed into service in 2012 for which a fifty percent bonus depreciation deduction was available under U.S. tax law. An extension of fifty percent bonus depreciation through 2013 was enacted on January 2, 2013. Deferred taxes are impacted by new business volume and the accelerated depreciation deduction rate under U.S. tax law. The difference in the timing of depreciation for financial statement and income tax purposes does not impact operating results. The impact on liquidity in 2013 is not expected to be significant.

17

PACCAR Financial Corp.

(Millions of Dollars)

2011 Compared to 2010:

	Year ended December 31
	2011		2010		% Change
New business volume by product:
Retail loans and direct financing leases	$	1,462.6	$	825.6		77%
Equipment on operating leases		467.7		162.2		188%
Dealer master notes		242.7		160.5		51%
	$	2,173.0	$	1,148.3		89%
Average earning assets by product:
Retail loans and direct financing leases	$	2,572.3	$	2,508.7		3%
Equipment on operating leases		799.7		668.6		20%
Dealer wholesale financing		428.8		298.3		44%
Dealer master notes		63.3		79.2		(20%)
	$	3,864.1	$	3,554.8		9%
Revenue by product:
Retail loans and direct financing leases	$	148.4	$	161.4		(8%)
Equipment on operating leases		225.9		188.0		20%
Dealer wholesale financing		12.4		9.7		28%
Dealer master notes		2.6		3.5		(26%)
Used truck sales, other revenues and fees		40.5		49.7		(19%)
	$	429.8	$	412.3		4%
Income before income taxes	$	112.4	$	63.2		78%

New Business Volume

New business volume in 2011 increased 89% from 2010 due to higher retail sales of PACCAR trucks in 2011 and higher finance market share. Equipment on operating lease new business volume in 2011 increased $305.5 from 2010. This increase was attributable to increased fleet business in 2011.

Income Before Income Taxes

The Company’s income before income taxes was $112.4 in 2011 compared to $63.2 in 2010. The increase in income before income taxes was primarily the result of a higher operating lease margin of $21.2, a higher finance margin of $15.1 and a lower provision for credit losses of $14.6.

18

PACCAR Financial Corp.

(Millions of Dollars)

Revenue and Expenses

The major factors for the change in interest and fee income, interest and other borrowing costs and finance margin in 2011 compared to 2010 are summarized below:

	Interest   and Fee Income			Interest and Other   Borrowing Costs			Finance Margin
2010	$	184.4		$	95.6		$	88.8
Increase (decrease)
Average finance receivables		13.1						13.1
Average debt balances					10.4			(10.4	)
Yields		(25.5	)					(25.5	)
Borrowing rates					(37.9	)		37.9
Total (decrease) increase		(12.4	)		(27.5	)		15.1
2011	$	172.0		$	68.1		$	103.9

• Average finance receivables in 2011 increased $178.2 as a result of higher dealer wholesale financing, as well as retail portfolio new business volume exceeding repayments.

• The increase in average debt balances in 2011 of $259.2 reflected funding for higher average portfolio assets in 2011.

• Lower market rates resulted in lower yields (5.6% in 2011 and 6.4% in 2010) and lower borrowing rates (2.4% in 2011 and 3.7% in 2010).

The major factors for the change in operating lease and rental revenues, depreciation and other rental expenses and operating lease margin in 2011 compared to 2010 are summarized below:

	Operating Lease and		Depreciation and			Operating
	Rental Revenues		Other Rental Expenses			Lease Margin
2010	$	188.0	$	163.4		$	24.6
Increase (decrease)
Operating lease impairments				(.7	)		.7
Results on returned lease assets				(13.1	)		13.1
Average operating lease assets		8.6		6.4			2.2
Revenue and cost per asset		29.3		24.1			5.2
Total increase		37.9		16.7			21.2
2011	$	225.9	$	180.1		$	45.8

• Results on returned leased assets were higher in 2011 compared to 2010 due to stronger used truck values.

• Average operating lease assets increased due to a higher number of units on operating lease in 2011.

19

PACCAR Financial Corp.

(Millions of Dollars)

Used truck sales and other revenue and cost of used truck sales and other expenses are summarized below for 2011 compared to 2010:

	2011		2010
Used truck sales and other revenues	$	31.9	$	39.9
Cost of used truck sales and other expenses		24.2		33.0
	$	7.7	$	6.9

Used truck sales and other revenue and Cost of used truck sales and other expenses decreased in 2011 due to lower sales of used trucks acquired from PACCAR truck division customers as part of new truck sales packages.

The provision for losses on receivables in 2011 decreased to $2.5 from $17.1 in 2010 primarily due to improvements in the performance of the portfolio reflecting stronger freight demand.

Allowance for Losses

	Year ended December 31
	2011			2010
Balance at beginning of period	$	61.7		$	75.7
Provision for losses		2.5			17.1
Net Charge offs		(5.4	)		(31.1	)
Balance at end of period	$	58.8		$	61.7
Ratios:
Charge offs, net of recoveries ($5.4 in 2011) to average total portfolio ($3,064.4 in 2011)		.18%			1.08%
Allowance for losses ($58.8 in 2011) to year-end total portfolio ($3,641.3 in 2011)		1.61%			2.18%
Year-end retail loan and lease receivables past due, over 30 days, ($39.2 in 2011) to year-end retail loan and lease receivables ($2,927.6 in 2011)		1.34%			2.53%

Retail loan and lease receivables past due over 30 days at December 31, 2011 was 1.34%, a decrease from 2.53% at December 31, 2010 and the lowest level since the second quarter of 2007. Included in the December 31, 2011 past-due percentage is 1.04% related to one large customer. Excluding that customer, the past due percentage would have been .30% at December 31, 2011, compared to .88% at December 31, 2010. At December 31, 2011, the Company had $18.2 of specific loss reserves for this large customer and other accounts considered at risk. The Company remains focused on minimizing past-due balances. The allowance for losses as a percentage of the total portfolio decreased to 1.61% at December 31, 2011 from 2.18% as of December 31, 2010, reflecting improved operating conditions and cash flows for its customers.

In 2011, charge offs, net of recoveries decreased $25.7 to $5.4 from $31.1 in 2010 due to improved economic conditions, higher used truck values and stronger underwriting practices, which resulted in fewer repossessions and a lower loss per repossession.

20

PACCAR Financial Corp.

(Millions of Dollars)

When the Company modifies a 30+ days past-due account, the customer is generally considered current under the revised contractual terms. The Company modified $.2 of accounts during the fourth quarter of 2011 and $6.0 of accounts during the fourth quarter of 2010 that were 30+ days past due and became current at the time of modification. Had these accounts not been modified and continued to not make payments, the pro forma percentage of retail loan and lease accounts 30+ days past due would have been as follows:

	As of December 31
	2011		2010
Pro forma percentage of retail loan and lease accounts 30+ days past due		1.35%		2.77%

Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are included in past dues as of December 31, 2011 and 2010 if they were not performing under the modified terms. The effect on the allowance for credit losses from such modifications was not significant at December 31, 2011 and 2010. See “Critical Accounting Policies”, “Note A – Significant Accounting Policies” and “Note B – Finance and Other Receivables” for additional discussion regarding the Allowance for Losses.

The Company’s portfolio is concentrated with customers in the heavy and medium duty truck transportation industry. The portfolio is comprised of retail loans and leases, dealer wholesale financing and dealer master notes as follows:

	As of December 31
	2011			2010
Retail loans	$	1,807.2	49%	$	1,509.5	53%
Retail leases		1,120.4	31%		958.4	34%
Dealer wholesale financing		576.5	16%		267.0	9%
Dealer master notes		104.2	3%		70.4	3%
Other*		33.0	1%		27.9	1%
Total portfolio	$	3,641.3	100%	$	2,833.2	100%

* Operating lease and other trade receivables.

Retail loans, retail leases and dealer master notes increased to $1,807.2, $1,120.4 and $104.2, compared to $1,509.5, $958.4 and $70.4, at December 31, 2011 and 2010, respectively, due to new business volume exceeding collections.

Dealer wholesale financing balances increased to $576.5 at December 31, 2011 compared to $267.0 at December 31, 2010, as dealers increased new truck inventory to meet greater market demand.

The estimation methods and factors considered for determining the allowance during the periods included in this filing have been consistently applied and are discussed further under “Critical Accounting Policies”. There have been no significant changes in customer contract terms during the periods.

The Company’s effective income tax rate was 39.5% for 2011, compared to 30.2% for 2010. The 2010 effective tax rate reflected a favorable effect from revaluation of net deferred tax liabilities due to a reduction in the estimated average state income tax rate in 2010.

During 2011, the Company’s deferred income tax provision increased to $207.8 from a deferred benefit of $3.7 for 2010. The Company’s net deferred tax liability increased to $681.4 at December 31, 2011 from $472.6 at December 31, 2010. The increase in the deferred income tax provision and deferred tax liability primarily relates to the high volume of leased equipment placed into service in 2011 for which a one hundred percent depreciation deduction was available under U.S. tax law. Deferred taxes are impacted by new business volume and the accelerated depreciation deduction rate under U.S. tax law. Accelerated tax deductions under current U.S. tax law are expected to decrease which should reduce deferred tax liabilities. The difference in the timing of depreciation for financial statement and income tax purposes does not impact operating results. The impact on liquidity in 2012 was not significant.

21

PACCAR Financial Corp.

(Millions of Dollars)

Company Outlook

Average earning assets in 2013 may grow approximately 5-10% as increased new business financing from truck sales exceeds customer collections. Current levels of freight tonnage, freight rates and fleet utilization that are contributing to customers’ profitability and cash flow. If current freight transportation conditions decline due to weaker economic conditions, past due accounts, truck repossessions and credit losses would likely increase from current low levels. See the Forward Looking Statement section of Management’s Discussion and Analysis for factors that may affect this outlook.

Funding and Liquidity

The Company’s debt ratings at December 31, 2012 are as follows:

	Standard
	and Poor’s		Moody’s
Commercial paper		A-1		P-1
Senior unsecured debt		A+		A1

Any decrease in these credit ratings could negatively impact the Company’s ability to access capital markets at competitive interest rates and the Company’s ability to maintain liquidity and financial stability.

The Company periodically registers debt securities under the Securities Act of 1933 for offering to the public. In November 2012, the Company filed a shelf registration statement to issue medium-term notes. In February 2013, the Company issued $500.0 of medium-term notes under this registration. The shelf registration statement expires in November 2015 and does not limit the principal amount of debt securities that may be issued during the period. The total notional amount of medium-term notes outstanding for the Company as of December 31, 2012 was $2,700.0.

Loans due to PACCAR at December 31, 2012 are $218.0 compared to $415.0 at December 31, 2011. The $218.0 loan, with an effective fixed interest rate of 6.88%, matures in February 2014.

The Company believes it will be able to fund receivables, service debt and meet its other payment obligations through internally generated funds, access to public and private debt markets, and advances from PACCAR.

The Company participated with PACCAR and certain other PACCAR affiliates in syndicated credit facilities of $3,000.0 at December 31, 2012. Of this amount, $1,000.0 expires in June 2013, $1,000.0 expires in 2016 and $1,000.0 expires in 2017. PACCAR and the Company intend to replace these credit facilities as they expire with facilities of similar amounts.

Credit facilities of $2,060.0 are available for use by the Company and/or PACCAR and certain other PACCAR affiliates. The remaining $940.0 is allocated to the following subsidiaries: $323.8 is available for use by PACCAR’s Canadian finance subsidiary, $231.2 is available for use by PACCAR’s Mexican finance subsidiaries, $212.5 is available for use by PACCAR’s United Kingdom finance subsidiary and $172.5 is available for use by PACCAR’s Australian finance subsidiary.

These credit facilities are used to provide backup liquidity for the Company’s commercial paper and maturing medium-term notes. The Company is liable only for its own borrowings under these credit facilities. There were no borrowings under these credit facilities in the year ended December 31, 2012.

22

PACCAR Financial Corp.

(Millions of Dollars)

The Company issues commercial paper for a portion of its funding. Some of this commercial paper is converted to fixed interest rate debt through the use of interest rate swaps, which are used to manage interest rate risk. In the event of future disruption in the financial markets, the Company may not be able to issue replacement commercial paper. As a result, the Company is exposed to liquidity risk from the maturity of short-term borrowings paid to lenders compared to the timing of receivable collections from customers. The Company believes its cash balances and investments, syndicated bank lines, current investment-grade credit ratings of A+/A1 and its ability to borrow from PACCAR, if necessary, will continue to provide it with sufficient resources and access to capital markets at competitive interest rates and therefore contribute to the Company maintaining its liquidity and financial stability.

The following summarizes the Company’s contractual cash commitments at December 31, 2012:

	Maturity
	Less than		More than
	One Year		One Year		Total
Borrowings*	$	2,369.6	$	2,150.0	$	4,519.6
Due to PACCAR Inc				218.0		218.0
Interest on term debt**		42.5		45.1		87.6
Operating leases		.6		1.9		2.5
Total	$	2,412.7	$	2,415.0	$	4,827.7

* Borrowings also include commercial paper.

** Includes interest on intercompany, fixed- and floating-rate term debt. Interest on floating-rate debt is based on the applicable market rates at December 31, 2012.

As described in “Note F – Borrowings” in the Notes to the Financial Statements, borrowings consist of medium-term notes and commercial paper. The Company has operating leases for office space, truck leasing facilities and office equipment.

In addition, the Company had loan and lease commitments of $247.6 expiring within one year. These commitments represent commitments to fund new retail loan and lease contracts.

Critical Accounting Policies:

The Company’s significant accounting policies are disclosed in Note A of the financial statements. In the preparation of the Company’s financial statements in accordance with U.S. generally accepted accounting principles, management uses estimates and makes judgments and assumptions that affect asset and liability values and the amounts reported as income and expense during the periods presented. The following are accounting policies which, in the opinion of management, are particularly sensitive and which, if actual results are different from estimates used by management, may have a material impact on the financial statements.

Operating Leases

The accounting for trucks sold pursuant to agreements accounted for as operating leases are disclosed in Note C of the financial statements. In determining its estimate of the residual value of such vehicles, the Company considers the length of the lease term, the truck model, the expected usage of the truck and anticipated market demand. Operating lease terms generally range from three to five years. The resulting residual values on operating leases generally range between 30% and 50% of original equipment cost. If the sales price of the trucks at the end of the term of the agreement differs from the Company’s estimated residual value, a gain or loss will result.

Future market conditions, changes in government regulations and other factors outside the Company’s control could impact the ultimate sales price of trucks returned under these contracts. Residual values are reviewed regularly and adjusted if market conditions warrant. A decrease in the estimated equipment residual values would increase annual depreciation expense over the remaining lease term.

23

PACCAR Financial Corp.

(Millions of Dollars)

During 2012 and 2011, market values on equipment returning upon operating lease maturity were generally higher than the residual values on the equipment, resulting in a decrease in depreciation expense of $2.6 and $9.1, respectively. During 2010, lower market values on equipment returning upon lease maturity, as well as impairments on existing operating leases, resulted in additional depreciation expense of $3.9.

At December 31, 2012, the aggregate residual value of equipment on operating leases was $528.4. A 10% decrease in used truck values expected to persist over the remaining maturities of the Company’s operating leases would reduce residual value estimates and result in the Company recording approximately $13.2 of additional depreciation per year.

Allowance for Credit Losses

The allowance for credit losses related to the Company’s loans and finance leases is disclosed in “Note B – Finance and Other Receivables” of the financial statements. The Company has developed a systematic methodology for determining the allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail loans and direct finance leases, net of unearned interest. The wholesale segment consists of wholesale financing loans to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company requires monthly reporting of the dealer’s financial condition, conducts periodic audits of the trucks being financed and in many cases, obtains personal guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest generally over 36 to 60 months and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves.

The Company individually evaluates certain finance receivables for impairment. Finance receivables which are evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered probable the Company will be unable to collect all contractual interest and principal payments as scheduled. In addition, all retail loans and leases which have been classified as TDRs and all customer accounts over 90 days past due are considered impaired. All impaired accounts are on non-accrual status.

Impaired receivables are considered collateral dependent. Large balance retail and all wholesale impaired receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s recorded investment, no reserve is recorded. Small balance impaired receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.

For finance receivables that are not individually impaired, the Company determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past-due account data and current market conditions. Information used includes assumptions regarding the likelihood of collecting current and past-due accounts, repossession rates, the recovery rate on the underlying collateral based on used truck values and other pledged collateral or recourse.

The Company has developed a range of loss estimates for each of its portfolios based on historical experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is determined as probable based on current market conditions and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. After determining the appropriate level of the allowance for credit losses, the provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent in the portfolio.

24

PACCAR Financial Corp.

(Millions of Dollars)

The adequacy of the allowance is evaluated quarterly based on the most recent past due account information and current market conditions. As accounts become past-due, the likelihood increases they will not be fully collected. The Company’s experience indicates the probability of not fully collecting past-due accounts ranges between 20% and 80%. Over the past three years, the Company’s year-end 30+ days past-due accounts have ranged between .32% and 2.53% of year-end loan and lease receivables. Historically, a 100 basis point increase in the 30+ days past-due percentage has resulted in an increase in credit losses of 10 to 35 basis points of receivables. Past-dues were .32% at December 31, 2012. If past-dues were 100 basis points higher or 1.32% as of December 31, 2012, the Company’s estimate of credit losses would likely have increased by approximately $2 to $7 depending on the extent of the past-dues, the estimated value of the collateral as compared to amounts owed and general economic factors.

Forward Looking Statements

Certain information presented in this Form 10-K contains forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties that may affect actual results. Risks and uncertainties include, but are not limited to: national and local economic, political and industry conditions; changes in the levels of new business volume due to unit fluctuations in new PACCAR truck sales; changes in competitive factors; changes affecting the profitability of truck owners and operators; price changes impacting equipment costs and residual values; changes in costs and insufficient liquidity in the capital markets and availability of other funding sources; and legislation and governmental regulation.

25

PACCAR Financial Corp.

(Millions of Dollars)

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk and Derivative Financial Instruments

In the normal course of business, the Company issues various financial instruments that expose the Company to market risk associated with market interest rates. Policies and procedures have been established by the Company to manage these market risks through the use of various derivative financial instruments. The Company does not engage in derivatives trading, market-making or other speculative activities.

The following is a sensitivity analysis for the Company’s assets and liabilities that have interest rate risk. The Company measures its interest-rate risk by estimating the amount by which the fair value of interest rate sensitive assets and liabilities, including derivative financial instruments, would change assuming an immediate 100 basis point increase across the yield curve as shown in the following table:

Fair Value Gains (Losses)

	Year ended December 31
	2012			2011
Assets
Fixed rate loans	$	(44.2	)	$	(33.0	)
Due from PACCAR		(1.4	)		(1.9	)
Due from foreign finance affiliates		(.9	)		(1.3	)
Interest rate swaps related to debt					2.6
Liabilities
Fixed rate debt		51.4			16.9
Interest rate swaps related to debt		9.0			17.1
Due to PACCAR		2.8			5.7
Total	$	16.7		$	6.1

The Company’s debt as of December 31, 2012 and 2011 consisted of commercial paper and floating and fixed-rate medium-term notes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company and related schedules described under Item 15 – Exhibits and Financial Statement Schedules are included following this page.

26

Report of Independent Registered Public Accounting Firm

Board of Directors

PACCAR Inc and PACCAR Financial Corp.

We have audited the accompanying balance sheets of PACCAR Financial Corp. (a wholly-owned subsidiary of PACCAR Inc) as of December 31, 2012 and 2011, and the related statements of income and comprehensive income, cash flows, and stockholder’s equity for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PACCAR Financial Corp. at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2012 in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Seattle, Washington

February 27, 2013

27

PACCAR Financial Corp.

STATEMENTS OF INCOME

(Millions of Dollars)

	Year ended December 31
	2012		2011		2010
Interest and fee income	$	198.5	$	172.0	$	184.4
Operating lease and rental revenues		258.6		225.9		188.0
Used truck sales and other revenues		53.4		31.9		39.9
TOTAL INTEREST AND OTHER REVENUE	$	510.5	$	429.8	$	412.3
Interest and other borrowing costs		63.7		68.1		95.6
Depreciation and other rental expenses		211.6		180.1		163.4
Cost of used truck sales and other expenses		49.7		24.2		33.0
Selling, general and administrative expenses		42.8		42.5		40.0
Provision for losses on receivables		9.1		2.5		17.1
TOTAL EXPENSES	$	376.9	$	317.4	$	349.1
INCOME BEFORE INCOME TAXES	$	133.6	$	112.4	$	63.2
Income taxes		49.9		44.4		19.1
NET INCOME	$	83.7	$	68.0	$	44.1

Earnings per share and dividends per share are not reported because the Company is a wholly-owned subsidiary of PACCAR.

STATEMENTS OF COMPREHENSIVE INCOME

(Millions of Dollars)

	Year ended December 31
	2012			2011			2010
Net income	$	83.7		$	68.0		$	44.1
Other comprehensive income
Unrealized losses on derivative contracts
Losses arising during the period		(9.5	)		(16.5	)		(13.7	)
Tax effect		3.5			6.2			5.2
Reclassification adjustment		9.9			19.8			42.4
Tax effect		(3.7	)		(7.4	)		(16.2	)
Net other comprehensive income		.2			2.1			17.7
TOTAL COMPREHENSIVE INCOME	$	83.9		$	70.1		$	61.8

See Notes to Financial Statements

28

PACCAR Financial Corp.

BALANCE SHEETS

(Millions of Dollars)

	As of December 31
	2012			2011
ASSETS
Cash	$	26.6		$	33.2
Finance and other receivables, net of allowance for losses (2012 - $52.8 and 2011 - $58.8)		4,259.1			3,582.5
Due from PACCAR Inc and affiliates		1,049.8			627.7
Equipment on operating leases, net of accumulated depreciation (2012 - $355.3 and 2011-$313.0)		1,042.2			880.6
Other assets		160.0			126.1
TOTAL ASSETS	$	6,537.7		$	5,250.1
LIABILITIES
Accounts payable, accrued expenses and other	$	170.3		$	208.9
Due to PACCAR Inc and affiliates		253.1			451.7
Commercial paper		1,819.6			1,779.2
Medium-term notes		2,701.1			1,350.3
Deferred taxes and other liabilities		755.7			709.0
TOTAL LIABILITIES	$	5,699.8		$	4,499.1
STOCKHOLDER’S EQUITY
Preferred stock, par value $100 per share, 6% noncumulative and nonvoting, 450,000 shares authorized, 310,000 shares issued and outstanding	$	31.0		$	31.0
Common Stock, par value $100 per share, 200,000 shares authorized, 145,000 shares issued and outstanding		14.5			14.5
Additional paid-in capital		104.7			101.7
Retained earnings		695.4			611.7
Accumulated other comprehensive loss		(7.7	)		(7.9	)
TOTAL STOCKHOLDER’S EQUITY	$	837.9		$	751.0
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	6,537.7		$	5,250.1

See Notes to Financial Statements

29

PACCAR Financial Corp.

STATEMENTS OF CASH FLOWS

(Millions of Dollars)

	Year ended December 31
	2012			2011			2010
OPERATING ACTIVITIES
Net income	$	83.7		$	68.0		$	44.1
Items included in net income not affecting cash:
Depreciation and amortization		186.7			149.4			141.3
Provision for losses on receivables		9.1			2.5			17.1
Deferred tax provision		46.1			207.8			(3.7	)
Administrative fees for services from PACCAR Inc		3.0			1.9			.9
(Decrease) increase in payables and other		(75.6	)		(106.1	)		6.5
NET CASH PROVIDED BY OPERATING ACTIVITIES		253.0			323.5			206.2
INVESTING ACTIVITIES
Finance and other receivables originated		(2,061.1	)		(1,699.8	)		(992.4	)
Collections on finance and other receivables		1,417.7			1,187.9			1,200.4
Net (increase) decrease in wholesale receivables		(65.2	)		(309.5	)		8.7
Net (increase) decrease in loans and leases to PACCAR Inc and affiliates		(399.4	)		2.2			(79.0	)
Acquisition of equipment on operating leases, primarily from
PACCAR Inc		(463.2	)		(466.6	)		(162.2	)
Proceeds from disposal of equipment		104.7			102.4			140.3
Changes in restricted cash		15.0			(15.0	)
Other		(.7	)		(14.9	)		(6.7	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(1,452.2	)		(1,213.3	)		109.1
FINANCING ACTIVITIES
Net increase (decrease) in commercial paper		40.4			783.6			(299.3	)
Proceeds from medium-term notes		1,599.2			549.5			549.7
Payments of medium-term notes		(250.0	)		(323.5	)		(575.0	)
Advances (to) from PACCAR Inc		(197.0	)		20.0
Dividends paid					(117.0	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		1,192.6			912.6			(324.6	)
NET (DECREASE) INCREASE IN CASH		(6.6	)		22.8			(9.3	)
CASH AT BEGINNING OF YEAR		33.2			10.4			19.7
CASH AT END OF YEAR	$	26.6		$	33.2		$	10.4

See Notes to Financial Statements

30

PACCAR Financial Corp.

STATEMENTS OF STOCKHOLDER’S EQUITY

(Millions of Dollars)

	Year ended December 31
	2012			2011			2010
PREFERRED STOCK, $100 par value
Balance at beginning of year	$	31.0		$	31.0		$	31.0
Balance at end of year		31.0			31.0			31.0
COMMON STOCK, $100 par value
Balance at beginning of year		14.5			14.5			14.5
Balance at end of year		14.5			14.5			14.5
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year		101.7			99.8			98.9
Investments from PACCAR Inc		3.0			1.9			.9
Balance at end of year		104.7			101.7			99.8
RETAINED EARNINGS
Balance at beginning of year		611.7			660.7			616.6
Net income		83.7			68.0			44.1
Dividends paid					(117.0	)
Balance at end of year		695.4			611.7			660.7
ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated unrealized net (loss) gain on derivative contracts:
Balance at beginning of year		(7.9	)		(10.0	)		(27.7	)
Net unrealized gain		.2			2.1			17.7
Balance at end of year		(7.7	)		(7.9	)		(10.0	)
TOTAL STOCKHOLDER’S EQUITY	$	837.9		$	751.0		$	796.0

See Notes to Financial Statements

31

PACCAR Financial Corp.

(Millions of Dollars)

NOTE A – SIGNIFICANT ACCOUNTING POLICIES

Description of Operations and Basis of Presentation: PACCAR Financial Corp. (the “Company”), is a wholly-owned subsidiary of PACCAR Inc (“PACCAR”). The Company primarily provides financing of PACCAR-manufactured trucks and related equipment sold by authorized dealers. The Company also finances dealer inventories of transportation equipment and franchises Kenworth and Peterbilt dealerships to engage in full-service and finance leasing. The operations of the Company are fundamentally affected by its relationship with PACCAR.

In 2000, PACCAR transferred the stock of the Company to PACCAR Financial Services Corporation (“PFSC”), a wholly-owned subsidiary of PACCAR. In December 2011, PFSC was dissolved by means of a statutory merger with and into PACCAR Financial Corp., making the Company a direct subsidiary of PACCAR. The merger was accounted for using the pooling of interest method because the Company and PFSC were under common control of PACCAR. Under this method of accounting, the results and cash flows of the pre-merged Company and PFSC and their assets and liabilities are combined at the amounts at which they were previously recorded as if they had been part of the Company since the beginning of the periods shown. There was no material impact to the financial statements for all years presented.

Due to the nature of the Company’s business, customers are concentrated in the transportation industry throughout the United States. Generally, all receivables are collateralized by the equipment being financed. The risk of credit losses related to this concentration has been considered in establishing the allowance for losses.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Finance and Other Receivables:

Loans – Loans represent fixed- or floating-rate loans to customers or dealers collateralized by the vehicles purchased or financed and are recorded at amortized cost.

Finance leases – Finance leases are retail direct financing leases and sales-type finance leases, which lease equipment to retail customers and dealers. These leases are reported as the sum of minimum lease payments receivable and estimated residual value of the property subject to the contracts, reduced by unearned interest which is shown separately.

Dealer wholesale financing – Dealer wholesale financing is floating-rate wholesale loans to Kenworth and Peterbilt dealers for new and used trucks and are recorded at amortized cost. The loans are collateralized by the trucks being financed.

Interest and other – Interest and other receivables are interest on loans and leases and other amounts due within one year in the normal course of business.

Allowance for Losses:

The Company continuously monitors the payment performance of all its finance receivables. For large retail finance customers and dealers with wholesale financing, the Company regularly reviews their financial statements and makes site visits and phone contact as appropriate. If the Company becomes aware of circumstances that could cause those customers or dealers to face financial difficulty, whether or not they are past due, the customers are placed on a watch list.

32

PACCAR Financial Corp.

(Millions of Dollars)

The Company modifies loans and finance leases as a normal part of its operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification.

When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms. When the Company modifies loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings (TDRs). The Company does not typically grant credit modifications for customers that do not meet minimum underwriting standards since the Company normally repossesses the financed equipment in these circumstances. When such modifications do occur, they are considered TDRs.

On average, modifications extended contractual terms by four months in 2012 and nine months in 2011 and did not have a significant effect on the weighted average term or interest rate of the total portfolio at December 31, 2012 or 2011.

The Company has developed a systematic methodology for determining the allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail loans and direct finance leases, net of unearned interest. The wholesale segment consists of truck inventory financing loans to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company requires monthly reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and, in many cases, obtains personal guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest generally over 36 to 60 months and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves.

The Company individually evaluates certain finance receivables for impairment. Finance receivables which are evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered probable the Company will be unable to collect all contractual interest and principal payments as scheduled. In addition, all retail loans and leases which have been classified as TDRs and all customer accounts over 90-days past due are considered impaired. Generally, impaired accounts are on non-accrual status. Impaired accounts classified as TDRs which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments.

Impaired receivables are considered collateral dependent. Large balance retail and all wholesale impaired receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s loss exposure, no reserve is recorded. Small balance impaired receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.

For finance receivables that are not individually impaired, the Company collectively evaluates and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past-due account data and current market conditions. Information used includes assumptions regarding the likelihood of collecting current and past-due accounts, repossession rates, the recovery rate on the underlying collateral based on used truck values and other pledged collateral or recourse. The Company has developed a range of loss estimates for its portfolio based on historical experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is determined as probable based on current market conditions and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. After determining the appropriate level of the allowance for credit losses, the provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent in the portfolio.

33

PACCAR Financial Corp.

(Millions of Dollars)

In determining the fair value of the collateral, the Company uses a pricing matrix and categorizes the fair value as Level 2 in the hierarchy of fair value measurement. The pricing matrix is reviewed quarterly and updated as appropriate. The pricing matrix considers the make, model and year of the equipment as well as recent sales prices of comparable equipment through wholesale channels to the Company’s dealers (principal market). The fair value of the collateral also considers the overall condition of the equipment.

Accounts are charged off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). Typically the timing between the repossession and charge off is not significant. In cases where repossession is delayed (e.g., for legal proceedings), the Company records partial charge offs. The charge off is determined by comparing the fair value of the collateral, less cost to sell, to the recorded investment.

Revenue Recognition: Interest income from finance and other receivables is recognized using the interest method. Certain loan origination costs are deferred and amortized to interest income over the expected life of the contracts, generally 36 to 60 months, using the straight-line method which approximates the interest method. For operating leases, rental revenue is recognized on a straight-line basis over the lease term.

Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at December 31, 2012 or December 31, 2011. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is impaired or on non-accrual status are applied to interest and principal in accordance with the contractual terms.

The Company recognizes revenue on the sale of used trucks acquired from PACCAR truck division customers as part of new truck sales packages when the used trucks are invoiced and delivered to a customer.

Equipment on Operating Leases: Equipment on operating leases is recorded at cost and is depreciated on the straight-line basis to its estimated residual value. Residual values are reviewed regularly and adjusted if market conditions warrant.

Restricted Cash: Restricted cash consists of cash proceeds from the sale of eligible assets set aside for the acquisition of replacement assets under the Company’s like-kind exchange tax program. Restricted cash is classified within Other assets. The changes in restricted cash balances are reflected as an investing activity in the Statement of Cash Flows as they relate to sales and purchases of revenue earning assets.

Derivative Financial Instruments: Derivative financial instruments are used to hedge exposures to fluctuations in interest rates. Certain derivative instruments designated as either cash flow hedges or fair value hedges are subject to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as economic hedges. The Company’s policies prohibit the use of derivatives for speculation or trading. At the inception of each hedge relationship, the Company documents its risk management objectives, procedures and accounting treatment.

The Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same master netting agreements. The Company is not required to post or receive collateral under these agreements. Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company had no material exposures to default at December 31, 2012.

34

PACCAR Financial Corp.

(Millions of Dollars)

The Company uses regression analysis to assess effectiveness of interest-rate contracts on a quarterly basis. All components of the derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings. Hedge accounting is discontinued prospectively when the Company determines that a derivative financial instrument has ceased to be a highly effective hedge.

Income Taxes: The Company is included in the consolidated federal income tax return of PACCAR. Income taxes for the Company are determined on a separate return basis, and any related tax liability is paid by the Company to PACCAR and any related tax benefit is paid by PACCAR to the Company. State income taxes, where the Company files combined tax returns with PACCAR, are determined on a blended statutory rate, which is substantially the same as the rate computed on a separate return basis. As of December 31, 2012, the United States Internal Revenue Service has completed examinations of PACCAR’s tax returns for all years through 2008. PACCAR’s tax returns remain subject to examination in most jurisdictions for the years ranging from 2009 through 2012.

Preferred Stock: The Company’s Articles of Incorporation provide that the 6%, noncumulative, nonvoting preferred stock (100% owned by PACCAR) is redeemable only at the option of the Company’s Board of Directors.

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. While many of the amendments were clarifications to the existing guidance and are intended to align U.S. GAAP and IFRS, the ASU changed some fair value measurement principles and disclosure requirements. The Company adopted ASU 2011-04 in the first quarter of 2012. The impact of adoption reduced the allowance for credit loss for the impaired finance receivables by $2.5 at March 31, 2012, including $1.9 for impaired leases and $.6 for impaired loans.

The FASB issued ASU 2011-05, Presentation of Comprehensive Income, in June 2011, which was subsequently amended by ASU 2011-12 in December 2011. The new guidance requires entities to present components of net income and comprehensive income in either a combined financial statement or in two separate but consecutive statements of net income and comprehensive income. The Company adopted ASU 2011-05 as amended in the first quarter of 2012. The Company has elected to present components of net income combined with a total for comprehensive income in a single continuous statement in its interim financial statements and two separate consecutive statements of net income and comprehensive income in its annual financial statements.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires disclosure of additional information about reclassification adjustments from other comprehensive income. The ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company will provide the new disclosures in 2013.

In January 2013, the FASB issued ASU 2013-01 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, an update of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The ASUs require entities with derivatives, repurchase agreements and securities borrowing and lending transactions that are either offset on the balance sheet, or subject to a master netting arrangement, to provide expanded disclosures about the nature of the rights of offset. The updated ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company will provide the expanded disclosures in 2013.

35

PACCAR Financial Corp.

(Millions of Dollars)

NOTE B – FINANCE AND OTHER RECEIVABLES

The Company’s finance and other receivables are as follows:

	December 31			December 31
	2012			2011
Retail loans	$	2,242.1		$	1,807.2
Retail direct financing leases		1,451.8			1,245.1
Dealer wholesale financing		641.7			576.5
Dealer master notes		92.4			104.2
Interest and other receivables		32.4			33.0
Unearned interest - finance leases		(148.5	)		(124.7	)
Total portfolio	$	4,311.9		$	3,641.3
Less allowance for losses:
Loans, leases and other		(47.8	)		(54.3	)
Dealer wholesale financing		(3.9	)		(3.4	)
Operating lease and other trade receivables		(1.1	)		(1.1	)
Total portfolio, net of allowance for losses	$	4,259.1		$	3,582.5

Annual minimum payments due on loans and leases are as follows:

Beginning January 1, 2013	Loans		Finance leases
2013	$	716.9	$	345.4
2014		562.9		300.1
2015		470.9		256.5
2016		338.2		240.1
2017		211.7		161.2
Thereafter		33.9		100.9

Estimated residual values included with finance leases amounted to $47.6 in 2012 and $42.0 in 2011. Repayment experience indicates substantially all of dealer wholesale financing will be repaid within one year. In addition, repayment experience indicates that some loans, leases and other finance receivables will be paid prior to contract maturity, while others may be extended or modified.

For the following credit quality disclosures, financial receivables are classified as dealer wholesale, dealer retail and customer retail segments. Customer retail receivables are further segregated between fleet and owner/operator classes. Each individual class has similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk. The wholesale segment consists of truck inventory financing to PACCAR dealers. The customer retail segment consists of loans and leases directly to customers for the acquisition of commercial vehicles and related equipment. The dealer retail segment consists of loans and leases to participating dealers and franchises that use the proceeds to fund customers’ acquisition of commercial vehicles and related equipment. The fleet class consists of customer retail accounts operating more than five trucks. All other customer retail accounts are considered owner/operator.

36

PACCAR Financial Corp.

(Millions of Dollars)

Allowance for Credit Losses

The allowance for credit losses is summarized as follows:

	2012
			Retail
	Wholesale		Customer			Dealer		Other*			Total
Balance at January 1	$	3.4	$	44.4		$	9.9	$	1.1		$	58.8
Provision for losses		.5		7.6			.8		.2			9.1
Charge offs				(16.7	)				(.2	)		(16.9	)
Recoveries				1.8								1.8
Balance at December 31	$	3.9	$	37.1		$	10.7	$	1.1		$	52.8

	2011
			Retail
	Wholesale		Customer			Dealer		Other*			Total
Balance at January 1	$	1.5	$	50.8		$	8.2	$	1.2		$	61.7
Provision for losses		1.9		(1.2	)		1.7		.1			2.5
Charge offs				(8.4	)				(.2	)		(8.6	)
Recoveries				3.2								3.2
Balance at December 31	$	3.4	$	44.4		$	9.9	$	1.1		$	58.8

	2010
				Retail
	Wholesale			Customer			Dealer			Other*			Total
Balance at January 1	$	1.7		$	64.4		$	8.6		$	1.0		$	75.7
Provision for losses		(.2	)		16.2			(.4	)		1.5			17.1
Charge offs					(34.7	)					(1.3	)		(36.0	)
Recoveries					4.9									4.9
Balance at December 31	$	1.5		$	50.8		$	8.2		$	1.2		$	61.7

* Operating lease and other trade receivables

37

PACCAR Financial Corp.

(Millions of Dollars)

Information regarding finance receivables evaluated collectively and individually is as follows:

			Retail
At December 31, 2012	Wholesale		Customer		Dealer		Total
Recorded investment for impaired finance receivables evaluated individually	$		$	18.5	$	.1	$	18.6
Allowance for finance receivables evaluated individually	$		$	2.1	$		$	2.1
Recorded investment for finance receivables evaluated collectively	$	641.7	$	2,405.8	$	1,213.4	$	4,260.9
Allowance for finance receivables evaluated collectively	$	3.9	$	35.0	$	10.7	$	49.6

			Retail
At December 31, 2011	Wholesale		Customer		Dealer		Total
Recorded investment for impaired finance receivables evaluated individually	$		$	51.6	$	.4	$	52.0
Allowance for finance receivables evaluated individually	$		$	18.1	$	.1	$	18.2
Recorded investment for finance receivables evaluated collectively	$	576.5	$	1,961.0	$	1,018.8	$	3,556.3
Allowance for finance receivables evaluated collectively	$	3.4	$	26.3	$	9.8	$	39.5

The recorded investment for finance receivables that are on non-accrual status in the wholesale segment and the fleet, owner/operator, and retail dealer portfolio classes as of December 31, 2012 are nil, $14.0, $4.5, and $.1, and as of December 31, 2011 were nil, $44.2, $7.4, and $.4, respectively.

38

PACCAR Financial Corp.

(Millions of Dollars)

Impaired Loans

Impaired loans with no specific reserve were $2.9 and nil at December 31, 2012 and 2011, respectively. Impaired loans with a specific reserve are summarized below. The impaired loans with specific reserve represent the unpaid principal balance.

		Retail Customer
At December 31, 2012	Wholesale	Fleet			Owner/ Operator			Retail Dealer	Total
Impaired loans with specific reserve	$	$	9.4		$	4.3		$	$	13.7
Associated allowance			(.7	)		(1.1	)			(1.8	)
Net carrying amount of impaired loans	$	$	8.7		$	3.2		$	$	11.9
Average recorded investment	$	$	11.3		$	5.4		$	$	16.7

		Retail Customer
At December 31, 2011	Wholesale	Fleet			Owner/ Operator			Retail Dealer		Total
Impaired loans with specific reserve	$	$	10.8		$	7.1		$		$	17.9
Associated allowance			(2.4	)		(1.8	)				(4.2	)
Net carrying amount of impaired loans	$	$	8.4		$	5.3		$		$	13.7
Average recorded investment	$	$	10.1		$	9.4		$	.6	$	20.1

During the period the loans above were considered impaired, interest income recognized on a cash basis is as follows:

	2012		2011		2010
Interest income recognized:
Wholesale	$		$		$
Retail Customer
Fleet		.5		.6		.5
Owner/Operator		.5		.6		.1
Retail Dealer
	$	1.0	$	1.2	$	.6

Credit Quality

The Company’s customers are principally concentrated in the transportation industry in the United States. The Company’s portfolio is diversified over a large number of customers and dealers with no single customer or dealer balances over 7% of the total portfolio. The Company has contractual arrangements with one customer, Swift Transportation Corporation, that account for 10.8%, 11.6% and 11.4% of total Interest and Other Revenue for the periods ended December 31, 2012, 2011 and 2010, respectively. The Company retains as collateral a security interest in the related equipment.

At the inception of each contract, the Company considers the credit risk based on a variety of credit quality factors including; prior payment experience, customer financial information, credit-rating agency, loan-to-value ratios and other internal metrics. On an ongoing basis, the Company monitors credit quality based on past-due status and collection experience as the Company has found a meaningful correlation between the past-due status of customers and the risk of loss.

39

PACCAR Financial Corp.

(Millions of Dollars)

The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in accordance with the contractual terms and are not considered high risk. Watch accounts include accounts 31 to 90 days past-due and large accounts that are performing but are considered to be high-risk. Watch accounts are not impaired. At-risk accounts are accounts that are impaired, including TDRs, accounts over 90 days past-due and other accounts on non-accrual status. The Company uses historical data and known trends, to categorize each credit quality indicator.

The table below summarizes the Company’s finance receivables by credit quality indicator and portfolio class.

			Retail Customer
At December 31, 2012	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Performing	$	641.7	$	2,008.8	$	385.7	$	1,207.1	$	4,243.3
Watch				10.9		.4		6.3		17.6
At-risk				14.0		4.5		.1		18.6
Total	$	641.7	$	2,033.7	$	390.6	$	1,213.5	$	4,279.5

			Retail Customer
At December 31, 2011	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Performing	$	576.5	$	1,595.6	$	347.9	$	1,010.9	$	3,530.9
Watch				17.1		.4		7.9		25.4
At-risk				44.2		7.4		.4		52.0
Total	$	576.5	$	1,656.9	$	355.7	$	1,019.2	$	3,608.3

The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the Company considers the entire contractual account balance past due when any installment is over 30 days past due. Substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

			Retail Customer
At December 31, 2012	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Current and up to 30 days past-due	$	641.7	$	2,025.9	$	386.9	$	1,213.5	$	4,268.0
31 – 60 days past-due				2.2		.7				2.9
Greater than 60 days past-due				5.6		3.0				8.6
Total	$	641.7	$	2,033.7	$	390.6	$	1,213.5	$	4,279.5

			Retail Customer
At December 31, 2011	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Current and up to 30 days past-due	$	576.5	$	1,623.3	$	350.1	$	1,019.2	$	3,569.1
31 – 60 days past-due				1.4		.9				2.3
Greater than 60 days past-due				32.2		4.7				36.9
Total	$	576.5	$	1,656.9	$	355.7	$	1,019.2	$	3,608.3

40

PACCAR Financial Corp.

(Millions of Dollars)

Troubled Debt Restructurings

The Company modifies loans and finance leases as a normal part of its operations. The Company’s modifications typically resulted in granting more time to pay the contractual amounts owed and charging a fee and additional interest for the modification. The Company rarely forgives principal or accrued interest and may require principal and accrued interest payments at the time of modification. When the Company modifies loans and finance leases for customers in financial difficulty and grants a concession, the modifications are classified as TDRs.

During 2012, the pre-modification and post-modification recorded investments were $29.5 and $21.3, respectively. The decrease in the post-modification recorded investment in 2012 reflects a contract modification of one large customer that resulted in a finance receivable charge off of $8.2. For the year ended December 31, 2011, there was no change in the recorded investment for loans and leases modified as TDRs.

At modification date, the pre-and post-modification recorded investment balances are as follows:

	2012				2011
	Recorded Investment				Recorded Investment
	Pre-Modification		Post-Modification		Pre-Modification		Post-Modification
Fleet	$	29.2	$	21.0	$	10.8	$	10.8
Owner/Operator		.3		.3		2.1		2.1
	$	29.5	$	21.3	$	12.9	$	12.9

The balance of TDRs was $11.0 and $11.4 at December 31, 2012 and 2011, respectively.

The post-modification recorded investment of finance receivables modified as TDRs during the previous twelve months that subsequently defaulted (i.e. became more than 30 days past-due) in the year ended December 31, 2012 was $3.6 and nil for fleet and owner/operator, respectively. The TDRs that subsequently defaulted did not significantly impact the Company’s allowance for losses at December 31, 2012.

Repossessions

When the Company determines a customer is not likely to meet its contractual commitments, the Company repossesses the vehicles which serve as collateral for the loans, finance leases and equipment under operating lease. The Company records the vehicles as used truck inventory included in Other assets on the Balance Sheets. The balance of repossessed inventory at December 31, 2012 and 2011 was $10.4 and $1.0, respectively. Proceeds from the sales of repossessed assets were $11.3, $16.9, and $56.3 for the years ended December 31, 2012, 2011 and 2010, respectively. These amounts are included in Proceeds from disposal of equipment on the Statements of Cash Flows. Write downs of repossessed equipment on operating leases are recorded as impairments and included in Depreciation and other expense on the Statements of Income.

Unamortized Loan Origination Costs

The unamortized loan origination costs at December 31, 2012 and 2011 were $12.2 and $10.4, respectively. These amounts are included in Other assets on the Balance Sheets.

NOTE C – EQUIPMENT ON OPERATING LEASES

Terms of operating leases at origination and the related depreciation, generally range from three to seven years. The total future annual minimum rental payments to be received for equipment on non-cancelable operating leases beginning January 1, 2013 of $560.2 are due as follows: $223.2 in 2013; $164.0 in 2014; $109.6 in 2015; $50.6 in 2016; $12.9 in 2017 and beyond. Depreciation expense related to equipment on operating leases was $179.5, $147.1, $131.6 in 2012, 2011 and 2010, respectively. Substantially all equipment on operating leases is manufactured by PACCAR.

41

PACCAR Financial Corp.

(Millions of Dollars)

NOTE D – TRANSACTIONS WITH PACCAR AND AFFILIATES

The Company and PACCAR are parties to a Support Agreement that obligates PACCAR to provide, when required, financial assistance to the Company to ensure that the Company maintains a ratio of net earnings available for fixed charges to fixed charges (as defined in the Support Agreement) of at least 1.25 to 1 for any fiscal year. The required ratio for the years ended December 31, 2012, 2011 and 2010 was met without assistance. The Support Agreement also requires PACCAR to own, directly or indirectly, all outstanding voting stock of the Company.

Periodically, the Company makes loans to, borrows from and has intercompany transactions with PACCAR. In addition, the Company periodically loans funds to certain foreign finance and leasing affiliates of PACCAR. These various affiliates have Support Agreements with PACCAR, similar to the Company’s Support Agreement with PACCAR. The foreign affiliates operate in the United Kingdom, the Netherlands, Mexico, Canada and Australia, and any resulting currency exposure is fully hedged. The foreign affiliates primarily provide financing and leasing of PACCAR-manufactured trucks and related equipment sold through DAF’s, Kenworth’s and Peterbilt’s independent dealer networks in Europe, Mexico, Canada and Australia. The Company will not make loans to the foreign affiliates in excess of the equivalent of $500.0 United States dollars, unless the amount in excess of such limit is guaranteed by PACCAR. The Company periodically reviews the funding alternatives for these affiliates, and these limits may be revised in the future.

Loans due to PACCAR decreased to $218.0 at December 31, 2012 from $415.0 at December 31, 2011 due to the repayments of a $177.0 loan in February 2012 and a $20.0 loan in September 2012. The $218.0 loan due to PACCAR has an effective fixed interest rate of 6.88% and matures in February 2014. The Company recognized interest expense on these borrowings of $16.9, $26.9 and $26.4 in 2012, 2011 and 2010, respectively. Cash paid for interest on these borrowings was $20.7, $26.4 and $25.9 in 2012, 2011 and 2010, respectively.

Amounts outstanding at December 31, 2012 and 2011, including foreign finance affiliates operating in the United Kingdom, the Netherlands, Mexico, Canada and Australia, are summarized below:

	December 31		December 31
	2012		2011
Due from PACCAR and affiliates
Loans due from PACCAR	$	428.4	$	170.1
Loans due from foreign finance affiliates		360.6		219.6
Direct financing leases due from affiliate		13.9		13.8
Receivables		246.9		224.2
Total	$	1,049.8	$	627.7
Due to PACCAR and affiliates
Loans due to PACCAR	$	218.0	$	415.0
Payables		35.1		36.7
Total	$	253.1	$	451.7

The Company provides direct financing leases to a dealer location operated by an affiliate of PACCAR.

PACCAR has issued letters of credit as of December 31, 2012 in the amount of $4.3 on behalf of the Company to guarantee funds for payment to insured franchisees and customers for any future insurance losses.

42

PACCAR Financial Corp.

(Millions of Dollars)

PACCAR charges the Company for certain administrative services it provides. These costs were charged to the Company based upon the Company’s specific use of the services and PACCAR’s cost. Management considers these charges reasonable and similar to the costs that would be incurred if the Company were on a stand-alone basis. Fees for services of $3.0, $1.9 and $.9 in 2012, 2011 and 2010, respectively, were charged to the Company. The Company records the investment as additional paid-in capital.

There were no dividends declared or paid during 2012 and 2010. Dividends in the amount of $117.0 were declared and paid to PACCAR during 2011.

The Company’s principal office is located in the corporate headquarters building of PACCAR (owned by PACCAR). The Company also leases office space from one facility owned by PACCAR and five facilities leased by PACCAR.

The Company’s employees and PACCAR employees are covered by a defined benefit pension plan sponsored by PACCAR. The assets and liabilities of the plan are reflected in the financial statements of PACCAR. PACCAR contributes to the plan and allocates the expenses to the Company based principally on the number of eligible plan participants. Expenses for the defined benefit pension plan were $2.7, $1.9 and $1.5 for years 2012, 2011 and 2010, respectively, and are included in selling, general and administrative expenses.

Company employees and PACCAR employees are also covered by a defined contribution plan, sponsored by PACCAR. Expenses incurred by the Company for the defined contribution plan were $1.2, $1.0 and $.5 for years 2012, 2011 and 2010, respectively.

NOTE E – DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate contracts involve the exchange of fixed for floating rate or floating for fixed rate interest payments based on the contractual notional amounts in a single currency. The Company is exposed to interest rate risk caused by market volatility as a result of its borrowing activities. The objective of these contracts is to mitigate the fluctuations on earnings, cash flows and the fair value of borrowings. Net amounts paid or received are reflected as adjustments to interest expense. The notional amount is used to measure the volume of these contracts and does not represent exposure to credit loss. In the event of default by the counterparty, the risk in these transactions is the fair value of replacing the interest rate contract at current market rates.

The Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same master netting agreements. The Company is not required to post or receive collateral under these agreements. Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company had no material exposures to default at December 31, 2012.

At December 31, 2012, the notional amount of these contracts totaled $1,249.5 with amounts expiring over the next five years. Notional maturities for all interest rate contracts are $456.5 for 2013, $601.0 for 2014, $150.0 for 2015, $22.0 for 2016, and $20.0 for 2017. The majority of these contracts are floating to fixed swaps that effectively convert an equivalent amount of commercial paper and other variable rate debt to fixed rates.

The following table presents the balance sheet locations and fair value of derivative financial instruments:

	December 31			December 31
	2012			2011
Interest-rate contracts	Assets	Liabilities		Assets	Liabilities
Accounts payable, accrued expenses and other	$	$	12.5	$	$	13.0

43

PACCAR Financial Corp.

(Millions of Dollars)

Cash Flow Hedges

Substantially all of the Company’s interest rate contracts have been designated as cash flow hedges. The Company uses regression analysis to assess the effectiveness of hedges. The change in variable cash flow method or the hypothetical derivative method is used to measure ineffectiveness of interest rate contracts designated as cash flow hedges. Changes in the fair value of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive income to the extent such hedges are considered effective. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings and were immaterial for the years ended December 31, 2012, 2011 and 2010. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is 4.1 years.

Amounts in accumulated other comprehensive income (OCI) are reclassified into net income in the same period in which the hedged transaction affects earnings. Net realized gains and losses from interest rate contracts are recognized as an adjustment to interest expense. Of the $7.7, net of tax, included in accumulated other comprehensive loss as of December 31, 2012, $4.4, net of tax, is expected to be reclassified to interest expense in the following 12 months. The fixed interest earned on finance receivables will offset the amount recognized in interest expense, resulting in a stable interest margin consistent with the Company’s interest rate risk management strategy.

The following table presents the pre-tax effects of derivative instruments designated as cash flow hedges recognized into accumulated other comprehensive income and into the Statements of Income.

	Year ended December 31
	2012			2011			2010
Pre-tax loss on derivative contracts recognized in OCI	$	(9.5	)	$	(16.5	)	$	(13.7	)
Expenses reclassified from accumulated OCI into
Interest and other borrowing expenses	$	9.9		$	19.8		$	42.4

Fair Value Hedges

Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with the changes in fair value of the hedged item attributable to the risk being hedged. The expense or (income) recognized in earnings related to fair value hedges was as follows:

	Year ended December 31
	2012			2011			2010
Interest-rate swaps	$	(2.3	)	$	.1		$	(3.0	)
Term notes	$	2.1		$	(.3	)	$	3.1

In addition, the net interest income from the settlement of the interest-rate swaps was $.9, $.1 and $.8 for the year ended December 31, 2012, 2011 and 2010 is reported in interest and other borrowing costs.

44

PACCAR Financial Corp.

(Millions of Dollars)

NOTE F – BORROWINGS

Borrowings are summarized as follows:

	2012				2011
	Effective Rate		Borrowings		Effective Rate		Borrowings
Commercial paper		.54%	$	1,819.6		.81%	$	1,779.2
Fixed rate medium-term notes		1.26%		2,001.1		1.67%		900.3
Floating rate medium-term notes		1.09%		700.0		1.57%		450.0
		.94%	$	4,520.7		1.17%	$	3,129.5

The fixed-rate medium-term notes of $2,001.1 at December 31, 2012 include an increase in fair value of $1.1 for notes designated as fair value hedges. The fixed-rate medium-term notes of $900.3 at December 31, 2011 include an increase in fair value of $.3 for notes designated as fair value hedges. The effective rate is the weighted average rate as of December 31, 2012 and includes the effects of interest rate swap agreements.

The annual principal maturities of the borrowings are as follows:

Beginning January 1, 2013	Commercial Paper		Term Notes
2013	$	1,819.6	$	550.0
2014				800.0
2015				850.0
2016
2017				500.0
	$	1,819.6	$	2,700.0

Interest expense on borrowings amounted to $42.3, $37.1, and $64.2 for 2012, 2011 and 2010, respectively. Interest paid on borrowings was $39.0 in 2012, $40.0 in 2011, and $68.6 in 2010.

In November 2012, the Company filed a shelf registration statement under the Securities Act of 1933. In February 2013, the Company issued $500.0 of medium-term notes under this registration. The registration expires in the fourth quarter of 2015 and does not limit the principal amount of debt securities that may be issued during the period. The total notional amount of medium-term notes outstanding as of December 31, 2012 was $2,700.0.

See Note D for discussion of borrowings from PACCAR.

NOTE G – CREDIT ARRANGEMENTS

The Company participated with PACCAR and certain other PACCAR affiliates in syndicated credit facilities of $3,000.0 at December 31, 2012. Of this amount, $1,000.0 expires in June 2013, $1,000.0 expires in 2016 and $1,000.0 expires in 2017. PACCAR and the Company intend to replace these credit facilities as they expire with facilities of similar amounts.

Credit facilities of $2,060.0 are available for use by the Company and/or PACCAR and certain other PACCAR affiliates. The remaining $940.0 is allocated to the following subsidiaries: $323.8 is available for use by PACCAR’s Canadian financial subsidiary, $231.2 is available for use by PACCAR’s Mexican financial subsidiaries, $212.5 is available for use by PACCAR’s United Kingdom financial subsidiary and $172.5 is available for use by PACCAR’s Australian financial subsidiary. These credit facilities are used to provide backup liquidity for the Company’s commercial paper and maturing medium-term notes. The Company is liable only for its own borrowings under these credit facilities. There were no borrowings under these credit facilities in the years ended December 31, 2012 and 2011.

45

PACCAR Financial Corp.

(Millions of Dollars)

NOTE H – INCOME TAXES

The provision for income taxes consisted of the following:

	Year ended December 31
	2012			2011			2010
Current (benefit) provision
Federal	$	(1.4	)	$	(163.5	)	$	19.0
State		5.2			.1			3.8
	$	3.8		$	(163.4	)	$	22.8
Deferred provision (benefit)
Federal	$	42.9		$	201.1		$	4.8
State		3.2			6.7			(8.5	)
	$	46.1		$	207.8		$	(3.7	)
	$	49.9		$	44.4		$	19.1

A reconciliation between the statutory federal income tax rate to the actual provision for income taxes is shown below:

	Year ended December 31
	2012		2011		2010
Statutory rate		35.0%		35.0%		35.0%
Effect of:
State		1.9%		3.9%		(5.1%)
Other		.5%		.6%		.3%
		37.4%		39.5%		30.2%

Cash paid (received) for income taxes was $2.2 in 2012, ($5.2) in 2011 and $30.6 in 2010.

Deferred income tax assets (liabilities) consisted of the following:

	As of December 31
	2012			2011
Deferred tax assets:
Allowance for losses on receivables	$	20.0		$	22.3
Derivative liability		4.7			4.9
Other		12.1			5.4
Deferred tax liabilities:
Asset capitalization and depreciation	$	(765.0	)	$	(714.0	)
Net deferred tax liability	$	(728.2	)	$	(681.4	)

46

PACCAR Financial Corp.

(Millions of Dollars)

NOTE I – FAIR VALUE MEASUREMENTS

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs to valuation techniques used to measure fair value are either observable or unobservable. These inputs have been categorized into the fair value hierarchy described below:

Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market or exchange traded market, valuation of these instruments does not require a significant degree of judgment. The Company has no financial instruments valued under Level 1 criteria.

Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained from unobservable market information that is significant to the overall fair value measurement and which require a significant degree of management judgment. The Company has no financial instruments valued under Level 3 criteria.

There were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy during the year ended December 31, 2012. The Company’s policy is to recognize transfers between levels at the end of the reporting period.

Assets and Liabilities Subject to Non-recurring and Recurring Fair Value Measurement

Impaired loans and used trucks held for sale are measured on a non-recurring basis. Derivative contracts are measured on a recurring basis. These assets and liabilities are outlined in the table below:

Level 2	December 31 2012		December 31 2011
Assets:
Impaired loans	$	14.8	$	13.7
Used trucks held for sale		12.4
Liabilities:
Derivative contracts	$	12.5	$	13.0

The Company uses the following methods and assumptions to measure fair value for assets and liabilities subject to non-recurring and recurring fair value measurements.

Impaired Loans: Impaired loans are considered collateral dependent. Accordingly, the evaluation of individual reserves considers the fair value of the associated collateral (estimated sales proceeds less the costs to sell).

Used Trucks Held for Sale: The carrying amount of used trucks held for sale is written down as necessary to reflect the fair value less costs to sell. The Company determines the fair value of used trucks from a pricing matrix, which is based on the market approach. The significant observable inputs into the valuation model are recent sales prices of comparable units and the condition of the vehicles. Used truck impairments related to units held at December 31, 2012 and 2011 were $2.0 and nil during 2012 and 2011, respectively, and were recorded in Depreciation and other rental expenses on the Statements of Income. These assets, which are shown in the above table when they are written down to fair value less costs to sell, are categorized as Level 2 and are included in Other assets on the Balance Sheets.

47

PACCAR Financial Corp.

(Millions of Dollars)

Derivative Financial Instruments: The Company’s derivative financial instruments consist of interest-rate swaps and are carried at fair value. These derivative contracts are traded over the counter and their fair value is determined using industry standard valuation models, which are based on the income approach (i.e., discounted cash flows). The significant observable inputs into the valuation models include interest rates, yield curves and credit default swap spreads. These contracts are categorized as Level 2 and are included in Other assets and Accounts payable, accrued expenses and other on the Balance Sheets.

Fair Value Disclosure of Other Financial Instruments

For financial instruments that are not recognized at fair value, the Company uses the following methods and assumptions to determine the fair value. These instruments are categorized as Level 2, except fixed-rate loans which are categorized as Level 3.

Cash: Carrying amounts approximate fair value.

Net Receivables: For floating rate loans, wholesale financing, and interest and other receivables, carrying values approximate fair values. For fixed rate loans, fair values are estimated using the income approach by discounting cash flows to their present value based on current rates for comparable loans. Finance lease receivables and related allowance for credit loss provisions have been excluded from the accompanying table.

Commercial Paper and Medium-Term Notes: The carrying amounts of the Company’s commercial paper and floating-rate medium-term notes approximate their fair value. A portion of the Company’s fixed-rate term notes has been converted to variable-rate term notes using fair value hedges for interest rate risk. Fair value of fixed-rate term notes is determined using modeling techniques that include market inputs for interest rates.

The Company’s estimate of fair value for fixed-rate loans and debt that are not carried at fair value at December 31, 2012 and December 31, 2011 were as follows:

	December 31				December 31
	2012				2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Assets:
Due from PACCAR	$	314.4	$	315.3	$	125.4	$	126.9
Due from foreign finance affiliates		216.6		217.0		49.6		50.1
Fixed rate loans		2,175.6		2,221.7		1,732.8		1,761.3
Liabilities:
Due to PACCAR	$	218.0	$	233.6	$	415.0	$	442.0
Fixed rate debt		2,001.1		2,023.0		900.3		907.3

48

PACCAR Financial Corp.

(Millions of Dollars)

NOTE J – QUARTERLY RESULTS (UNAUDITED)

	QUARTER
	First		Second		Third		Fourth
2012
Interest and other revenue	$	117.0	$	121.1	$	128.7	$	143.7
Income before income taxes		31.8		34.4		35.5		31.9
Net income		19.0		20.7		22.0		22.0
2011
Interest and other revenue	$	98.2	$	106.6	$	110.9	$	114.1
Income before income taxes		23.5		26.3		30.5		32.1
Net income		14.6		16.2		18.3		18.9

NOTE K – COMMITMENTS AND CONTINGENCIES

The Company is a party to various routine legal proceedings incidental to its business involving the collection of accounts and other matters. The Company does not consider such matters to be material with respect to the business or financial condition of the Company as a whole.

At December 31, 2012, the Company has loan and lease commitments of $247.6 expiring within one year. These commitments represent commitments to fund new retail loan and lease contracts.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The registrant has not had any disagreements with its independent auditors on accounting or financial disclosure matters.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of December 31, 2012. Based on that evaluation, the principal executive officer and principal financial officer of the Company concluded that the disclosure controls and procedures in place at the Company are effective to ensure that information required to be disclosed by the Company in reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported on a timely basis in accordance with applicable rules and regulations. There have been no changes in the Company’s internal control over financial reporting during the fourth quarter that occurred that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining satisfactory internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

49

PACCAR Financial Corp.

(Millions of Dollars)

Internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management assessed the Company’s internal control over financial reporting as of December 31, 2012, based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, we concluded that the Company maintained effective internal control over financial reporting as of December 31, 2012.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEMS  10, 11, 12 AND 13

These items omitted pursuant to Form 10-K General Instruction (I)(1)(a) and (b).

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Audit fees charged to the Company were $.8 and $.7 in 2012 and 2011, respectively.

Other Fees

The Company was charged $.1 and $.2 in 2012 and 2011, respectively, by the principal accountant for tax consulting services.

As a wholly-owned, subsidiary of PACCAR, audit and non-audit services provided by the Company’s independent registered public accounting firm are subject to PACCAR’s Audit Committee pre-approval policies and procedures as described in the PACCAR 2012 proxy statement. During the year ended December 31, 2012, all services provided by the independent registered public accounting firm were pre-approved by the PACCAR Audit Committee.

50

PACCAR Financial Corp.

(Millions of Dollars)

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) Listing of financial statements

The following financial statements of the Company are included in Item 8:

Statements of Income – Years Ended December 31, 2012, 2011, and 2010

Statements of Comprehensive Income – Years Ended December 31, 2012, 2011, and 2010

Balance Sheets – December 31, 2012 and 2011

Statements of Cash Flows – Years Ended December 31, 2012, 2011, and 2010

Statements of Stockholder’s Equity – Years Ended December 31, 2012, 2011, and 2010

Notes to Financial Statements – December 31, 2012, 2011, and 2010

(2) Listing of financial statement schedules

All schedules are omitted because the required matter or conditions are not present or because the information required by the schedules is submitted as part of the consolidated financial statements and notes thereto.

(3) Listing of Exhibits

The exhibits required by Item 601 of Regulation S-K are listed in the accompanying Exhibit Index.

51

PACCAR Financial Corp.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PACCAR Financial Corp.
By	/s/ T. R. Hubbard
	T. R. Hubbard
	President

Date February 27, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant as of the above date and in the capacities indicated.

(1) Principal Executive Officer

/s/ R. E. Armstrong	Chairman
R. E. Armstrong

(2) Principal Financial Officer

/s/ R. A. Bengston	Vice Chairman
R. A. Bengston

(3) Principal Accounting Officer

/s/ G. L. Watkins	Controller
G. L. Watkins

(4) A Majority of the Board of Directors

/s/ R. E. Armstrong	Director
R. E. Armstrong
/s/ R. A. Bengston	Director
R. A. Bengston
/s/ T. R. Hubbard	Director
T. R. Hubbard

52

PACCAR Financial Corp.

EXHIBIT INDEX

Exhibits (in order of assigned index numbers)

Exhibit Number		Exhibit Description	Form	Date of First Filing	Exhibit Number	File Number
(3)		Articles of incorporation and by-laws:
	(a)	Restated Articles of Incorporation of the Company	10-K	March 26, 1985	3.1	001-11677
	(b)	Amendment to Articles of Incorporation of the Company	10-Q	August 13, 1985	19.1	001-11677
	(c)	By-laws of the Company	10-Q	October 20, 1983	3.2	001-11677
(4)		Instruments defining the rights of security holders, including indentures:
	(a)	Indenture for Senior Debt Securities dated as of November 20, 2009 between the Company and The Bank of New York Mellon Trust Company, N.A.	10-K	February 26, 2010	4(c)	001-11677
	(b)	Forms of Medium-Term Note, Series M	S-3	November 20, 2009	4.2 and 4.3	333-163273
	(c)	Forms of Medium-Term Note, Series N	S-3	November 7, 2012	4.2 and 4.3	333-184808
	(d)	Form of InterNotes, Series B	S-3	November 7, 2012	4.4	333-184808
(10)		Material contracts:
	(a)	Support Agreement between the Company and PACCAR dated as of June 19, 1989	S-3	June 23, 1989	28.1	33-29434
(12)		Statements re: computation of ratios:
	(a)	Computation of ratio of earnings to fixed charges of the Company pursuant to SEC reporting requirements for the each of the five years ended December 31, 2008 – 2012.
	(b)	Computation of ratio of earnings to fixed charges of the Company pursuant to the Support Agreement between the Company and PACCAR for the each of the five years ended December 31, 2008 – 2012.

53

PACCAR Financial Corp.

EXHIBIT INDEX

Exhibit Number		Exhibit Description	Form	Date of First Filing	Exhibit Number	File Number
(23)		Consent of Independent Registered Public Accounting Firm.
(31)		Rule 13a-14(a)/15d-14(a) Certifications:
	(a)	Certification of Principal Executive Officer
	(b)	Certification of Principal Financial Officer
(32)		Section 1350 Certifications:
	(a)	Certification pursuant to rule 13a-14(b) and section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)
(101.INS)*		XBRL Instance Document
(101.SCH)*		XBRL Taxonomy Extension Schema Document
(101.CAL)*		XBRL Taxonomy Extension Calculation Linkbase Document
(101.DEF)*		XBRL Taxonomy Extension Definition Linkbase Document
(101.LAB)*		XBRL Taxonomy Extension Label Linkbase Document
(101.PRE)*		XBRL Taxonomy Extension Presentation Linkbase Document

* Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.

54

EX-12.(A)

Exhibit 12(a)

PACCAR Financial Corp.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

PURSUANT TO SEC REPORTING REQUIREMENTS (1)

(Millions of Dollars)

	Year ended December 31
	2012		2011		2010		2009		2008
FIXED CHARGES
Interest expense	$	59.2	$	64.0	$	90.5	$	126.2	$	160.1
Portion of rentals deemed interest		1.2		1.5		1.7		1.7		1.7
TOTAL FIXED CHARGES	$	60.4	$	65.5	$	92.2	$	127.9	$	161.8
EARNINGS
Income before income taxes	$	133.6	$	112.4	$	63.2	$	44.8	$	71.6
Fixed charges		60.4		65.5		92.2		127.9		161.8
EARNINGS AS DEFINED	$	194.0	$	177.9	$	155.4	$	172.7	$	233.4
RATIO OF EARNINGS TO FIXED CHARGES		3.21x		2.72x		1.69x		1.35x		1.44x

(1) The method of computing the ratio of earnings to fixed charges shown above complies with SEC reporting requirements, but differs from the method called for in the Support Agreement between the Company and PACCAR as shown in Exhibit 12(b).

EX-12.(B)

Exhibit 12(b)

PACCAR Financial Corp.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

PURSUANT TO THE SUPPORT AGREEMENT

BETWEEN THE COMPANY AND PACCAR

(Millions of Dollars)

	Year ended December 31
	2012		2011		2010		2009		2008
FIXED CHARGES
Interest expense	$	59.2	$	64.0	$	90.5	$	126.2	$	160.1
Facility and equipment rental		1.5		1.9		2.1		2.1		2.3
TOTAL FIXED CHARGES	$	60.7	$	65.9	$	92.6	$	128.3	$	162.4
EARNINGS
Income before income taxes	$	133.6	$	112.4	$	63.2	$	44.8	$	71.6
Depreciation		180.6		148.1		132.4		122.3		107.8
		314.2		260.5		195.6		167.1		179.4
FIXED CHARGES		60.7		65.9		92.6		128.3		162.4
EARNINGS AS DEFINED	$	374.9	$	326.4	$	288.2	$	295.4	$	341.8
RATIO OF EARNINGS TO FIXED CHARGES		6.18x		4.95x		3.11x		2.30x		2.10x

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-184808) of PACCAR Financial Corp. and in the related Prospectus of our report dated February 27, 2013 with respect to the financial statements of PACCAR Financial Corp. included in this Annual Report (Form 10-K) for the year ended December 31, 2012.

/s/ Ernst & Young LLP

Seattle, Washington

February 27, 2013

EX-31.(A)

Exhibit 31(a)

PACCAR Financial Corp.

CERTIFICATIONS

I, Ronald E. Armstrong, certify that:

1. I have reviewed this annual report on Form 10-K of PACCAR Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date February 27, 2013

/s/ Ronald E. Armstrong

Ronald E. Armstrong

Chairman

(Principal Executive Officer)

EX-31.(B)

Exhibit 31(b)

PACCAR Financial Corp.

CERTIFICATIONS

I, Robert A. Bengston, certify that:

1. I have reviewed this annual report on Form 10-K of PACCAR Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date February 27, 2013

/s/ Robert A. Bengston

Robert A. Bengston

Vice Chairman

(Principal Financial Officer)

EX-32.(A)

Exhibit 32(a)

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

In connection with the Annual Report of PACCAR Financial Corp. (the “Company”) on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certify, pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), that to the best of our knowledge and belief:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date	February 27, 2013	By	/s/ Ronald E. Armstrong
			Ronald E. Armstrong
			Chairman
			PACCAR Financial Corp.
			(Principal Executive Officer)
		By	/s/ Robert A. Bengston
			Robert A. Bengston
			Vice Chairman
			PACCAR Financial Corp.
			(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Equipment On Operating Leases - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Minimum
Operating Leased Assets [Line Items]
Operating lease term	3 years
Maximum
Operating Leased Assets [Line Items]
Operating lease term	7 years
Non Cancelable Operating Leases
Operating Leased Assets [Line Items]
Future annual minimum rental payments	$ 560.2
2013	223.2
2014	164.0
2015	109.6
2016	50.6
2017	12.9
Operating Lease | Non Cancelable Operating Leases
Operating Leased Assets [Line Items]
Depreciation expense	$ 179.5	$ 147.1	$ 131.6

XML

Assets and Liabilities Fair Value Measurements (Detail) (Fair Value, Inputs, Level 2, USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Fair Value Measurements, Nonrecurring
Assets:
Impaired loans	$ 14.8	$ 13.7
Used trucks held for sale	12.4
Fair Value, Assets and Liabilities Measured on Recurring Basis
Liabilities:
Derivative contracts	$ 12.5	$ 13.0

XML

Annual Maturities of Borrowings (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Long Term Debt Maturities Repayments Of Principal [Line Items]
Debt outstanding	$ 4,520.7	$ 3,129.5
Commercial Paper
Long Term Debt Maturities Repayments Of Principal [Line Items]
2013	1,819.6
2014
2015
2016
2017
Debt outstanding	1,819.6
Term Note
Long Term Debt Maturities Repayments Of Principal [Line Items]
2013	550.0
2014	800.0
2015	850.0
2016
2017	500.0
Debt outstanding	$ 2,700.0

XML

Fair Value Measurements - Additional Information (Detail) (Trucks Inventory, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Trucks Inventory
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Used truck impairments	$ 2.0

XML

Summary of Borrowings (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Effective borrowing rate	0.94%	1.17%
Commercial paper	$ 1,819.6	$ 1,779.2
Medium-term notes	2,701.1	1,350.3
Borrowings Amount	4,520.7	3,129.5
Fixed Rate Medium-Term Notes
Debt Instrument [Line Items]
Effective borrowing rate	1.26%	1.67%
Medium-term notes	2,001.1	900.3
Floating Rate Medium-Term Notes
Debt Instrument [Line Items]
Effective borrowing rate	1.09%	1.57%
Medium-term notes	700.0	450.0
Commercial Paper
Debt Instrument [Line Items]
Effective borrowing rate	0.54%	0.81%
Borrowings Amount	$ 1,819.6

XML

Finance Receivables Summary by those Evaluated Collectively and Individually (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Recorded investment for impaired finance receivables evaluated individually	$ 18.6	$ 52.0
Allowance for finance receivables evaluated individually	2.1	18.2
Recorded investment for finance receivables evaluated collectively	4,260.9	3,556.3
Allowance for finance receivables evaluated collectively	49.6	39.5
Dealer Wholesale Financing
Financing Receivable, Allowance for Credit Losses [Line Items]
Recorded investment for finance receivables evaluated collectively	641.7	576.5
Allowance for finance receivables evaluated collectively	3.9	3.4
Retail | Customer
Financing Receivable, Allowance for Credit Losses [Line Items]
Recorded investment for impaired finance receivables evaluated individually	18.5	51.6
Allowance for finance receivables evaluated individually	2.1	18.1
Recorded investment for finance receivables evaluated collectively	2,405.8	1,961.0
Allowance for finance receivables evaluated collectively	35.0	26.3
Retail | Dealer
Financing Receivable, Allowance for Credit Losses [Line Items]
Recorded investment for impaired finance receivables evaluated individually	0.1	0.4
Allowance for finance receivables evaluated individually		0.1
Recorded investment for finance receivables evaluated collectively	1,213.4	1,018.8
Allowance for finance receivables evaluated collectively	$ 10.7	$ 9.8

XML

Quarterly Results (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Quarterly Results Of Operations [Line Items]
Interest and other revenue	$ 143.7	$ 128.7	$ 121.1	$ 117.0	$ 114.1	$ 110.9	$ 106.6	$ 98.2	$ 510.5	$ 429.8	$ 412.3
Income before income taxes	31.9	35.5	34.4	31.8	32.1	30.5	26.3	23.5	133.6	112.4	63.2
Net income	$ 22.0	$ 22.0	$ 20.7	$ 19.0	$ 18.9	$ 18.3	$ 16.2	$ 14.6	$ 83.7	$ 68.0	$ 44.1

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Components Of Provision for Income Taxes

The provision for income taxes consisted of the following:

	Year ended December 31
	2012			2011			2010
Current (benefit) provision
Federal	$	(1.4	)	$	(163.5	)	$	19.0
State		5.2			.1			3.8
	$	3.8		$	(163.4	)	$	22.8
Deferred provision (benefit)
Federal	$	42.9		$	201.1		$	4.8
State		3.2			6.7			(8.5	)
	$	46.1		$	207.8		$	(3.7	)
	$	49.9		$	44.4		$	19.1

Reconciliation Of Statutory and Effective Income Tax Rates

A reconciliation between the statutory federal income tax rate to the actual provision for income taxes is shown below:

	Year ended December 31
	2012		2011		2010
Statutory rate		35.0%		35.0%		35.0%
Effect of:
State		1.9%		3.9%		(5.1%)
Other		.5%		.6%		.3%
		37.4%		39.5%		30.2%

Deferred Income Tax Assets And Liabilities

Deferred income tax assets (liabilities) consisted of the following:

	As of December 31
	2012			2011
Deferred tax assets:
Allowance for losses on receivables	$	20.0		$	22.3
Derivative liability		4.7			4.9
Other		12.1			5.4
Deferred tax liabilities:
Asset capitalization and depreciation	$	(765.0	)	$	(714.0	)
Net deferred tax liability	$	(728.2	)	$	(681.4	)

XML

Provision for Income Taxes (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Current (benefit) provision
Federal	$ (1.4)	$ (163.5)	$ 19.0
State	5.2	0.1	3.8
Current Income Tax Expense (Benefit), Total	3.8	(163.4)	22.8
Deferred provision (benefit)
Federal	42.9	201.1	4.8
State	3.2	6.7	(8.5)
Deferred tax provision	46.1	207.8	(3.7)
Income taxes	$ 49.9	$ 44.4	$ 19.1

XML

Derivative Financial Instruments - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative Instruments and Hedging Activities Disclosure [Line Items]
Notional amount of interest-rate contracts	$ 1,249.5
Interest-rate contracts maturity period	5 years
Notional maturities for interest-rate contracts 2013	456.5
Notional maturities for interest-rate contracts 2014	601.0
Notional maturities for interest-rate contracts 2015	150.0
Notional maturities for interest-rate contracts 2016	22.0
Notional maturities for interest-rate contracts 2017	20.0
Maximum length of time for which company is hedging its exposure to the variability in future cash flows	4 years 1 month 6 days
Accumulated net loss on interest rate contracts included in accumulated other comprehensive loss	7.7
Accumulated net loss on interest rate contracts included in accumulated other comprehensive loss expected to be reclassified to interest expense in the following 12 months	4.4
Net interest income from settlement of interest-rate swaps	$ 0.9	$ 0.1	$ 0.8

XML

Financing Receivables by Aging Category (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current and up to 30 days past-due	$ 4,268.0	$ 3,569.1
31 - 60 days past-due	2.9	2.3
Greater than 60 days past-due	8.6	36.9
Total	4,279.5	3,608.3
Dealer Wholesale Financing
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current and up to 30 days past-due	641.7	576.5
Total	641.7	576.5
Retail | Fleet
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current and up to 30 days past-due	2,025.9	1,623.3
31 - 60 days past-due	2.2	1.4
Greater than 60 days past-due	5.6	32.2
Total	2,033.7	1,656.9
Retail | Owner/Operator
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current and up to 30 days past-due	386.9	350.1
31 - 60 days past-due	0.7	0.9
Greater than 60 days past-due	3.0	4.7
Total	390.6	355.7
Retail | Dealer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current and up to 30 days past-due	1,213.5	1,019.2
Total	$ 1,213.5	$ 1,019.2

XML

Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Taxes [Line Items]
Cash paid (received) for income tax	$ 2.2	$ (5.2)	$ 30.6

XML

Borrowings - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended				1 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Medium-term Notes	Feb. 28, 2013 Medium-term Notes Subsequent Event	Dec. 31, 2012 Fixed Rate Medium-Term Notes	Dec. 31, 2011 Fixed Rate Medium-Term Notes
Debt Disclosure [Line Items]
Medium term notes	$ 2,701.1	$ 1,350.3				$ 2,001.1	$ 900.3
Increase in fair value of notes designated as hedges						1.1	0.3
Interest expense on borrowings	42.3	37.1	64.2
Interest paid on borrowings	39.0	40.0	68.6
Medium term notes outstanding amount				2,700.0
Medium term notes issued					$ 500.0
Registration expiration				Fourth quarter of 2015

XML

Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Significant Accounting Policies

NOTE A – SIGNIFICANT ACCOUNTING POLICIES

Description of Operations and Basis of Presentation: PACCAR Financial Corp. (the “Company”), is a wholly-owned subsidiary of PACCAR Inc (“PACCAR”). The Company primarily provides financing of PACCAR-manufactured trucks and related equipment sold by authorized dealers. The Company also finances dealer inventories of transportation equipment and franchises Kenworth and Peterbilt dealerships to engage in full-service and finance leasing. The operations of the Company are fundamentally affected by its relationship with PACCAR.

In 2000, PACCAR transferred the stock of the Company to PACCAR Financial Services Corporation (“PFSC”), a wholly-owned subsidiary of PACCAR. In December 2011, PFSC was dissolved by means of a statutory merger with and into PACCAR Financial Corp., making the Company a direct subsidiary of PACCAR. The merger was accounted for using the pooling of interest method because the Company and PFSC were under common control of PACCAR. Under this method of accounting, the results and cash flows of the pre-merged Company and PFSC and their assets and liabilities are combined at the amounts at which they were previously recorded as if they had been part of the Company since the beginning of the periods shown. There was no material impact to the financial statements for all years presented.

Due to the nature of the Company’s business, customers are concentrated in the transportation industry throughout the United States. Generally, all receivables are collateralized by the equipment being financed. The risk of credit losses related to this concentration has been considered in establishing the allowance for losses.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Finance and Other Receivables:

Loans – Loans represent fixed- or floating-rate loans to customers or dealers collateralized by the vehicles purchased or financed and are recorded at amortized cost.

Finance leases – Finance leases are retail direct financing leases and sales-type finance leases, which lease equipment to retail customers and dealers. These leases are reported as the sum of minimum lease payments receivable and estimated residual value of the property subject to the contracts, reduced by unearned interest which is shown separately.

Dealer wholesale financing – Dealer wholesale financing is floating-rate wholesale loans to Kenworth and Peterbilt dealers for new and used trucks and are recorded at amortized cost. The loans are collateralized by the trucks being financed.

Interest and other – Interest and other receivables are interest on loans and leases and other amounts due within one year in the normal course of business.

Allowance for Losses:

The Company continuously monitors the payment performance of all its finance receivables. For large retail finance customers and dealers with wholesale financing, the Company regularly reviews their financial statements and makes site visits and phone contact as appropriate. If the Company becomes aware of circumstances that could cause those customers or dealers to face financial difficulty, whether or not they are past due, the customers are placed on a watch list.

The Company modifies loans and finance leases as a normal part of its operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification.

When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms. When the Company modifies loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings (TDRs). The Company does not typically grant credit modifications for customers that do not meet minimum underwriting standards since the Company normally repossesses the financed equipment in these circumstances. When such modifications do occur, they are considered TDRs.

On average, modifications extended contractual terms by four months in 2012 and nine months in 2011 and did not have a significant effect on the weighted average term or interest rate of the total portfolio at December 31, 2012 or 2011.

The Company has developed a systematic methodology for determining the allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail loans and direct finance leases, net of unearned interest. The wholesale segment consists of truck inventory financing loans to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company requires monthly reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and, in many cases, obtains personal guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest generally over 36 to 60 months and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves.

The Company individually evaluates certain finance receivables for impairment. Finance receivables which are evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered probable the Company will be unable to collect all contractual interest and principal payments as scheduled. In addition, all retail loans and leases which have been classified as TDRs and all customer accounts over 90-days past due are considered impaired. Generally, impaired accounts are on non-accrual status. Impaired accounts classified as TDRs which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments.

Impaired receivables are considered collateral dependent. Large balance retail and all wholesale impaired receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s loss exposure, no reserve is recorded. Small balance impaired receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.

For finance receivables that are not individually impaired, the Company collectively evaluates and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past-due account data and current market conditions. Information used includes assumptions regarding the likelihood of collecting current and past-due accounts, repossession rates, the recovery rate on the underlying collateral based on used truck values and other pledged collateral or recourse. The Company has developed a range of loss estimates for its portfolio based on historical experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is determined as probable based on current market conditions and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. After determining the appropriate level of the allowance for credit losses, the provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent in the portfolio.

In determining the fair value of the collateral, the Company uses a pricing matrix and categorizes the fair value as Level 2 in the hierarchy of fair value measurement. The pricing matrix is reviewed quarterly and updated as appropriate. The pricing matrix considers the make, model and year of the equipment as well as recent sales prices of comparable equipment through wholesale channels to the Company’s dealers (principal market). The fair value of the collateral also considers the overall condition of the equipment.

Accounts are charged off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). Typically the timing between the repossession and charge off is not significant. In cases where repossession is delayed (e.g., for legal proceedings), the Company records partial charge offs. The charge off is determined by comparing the fair value of the collateral, less cost to sell, to the recorded investment.

Revenue Recognition: Interest income from finance and other receivables is recognized using the interest method. Certain loan origination costs are deferred and amortized to interest income over the expected life of the contracts, generally 36 to 60 months, using the straight-line method which approximates the interest method. For operating leases, rental revenue is recognized on a straight-line basis over the lease term.

Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at December 31, 2012 or December 31, 2011. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is impaired or on non-accrual status are applied to interest and principal in accordance with the contractual terms.

The Company recognizes revenue on the sale of used trucks acquired from PACCAR truck division customers as part of new truck sales packages when the used trucks are invoiced and delivered to a customer.

Equipment on Operating Leases: Equipment on operating leases is recorded at cost and is depreciated on the straight-line basis to its estimated residual value. Residual values are reviewed regularly and adjusted if market conditions warrant.

Restricted Cash: Restricted cash consists of cash proceeds from the sale of eligible assets set aside for the acquisition of replacement assets under the Company’s like-kind exchange tax program. Restricted cash is classified within Other assets. The changes in restricted cash balances are reflected as an investing activity in the Statement of Cash Flows as they relate to sales and purchases of revenue earning assets.

Derivative Financial Instruments: Derivative financial instruments are used to hedge exposures to fluctuations in interest rates. Certain derivative instruments designated as either cash flow hedges or fair value hedges are subject to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as economic hedges. The Company’s policies prohibit the use of derivatives for speculation or trading. At the inception of each hedge relationship, the Company documents its risk management objectives, procedures and accounting treatment.

The Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same master netting agreements. The Company is not required to post or receive collateral under these agreements. Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company had no material exposures to default at December 31, 2012.

The Company uses regression analysis to assess effectiveness of interest-rate contracts on a quarterly basis. All components of the derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings. Hedge accounting is discontinued prospectively when the Company determines that a derivative financial instrument has ceased to be a highly effective hedge.

Income Taxes: The Company is included in the consolidated federal income tax return of PACCAR. Income taxes for the Company are determined on a separate return basis, and any related tax liability is paid by the Company to PACCAR and any related tax benefit is paid by PACCAR to the Company. State income taxes, where the Company files combined tax returns with PACCAR, are determined on a blended statutory rate, which is substantially the same as the rate computed on a separate return basis. As of December 31, 2012, the United States Internal Revenue Service has completed examinations of PACCAR’s tax returns for all years through 2008. PACCAR’s tax returns remain subject to examination in most jurisdictions for the years ranging from 2009 through 2012.

Preferred Stock: The Company’s Articles of Incorporation provide that the 6%, noncumulative, nonvoting preferred stock (100% owned by PACCAR) is redeemable only at the option of the Company’s Board of Directors.

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. While many of the amendments were clarifications to the existing guidance and are intended to align U.S. GAAP and IFRS, the ASU changed some fair value measurement principles and disclosure requirements. The Company adopted ASU 2011-04 in the first quarter of 2012. The impact of adoption reduced the allowance for credit loss for the impaired finance receivables by $2.5 at March 31, 2012, including $1.9 for impaired leases and $.6 for impaired loans.

The FASB issued ASU 2011-05, Presentation of Comprehensive Income, in June 2011, which was subsequently amended by ASU 2011-12 in December 2011. The new guidance requires entities to present components of net income and comprehensive income in either a combined financial statement or in two separate but consecutive statements of net income and comprehensive income. The Company adopted ASU 2011-05 as amended in the first quarter of 2012. The Company has elected to present components of net income combined with a total for comprehensive income in a single continuous statement in its interim financial statements and two separate consecutive statements of net income and comprehensive income in its annual financial statements.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires disclosure of additional information about reclassification adjustments from other comprehensive income. The ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company will provide the new disclosures in 2013.

In January 2013, the FASB issued ASU 2013-01 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, an update of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The ASUs require entities with derivatives, repurchase agreements and securities borrowing and lending transactions that are either offset on the balance sheet, or subject to a master netting arrangement, to provide expanded disclosures about the nature of the rights of offset. The updated ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company will provide the expanded disclosures in 2013.

XML

Balance Sheet Locations and Fair Value of Derivative Financial Instruments (Detail) (Interest Rate Contract, Accounts Payable and Accrued Liabilities, USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Interest Rate Contract | Accounts Payable and Accrued Liabilities
Derivatives, Fair Value [Line Items]
Derivative liabilities	$ 12.5	$ 13.0

XML

Finance and Other Receivables (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Accounts, Notes, Loans and Financing Receivable [Line Items]
Retail loans	$ 2,242.1		$ 1,807.2
Retail direct financing leases	1,451.8		1,245.1
Dealer wholesale financing	641.7		576.5
Dealer master notes	92.4		104.2
Interest and other receivables	32.4		33.0
Unearned interest - finance leases	(148.5)		(124.7)
Total portfolio	4,311.9		3,641.3
Allowance for losses	(52.8)		(58.8)		(61.7)		(75.7)
Total portfolio, net of allowance for losses	4,259.1		3,582.5
Retail
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for losses	(47.8)		(54.3)
Dealer Wholesale Financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for losses	(3.9)		(3.4)		(1.5)		(1.7)
Operating lease and other trade receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for losses	$ (1.1)	[1]	$ (1.1)	[1]	$ (1.2)	[1]	$ (1.0)	[1]

[1] Operating lease and other trade receivables

XML

Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2012 Segment	Dec. 31, 2011
Schedule Of Significant Accounting Policies [Line Items]
Number of portfolio segments		2
Receivables more than 90 days past due still accruing		$ 0	$ 0
Income Tax Examination, Description		As of December 31, 2012, the United States Internal Revenue Service has completed examinations of PACCAR's tax returns for all years through 2008. PACCAR's tax returns remain subject to examination in most jurisdictions for the years ranging from 2009 through 2012
Preferred stock dividend percentage		6.00%
Ownership Percentage of PACCAR Inc		100.00%
Decrease in impaired finance receivables allowance for credit loss	2,500,000
Finance Leases Financing Receivable
Schedule Of Significant Accounting Policies [Line Items]
Decrease in impaired finance receivables allowance for credit loss	1,900,000
Loans Receivable
Schedule Of Significant Accounting Policies [Line Items]
Decrease in impaired finance receivables allowance for credit loss	$ 600,000
Minimum
Schedule Of Significant Accounting Policies [Line Items]
Contractual term of regular payment of principal and interest		36 months
Origination costs, amortization period		36 months
Examination year		2009
Maximum
Schedule Of Significant Accounting Policies [Line Items]
Contractual term of regular payment of principal and interest		60 months
Origination costs, amortization period		60 months
Examination year		2012

XML

Carrying Amount and Fair Value Fixed-Rate Loans and Fixed-Rate Debt (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Assets:
Loans due from affiliates	$ 1,049.8	$ 627.7
Liabilities:
Due to PACCAR	253.1	451.7
Foreign Finance Affiliates
Assets:
Loans due from affiliates	360.6	219.6
Carrying Amount
Assets:
Fixed rate loans	2,175.6	1,732.8
Liabilities:
Fixed rate debt	2,001.1	900.3
Carrying Amount | PACCAR Inc
Assets:
Loans due from affiliates	314.4	125.4
Liabilities:
Due to PACCAR	218.0	415.0
Carrying Amount | Foreign Finance Affiliates
Assets:
Loans due from affiliates	216.6	49.6
Fair Value
Assets:
Fixed rate loans	2,221.7	1,761.3
Liabilities:
Fixed rate debt	2,023.0	907.3
Fair Value | PACCAR Inc
Assets:
Loans due from affiliates	315.3	126.9
Liabilities:
Due to PACCAR	233.6	442.0
Fair Value | Foreign Finance Affiliates
Assets:
Loans due from affiliates	$ 217.0	$ 50.1

XML

Pre-Tax Effects of Derivative Instruments Recognized into Accumulated Other Comprehensive Income (OCI) and into Statements of Income (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative [Line Items]
Pre-tax loss on derivative contracts recognized in OCI	$ (9.5)	$ (16.5)	$ (13.7)
Interest Expense
Derivative [Line Items]
Expenses reclassified from accumulated OCI into Interest and other borrowing expenses	$ 9.9	$ 19.8	$ 42.4

XML

Annual Minimum Payment Due on Loans and Leases (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
Loans
Leases Future Minimum Payments [Line Items]
2013	$ 716.9
2014	562.9
2015	470.9
2016	338.2
2017	211.7
Thereafter	33.9
Finance Leases Financing Receivable
Leases Future Minimum Payments [Line Items]
2013	345.4
2014	300.1
2015	256.5
2016	240.1
2017	161.2
Thereafter	$ 100.9

XML

Finance and Other Receivables - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Contract	Dec. 31, 2011	Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans with no specific reserve	$ 2.9
Pre-modification recorded investment	29.5	12.9
Post-modification recorded investment	21.3	12.9
Number of contracts modified	1
Finance receivable modification charge off	8.2
Troubled debt restructuring	11.0	11.4
Repossessed inventory	10.4	1.0
Proceeds from the sales of repossessed assets	11.3	16.9	56.3
Unamortized loan origination costs	12.2	10.4
Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of customers diversification in portfolio	7.00%
Swift Transportation Corporation
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of interest and other revenue	10.80%	11.60%	11.40%
Fleet
Accounts, Notes, Loans and Financing Receivable [Line Items]
Change in recorded investment for finance receivables modified as TDRs	3.6
Owner/Operator
Accounts, Notes, Loans and Financing Receivable [Line Items]
Change in recorded investment for finance receivables modified as TDRs
Finance Leases Financing Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Estimated residual values included with finance leases	47.6	42.0
Retail
Accounts, Notes, Loans and Financing Receivable [Line Items]
Change in recorded investment for finance receivables modified as TDRs		0
Retail | Fleet
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of vehicles in a fleet	5
Recorded investment of finance receivables that are on non-accrual status	14.0	44.2
Pre-modification recorded investment	29.2	10.8
Post-modification recorded investment	21.0	10.8
Retail | Owner/Operator
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment of finance receivables that are on non-accrual status	4.5	7.4
Pre-modification recorded investment	0.3	2.1
Post-modification recorded investment	0.3	2.1
Retail | Dealer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment of finance receivables that are on non-accrual status	0.1	0.4
Dealer Wholesale Financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment of finance receivables that are on non-accrual status

XML

Statements Of Stockholder's Equity (Parenthetical) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
PREFERRED STOCK, $100 par value	$ 100	$ 100
COMMON STOCK, $100 par value	$ 100	$ 100
Preferred Stock
PREFERRED STOCK, $100 par value	$ 100	$ 100	$ 100
Common Stock
COMMON STOCK, $100 par value	$ 100	$ 100	$ 100

XML

Allowance for Credit Losses (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	$ 58.8		$ 61.7		$ 75.7
Provision for losses	9.1		2.5		17.1
Charge offs	(16.9)		(8.6)		(36.0)
Recoveries	1.8		3.2		4.9
Ending Balance	52.8		58.8		61.7
Dealer Wholesale Financing
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	3.4		1.5		1.7
Provision for losses	0.5		1.9		(0.2)
Ending Balance	3.9		3.4		1.5
Retail
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance	47.8		54.3
Retail | Customer
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	44.4		50.8		64.4
Provision for losses	7.6		(1.2)		16.2
Charge offs	(16.7)		(8.4)		(34.7)
Recoveries	1.8		3.2		4.9
Ending Balance	37.1		44.4		50.8
Retail | Dealer
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	9.9		8.2		8.6
Provision for losses	0.8		1.7		(0.4)
Ending Balance	10.7		9.9		8.2
Operating lease and other trade receivables
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1.1	[1]	1.2	[1]	1.0	[1]
Provision for losses	0.2	[1]	0.1	[1]	1.5	[1]
Charge offs	(0.2)	[1]	(0.2)	[1]	(1.3)	[1]
Ending Balance	$ 1.1	[1]	$ 1.1	[1]	$ 1.2	[1]

[1] Operating lease and other trade receivables

XML

Transactions with PACCAR and Affiliates - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Facility	Dec. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Feb. 29, 2012
Related Party Transaction [Line Items]
Required ratio of net earnings available for fixed charges to fixed charges	1.25
Loans due to PACCAR Inc	$ 218.0	$ 415.0
Loans decrease due to maturity				20.0	177.0
Interest expense on borrowings	42.3	37.1	64.2
Interest paid on borrowings	39.0	40.0	68.6
Letter of credit issued	4.3
Administrative services fees	3.0	1.9	0.9
Dividends declared and paid	0	117.0	0
Number of facilities owned by company	1
Number of facilities leased by company	5
Defined benefit pension plan expenses	2.7	1.9	1.5
Defined contribution plan expenses	1.2	1.0	0.5
Period 1
Related Party Transaction [Line Items]
Fixed interest rate	6.88%
Loan maturity period	2014
Foreign Finance Affiliates
Related Party Transaction [Line Items]
Loans to foreign affiliates, upper limit	500.0
PACCAR Inc
Related Party Transaction [Line Items]
Interest expense on borrowings	16.9	26.9	26.4
Interest paid on borrowings	$ 20.7	$ 26.4	$ 25.9

XML

Deferred Income Tax Assets and Liabilities (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deferred tax assets:
Allowance for losses on receivables	$ 20.0	$ 22.3
Derivative liability	4.7	4.9
Other	12.1	5.4
Deferred tax liabilities:
Asset capitalization and depreciation	(765.0)	(714.0)
Net deferred tax liability	$ (728.2)	$ (681.4)

XML

Statements Of Income (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Interest and fee income	$ 198.5	$ 172.0	$ 184.4
Operating lease and rental revenues	258.6	225.9	188.0
Used truck sales and other revenues	53.4	31.9	39.9
TOTAL INTEREST AND OTHER REVENUE	510.5	429.8	412.3
Interest and other borrowing costs	63.7	68.1	95.6
Depreciation and other rental expenses	211.6	180.1	163.4
Cost of used truck sales and other expenses	49.7	24.2	33.0
Selling, general and administrative expenses	42.8	42.5	40.0
Provision for losses on receivables	9.1	2.5	17.1
TOTAL EXPENSES	376.9	317.4	349.1
INCOME BEFORE INCOME TAXES	133.6	112.4	63.2
Income taxes	49.9	44.4	19.1
NET INCOME	$ 83.7	$ 68.0	$ 44.1

XML

(Income) or Expense Recognized in Earnings Related to Fair Value Hedges (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Interest Rate Swap
Derivative [Line Items]
(Income) or expense recognized in earnings related to fair value hedges	$ (2.3)	$ 0.1	$ (3.0)
Term Loan
Derivative [Line Items]
(Income) or expense recognized in earnings related to fair value hedges	$ 2.1	$ (0.3)	$ 3.1

XML

Statements Of Cash Flows (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
OPERATING ACTIVITIES
Net income	$ 83.7	$ 68.0	$ 44.1
Items included in net income not affecting cash:
Depreciation and amortization	186.7	149.4	141.3
Provision for losses on receivables	9.1	2.5	17.1
Deferred tax provision	46.1	207.8	(3.7)
Administrative fees for services from PACCAR Inc	3.0	1.9	0.9
(Decrease) increase in payables and other	(75.6)	(106.1)	6.5
NET CASH PROVIDED BY OPERATING ACTIVITIES	253.0	323.5	206.2
INVESTING ACTIVITIES
Finance and other receivables originated	(2,061.1)	(1,699.8)	(992.4)
Collections on finance and other receivables	1,417.7	1,187.9	1,200.4
Net (increase) decrease in wholesale receivables	(65.2)	(309.5)	8.7
Net (increase) decrease in loans and leases to PACCAR Inc and affiliates	(399.4)	2.2	(79.0)
Acquisition of equipment on operating leases, primarily from PACCAR Inc	(463.2)	(466.6)	(162.2)
Proceeds from disposal of equipment	104.7	102.4	140.3
Changes in restricted cash	15.0	(15.0)
Other	(0.7)	(14.9)	(6.7)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES	(1,452.2)	(1,213.3)	109.1
FINANCING ACTIVITIES
Net increase (decrease) in commercial paper	40.4	783.6	(299.3)
Proceeds from medium-term notes	1,599.2	549.5	549.7
Payments of medium-term notes	(250.0)	(323.5)	(575.0)
Advances (to) from PACCAR Inc	(197.0)	20.0
Dividends paid	0	(117.0)	0
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	1,192.6	912.6	(324.6)
NET (DECREASE) INCREASE IN CASH	(6.6)	22.8	(9.3)
CASH AT BEGINNING OF YEAR	33.2	10.4	19.7
CASH AT END OF YEAR	$ 26.6	$ 33.2	$ 10.4

XML

Interest Income Recognized (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Financing Receivable, Impaired [Line Items]
Interest income recognized on a cash basis	$ 1.0	$ 1.2	$ 0.6
Dealer Wholesale Financing
Financing Receivable, Impaired [Line Items]
Interest income recognized on a cash basis
Retail | Fleet
Financing Receivable, Impaired [Line Items]
Interest income recognized on a cash basis	0.5	0.6	0.5
Retail | Owner/Operator
Financing Receivable, Impaired [Line Items]
Interest income recognized on a cash basis	0.5	0.6	0.1
Retail | Dealer
Financing Receivable, Impaired [Line Items]
Interest income recognized on a cash basis

XML

Transactions With PACCAR And Affiliates (Tables)

12 Months Ended

Dec. 31, 2012

Amounts Outstanding Including Foreign Finance Affiliates

Amounts outstanding at December 31, 2012 and 2011, including foreign finance affiliates operating in the United Kingdom, the Netherlands, Mexico, Canada and Australia, are summarized below:

	December 31		December 31
	2012		2011
Due from PACCAR and affiliates
Loans due from PACCAR	$	428.4	$	170.1
Loans due from foreign finance affiliates		360.6		219.6
Direct financing leases due from affiliate		13.9		13.8
Receivables		246.9		224.2
Total	$	1,049.8	$	627.7
Due to PACCAR and affiliates
Loans due to PACCAR	$	218.0	$	415.0
Payables		35.1		36.7
Total	$	253.1	$	451.7

XML

Financing Receivables by Credit Quality Indicator (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	$ 4,279.5	$ 3,608.3
Pass
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	4,243.3	3,530.9
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	17.6	25.4
Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	18.6	52.0
Dealer Wholesale Financing
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	641.7	576.5
Dealer Wholesale Financing | Pass
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	641.7	576.5
Retail | Fleet
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	2,033.7	1,656.9
Retail | Fleet | Pass
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	2,008.8	1,595.6
Retail | Fleet | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	10.9	17.1
Retail | Fleet | Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	14.0	44.2
Retail | Owner/Operator
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	390.6	355.7
Retail | Owner/Operator | Pass
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	385.7	347.9
Retail | Owner/Operator | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	0.4	0.4
Retail | Owner/Operator | Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	4.5	7.4
Retail | Dealer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	1,213.5	1,019.2
Retail | Dealer | Pass
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	1,207.1	1,010.9
Retail | Dealer | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	6.3	7.9
Retail | Dealer | Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables	$ 0.1	$ 0.4

XML

Borrowings (Tables)

12 Months Ended

Dec. 31, 2012

Summary of Borrowings

Borrowings are summarized as follows:

	2012				2011
	Effective Rate		Borrowings		Effective Rate		Borrowings
Commercial paper		.54%	$	1,819.6		.81%	$	1,779.2
Fixed rate medium-term notes		1.26%		2,001.1		1.67%		900.3
Floating rate medium-term notes		1.09%		700.0		1.57%		450.0
		.94%	$	4,520.7		1.17%	$	3,129.5

Summary Of Annual Maturities

The annual principal maturities of the borrowings are as follows:

Beginning January 1, 2013	Commercial Paper		Term Notes
2013	$	1,819.6	$	550.0
2014				800.0
2015				850.0
2016
2017				500.0
	$	1,819.6	$	2,700.0

XML

Statements Of Stockholder's Equity (USD $) In Millions	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Balance at Dec. 31, 2009		$ 31.0	$ 14.5	$ 98.9	$ 616.6	$ (27.7)
Net income	44.1				44.1
Investments from PACCAR Inc				0.9
Net unrealized gain						17.7
Balance at Dec. 31, 2010	796.0	31.0	14.5	99.8	660.7	(10.0)
Net income	68.0				68.0
Investments from PACCAR Inc				1.9
Net unrealized gain						2.1
Dividends paid					(117.0)
Balance at Dec. 31, 2011	751.0	31.0	14.5	101.7	611.7	(7.9)
Net income	83.7				83.7
Investments from PACCAR Inc				3.0
Net unrealized gain						0.2
Balance at Dec. 31, 2012	$ 837.9	$ 31.0	$ 14.5	$ 104.7	$ 695.4	$ (7.7)

XML

Statements Of Comprehensive Income (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net income	$ 83.7	$ 68.0	$ 44.1
Unrealized losses on derivative contracts
Losses arising during the period	(9.5)	(16.5)	(13.7)
Tax effect	3.5	6.2	5.2
Reclassification adjustment	9.9	19.8	42.4
Tax effect	(3.7)	(7.4)	(16.2)
Net other comprehensive income	0.2	2.1	17.7
TOTAL COMPREHENSIVE INCOME	$ 83.9	$ 70.1	$ 61.8

XML

Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements

NOTE I – FAIR VALUE MEASUREMENTS

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs to valuation techniques used to measure fair value are either observable or unobservable. These inputs have been categorized into the fair value hierarchy described below:

Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market or exchange traded market, valuation of these instruments does not require a significant degree of judgment. The Company has no financial instruments valued under Level 1 criteria.

Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained from unobservable market information that is significant to the overall fair value measurement and which require a significant degree of management judgment. The Company has no financial instruments valued under Level 3 criteria.

There were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy during the year ended December 31, 2012. The Company’s policy is to recognize transfers between levels at the end of the reporting period.

Assets and Liabilities Subject to Non-recurring and Recurring Fair Value Measurement

Impaired loans and used trucks held for sale are measured on a non-recurring basis. Derivative contracts are measured on a recurring basis. These assets and liabilities are outlined in the table below:

Level 2	December 31 2012		December 31 2011
Assets:
Impaired loans	$	14.8	$	13.7
Used trucks held for sale		12.4
Liabilities:
Derivative contracts	$	12.5	$	13.0

The Company uses the following methods and assumptions to measure fair value for assets and liabilities subject to non-recurring and recurring fair value measurements.

Impaired Loans: Impaired loans are considered collateral dependent. Accordingly, the evaluation of individual reserves considers the fair value of the associated collateral (estimated sales proceeds less the costs to sell).

Used Trucks Held for Sale: The carrying amount of used trucks held for sale is written down as necessary to reflect the fair value less costs to sell. The Company determines the fair value of used trucks from a pricing matrix, which is based on the market approach. The significant observable inputs into the valuation model are recent sales prices of comparable units and the condition of the vehicles. Used truck impairments related to units held at December 31, 2012 and 2011 were $2.0 and nil during 2012 and 2011, respectively, and were recorded in Depreciation and other rental expenses on the Statements of Income. These assets, which are shown in the above table when they are written down to fair value less costs to sell, are categorized as Level 2 and are included in Other assets on the Balance Sheets.

Derivative Financial Instruments: The Company’s derivative financial instruments consist of interest-rate swaps and are carried at fair value. These derivative contracts are traded over the counter and their fair value is determined using industry standard valuation models, which are based on the income approach (i.e., discounted cash flows). The significant observable inputs into the valuation models include interest rates, yield curves and credit default swap spreads. These contracts are categorized as Level 2 and are included in Other assets and Accounts payable, accrued expenses and other on the Balance Sheets.

Fair Value Disclosure of Other Financial Instruments

For financial instruments that are not recognized at fair value, the Company uses the following methods and assumptions to determine the fair value. These instruments are categorized as Level 2, except fixed-rate loans which are categorized as Level 3.

Cash: Carrying amounts approximate fair value.

Net Receivables: For floating rate loans, wholesale financing, and interest and other receivables, carrying values approximate fair values. For fixed rate loans, fair values are estimated using the income approach by discounting cash flows to their present value based on current rates for comparable loans. Finance lease receivables and related allowance for credit loss provisions have been excluded from the accompanying table.

Commercial Paper and Medium-Term Notes: The carrying amounts of the Company’s commercial paper and floating-rate medium-term notes approximate their fair value. A portion of the Company’s fixed-rate term notes has been converted to variable-rate term notes using fair value hedges for interest rate risk. Fair value of fixed-rate term notes is determined using modeling techniques that include market inputs for interest rates.

The Company’s estimate of fair value for fixed-rate loans and debt that are not carried at fair value at December 31, 2012 and December 31, 2011 were as follows:

	December 31				December 31
	2012				2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Assets:
Due from PACCAR	$	314.4	$	315.3	$	125.4	$	126.9
Due from foreign finance affiliates		216.6		217.0		49.6		50.1
Fixed rate loans		2,175.6		2,221.7		1,732.8		1,761.3
Liabilities:
Due to PACCAR	$	218.0	$	233.6	$	415.0	$	442.0
Fixed rate debt		2,001.1		2,023.0		900.3		907.3

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Jan. 31, 2013	Jun. 30, 2012
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Entity Registrant Name	PACCAR FINANCIAL CORP
Entity Central Index Key	0000731288
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		145,000
Entity Public Float			$ 0

XML

Quarterly Results

12 Months Ended

Dec. 31, 2012

Quarterly Results

NOTE J – QUARTERLY RESULTS (UNAUDITED)

	QUARTER
	First		Second		Third		Fourth
2012
Interest and other revenue	$	117.0	$	121.1	$	128.7	$	143.7
Income before income taxes		31.8		34.4		35.5		31.9
Net income		19.0		20.7		22.0		22.0
2011
Interest and other revenue	$	98.2	$	106.6	$	110.9	$	114.1
Income before income taxes		23.5		26.3		30.5		32.1
Net income		14.6		16.2		18.3		18.9

XML

Balance Sheets (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
ASSETS
Cash	$ 26.6	$ 33.2
Finance and other receivables, net of allowance for losses (2012 - $52.8 and 2011 - $58.8)	4,259.1	3,582.5
Due from PACCAR Inc and affiliates	1,049.8	627.7
Equipment on operating leases, net of accumulated depreciation (2012 - $355.3 and 2011-$313.0)	1,042.2	880.6
Other assets	160.0	126.1
TOTAL ASSETS	6,537.7	5,250.1
LIABILITIES
Accounts payable, accrued expenses and other	170.3	208.9
Due to PACCAR Inc and affiliates	253.1	451.7
Commercial paper	1,819.6	1,779.2
Medium-term notes	2,701.1	1,350.3
Deferred taxes and other liabilities	755.7	709.0
TOTAL LIABILITIES	5,699.8	4,499.1
STOCKHOLDER'S EQUITY
Preferred stock, par value $100 per share, 6% noncumulative and nonvoting, 450,000 shares authorized, 310,000 shares issued and outstanding	31.0	31.0
Common Stock, par value $100 per share, 200,000 shares authorized, 145,000 shares issued and outstanding	14.5	14.5
Additional paid-in capital	104.7	101.7
Retained earnings	695.4	611.7
Accumulated other comprehensive loss	(7.7)	(7.9)
TOTAL STOCKHOLDER'S EQUITY	837.9	751.0
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$ 6,537.7	$ 5,250.1

XML

Transactions With PACCAR And Affiliates

12 Months Ended

Dec. 31, 2012

Transactions With PACCAR And Affiliates

NOTE D – TRANSACTIONS WITH PACCAR AND AFFILIATES

The Company and PACCAR are parties to a Support Agreement that obligates PACCAR to provide, when required, financial assistance to the Company to ensure that the Company maintains a ratio of net earnings available for fixed charges to fixed charges (as defined in the Support Agreement) of at least 1.25 to 1 for any fiscal year. The required ratio for the years ended December 31, 2012, 2011 and 2010 was met without assistance. The Support Agreement also requires PACCAR to own, directly or indirectly, all outstanding voting stock of the Company.

Periodically, the Company makes loans to, borrows from and has intercompany transactions with PACCAR. In addition, the Company periodically loans funds to certain foreign finance and leasing affiliates of PACCAR. These various affiliates have Support Agreements with PACCAR, similar to the Company’s Support Agreement with PACCAR. The foreign affiliates operate in the United Kingdom, the Netherlands, Mexico, Canada and Australia, and any resulting currency exposure is fully hedged. The foreign affiliates primarily provide financing and leasing of PACCAR-manufactured trucks and related equipment sold through DAF’s, Kenworth’s and Peterbilt’s independent dealer networks in Europe, Mexico, Canada and Australia. The Company will not make loans to the foreign affiliates in excess of the equivalent of $500.0 United States dollars, unless the amount in excess of such limit is guaranteed by PACCAR. The Company periodically reviews the funding alternatives for these affiliates, and these limits may be revised in the future.

Loans due to PACCAR decreased to $218.0 at December 31, 2012 from $415.0 at December 31, 2011 due to the repayments of a $177.0 loan in February 2012 and a $20.0 loan in September 2012. The $218.0 loan due to PACCAR has an effective fixed interest rate of 6.88% and matures in February 2014. The Company recognized interest expense on these borrowings of $16.9, $26.9 and $26.4 in 2012, 2011 and 2010, respectively. Cash paid for interest on these borrowings was $20.7, $26.4 and $25.9 in 2012, 2011 and 2010, respectively.

Amounts outstanding at December 31, 2012 and 2011, including foreign finance affiliates operating in the United Kingdom, the Netherlands, Mexico, Canada and Australia, are summarized below:

	December 31		December 31
	2012		2011
Due from PACCAR and affiliates
Loans due from PACCAR	$	428.4	$	170.1
Loans due from foreign finance affiliates		360.6		219.6
Direct financing leases due from affiliate		13.9		13.8
Receivables		246.9		224.2
Total	$	1,049.8	$	627.7
Due to PACCAR and affiliates
Loans due to PACCAR	$	218.0	$	415.0
Payables		35.1		36.7
Total	$	253.1	$	451.7

The Company provides direct financing leases to a dealer location operated by an affiliate of PACCAR.

PACCAR has issued letters of credit as of December 31, 2012 in the amount of $4.3 on behalf of the Company to guarantee funds for payment to insured franchisees and customers for any future insurance losses.

PACCAR charges the Company for certain administrative services it provides. These costs were charged to the Company based upon the Company’s specific use of the services and PACCAR’s cost. Management considers these charges reasonable and similar to the costs that would be incurred if the Company were on a stand-alone basis. Fees for services of $3.0, $1.9 and $.9 in 2012, 2011 and 2010, respectively, were charged to the Company. The Company records the investment as additional paid-in capital.

There were no dividends declared or paid during 2012 and 2010. Dividends in the amount of $117.0 were declared and paid to PACCAR during 2011.

The Company’s principal office is located in the corporate headquarters building of PACCAR (owned by PACCAR). The Company also leases office space from one facility owned by PACCAR and five facilities leased by PACCAR.

The Company’s employees and PACCAR employees are covered by a defined benefit pension plan sponsored by PACCAR. The assets and liabilities of the plan are reflected in the financial statements of PACCAR. PACCAR contributes to the plan and allocates the expenses to the Company based principally on the number of eligible plan participants. Expenses for the defined benefit pension plan were $2.7, $1.9 and $1.5 for years 2012, 2011 and 2010, respectively, and are included in selling, general and administrative expenses.

Company employees and PACCAR employees are also covered by a defined contribution plan, sponsored by PACCAR. Expenses incurred by the Company for the defined contribution plan were $1.2, $1.0 and $.5 for years 2012, 2011 and 2010, respectively.

XML

Equipment On Operating Leases

12 Months Ended

Dec. 31, 2012

Equipment On Operating Leases

NOTE C – EQUIPMENT ON OPERATING LEASES

Terms of operating leases at origination and the related depreciation, generally range from three to seven years. The total future annual minimum rental payments to be received for equipment on non-cancelable operating leases beginning January 1, 2013 of $560.2 are due as follows: $223.2 in 2013; $164.0 in 2014; $109.6 in 2015; $50.6 in 2016; $12.9 in 2017 and beyond. Depreciation expense related to equipment on operating leases was $179.5, $147.1, $131.6 in 2012, 2011 and 2010, respectively. Substantially all equipment on operating leases is manufactured by PACCAR.

XML

Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2012

Balance Sheet Locations and Fair Value of Derivative Financial Instruments

The following table presents the balance sheet locations and fair value of derivative financial instruments:

	December 31			December 31
	2012			2011
Interest-rate contracts	Assets	Liabilities		Assets	Liabilities
Accounts payable, accrued expenses and other	$	$	12.5	$	$	13.0

Designated as Hedging Instrument

Gains/Losses of Derivative Financial Instruments

The following table presents the pre-tax effects of derivative instruments designated as cash flow hedges recognized into accumulated other comprehensive income and into the Statements of Income.

	Year ended December 31
	2012			2011			2010
Pre-tax loss on derivative contracts recognized in OCI	$	(9.5	)	$	(16.5	)	$	(13.7	)
Expenses reclassified from accumulated OCI into
Interest and other borrowing expenses	$	9.9		$	19.8		$	42.4

Fair Value Hedging

Gains/Losses of Derivative Financial Instruments

Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with the changes in fair value of the hedged item attributable to the risk being hedged. The expense or (income) recognized in earnings related to fair value hedges was as follows:

	Year ended December 31
	2012			2011			2010
Interest-rate swaps	$	(2.3	)	$	.1		$	(3.0	)
Term notes	$	2.1		$	(.3	)	$	3.1

XML

Commitments And Contingencies

12 Months Ended

Dec. 31, 2012

Commitments And Contingencies

NOTE K – COMMITMENTS AND CONTINGENCIES

The Company is a party to various routine legal proceedings incidental to its business involving the collection of accounts and other matters. The Company does not consider such matters to be material with respect to the business or financial condition of the Company as a whole.

At December 31, 2012, the Company has loan and lease commitments of $247.6 expiring within one year. These commitments represent commitments to fund new retail loan and lease contracts.

XML

Credit Arrangements

12 Months Ended

Dec. 31, 2012

Credit Arrangements

NOTE G – CREDIT ARRANGEMENTS

The Company participated with PACCAR and certain other PACCAR affiliates in syndicated credit facilities of $3,000.0 at December 31, 2012. Of this amount, $1,000.0 expires in June 2013, $1,000.0 expires in 2016 and $1,000.0 expires in 2017. PACCAR and the Company intend to replace these credit facilities as they expire with facilities of similar amounts.

Credit facilities of $2,060.0 are available for use by the Company and/or PACCAR and certain other PACCAR affiliates. The remaining $940.0 is allocated to the following subsidiaries: $323.8 is available for use by PACCAR’s Canadian financial subsidiary, $231.2 is available for use by PACCAR’s Mexican financial subsidiaries, $212.5 is available for use by PACCAR’s United Kingdom financial subsidiary and $172.5 is available for use by PACCAR’s Australian financial subsidiary. These credit facilities are used to provide backup liquidity for the Company’s commercial paper and maturing medium-term notes. The Company is liable only for its own borrowings under these credit facilities. There were no borrowings under these credit facilities in the years ended December 31, 2012 and 2011.

XML

Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments

NOTE E – DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate contracts involve the exchange of fixed for floating rate or floating for fixed rate interest payments based on the contractual notional amounts in a single currency. The Company is exposed to interest rate risk caused by market volatility as a result of its borrowing activities. The objective of these contracts is to mitigate the fluctuations on earnings, cash flows and the fair value of borrowings. Net amounts paid or received are reflected as adjustments to interest expense. The notional amount is used to measure the volume of these contracts and does not represent exposure to credit loss. In the event of default by the counterparty, the risk in these transactions is the fair value of replacing the interest rate contract at current market rates.

The Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same master netting agreements. The Company is not required to post or receive collateral under these agreements. Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company had no material exposures to default at December 31, 2012.

At December 31, 2012, the notional amount of these contracts totaled $1,249.5 with amounts expiring over the next five years. Notional maturities for all interest rate contracts are $456.5 for 2013, $601.0 for 2014, $150.0 for 2015, $22.0 for 2016, and $20.0 for 2017. The majority of these contracts are floating to fixed swaps that effectively convert an equivalent amount of commercial paper and other variable rate debt to fixed rates.

The following table presents the balance sheet locations and fair value of derivative financial instruments:

	December 31			December 31
	2012			2011
Interest-rate contracts	Assets	Liabilities		Assets	Liabilities
Accounts payable, accrued expenses and other	$	$	12.5	$	$	13.0

Cash Flow Hedges

Substantially all of the Company’s interest rate contracts have been designated as cash flow hedges. The Company uses regression analysis to assess the effectiveness of hedges. The change in variable cash flow method or the hypothetical derivative method is used to measure ineffectiveness of interest rate contracts designated as cash flow hedges. Changes in the fair value of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive income to the extent such hedges are considered effective. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings and were immaterial for the years ended December 31, 2012, 2011 and 2010. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is 4.1 years.

Amounts in accumulated other comprehensive income (OCI) are reclassified into net income in the same period in which the hedged transaction affects earnings. Net realized gains and losses from interest rate contracts are recognized as an adjustment to interest expense. Of the $7.7, net of tax, included in accumulated other comprehensive loss as of December 31, 2012, $4.4, net of tax, is expected to be reclassified to interest expense in the following 12 months. The fixed interest earned on finance receivables will offset the amount recognized in interest expense, resulting in a stable interest margin consistent with the Company’s interest rate risk management strategy.

The following table presents the pre-tax effects of derivative instruments designated as cash flow hedges recognized into accumulated other comprehensive income and into the Statements of Income.

	Year ended December 31
	2012			2011			2010
Pre-tax loss on derivative contracts recognized in OCI	$	(9.5	)	$	(16.5	)	$	(13.7	)
Expenses reclassified from accumulated OCI into
Interest and other borrowing expenses	$	9.9		$	19.8		$	42.4

Fair Value Hedges

Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with the changes in fair value of the hedged item attributable to the risk being hedged. The expense or (income) recognized in earnings related to fair value hedges was as follows:

	Year ended December 31
	2012			2011			2010
Interest-rate swaps	$	(2.3	)	$	.1		$	(3.0	)
Term notes	$	2.1		$	(.3	)	$	3.1

In addition, the net interest income from the settlement of the interest-rate swaps was $.9, $.1 and $.8 for the year ended December 31, 2012, 2011 and 2010 is reported in interest and other borrowing costs.

XML

Borrowings

12 Months Ended

Dec. 31, 2012

Borrowings

NOTE F – BORROWINGS

Borrowings are summarized as follows:

	2012				2011
	Effective Rate		Borrowings		Effective Rate		Borrowings
Commercial paper		.54%	$	1,819.6		.81%	$	1,779.2
Fixed rate medium-term notes		1.26%		2,001.1		1.67%		900.3
Floating rate medium-term notes		1.09%		700.0		1.57%		450.0
		.94%	$	4,520.7		1.17%	$	3,129.5

The fixed-rate medium-term notes of $2,001.1 at December 31, 2012 include an increase in fair value of $1.1 for notes designated as fair value hedges. The fixed-rate medium-term notes of $900.3 at December 31, 2011 include an increase in fair value of $.3 for notes designated as fair value hedges. The effective rate is the weighted average rate as of December 31, 2012 and includes the effects of interest rate swap agreements.

The annual principal maturities of the borrowings are as follows:

Beginning January 1, 2013	Commercial Paper		Term Notes
2013	$	1,819.6	$	550.0
2014				800.0
2015				850.0
2016
2017				500.0
	$	1,819.6	$	2,700.0

Interest expense on borrowings amounted to $42.3, $37.1, and $64.2 for 2012, 2011 and 2010, respectively. Interest paid on borrowings was $39.0 in 2012, $40.0 in 2011, and $68.6 in 2010.

In November 2012, the Company filed a shelf registration statement under the Securities Act of 1933. In February 2013, the Company issued $500.0 of medium-term notes under this registration. The registration expires in the fourth quarter of 2015 and does not limit the principal amount of debt securities that may be issued during the period. The total notional amount of medium-term notes outstanding as of December 31, 2012 was $2,700.0.

See Note D for discussion of borrowings from PACCAR.

XML

Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

NOTE H – INCOME TAXES

The provision for income taxes consisted of the following:

	Year ended December 31
	2012			2011			2010
Current (benefit) provision
Federal	$	(1.4	)	$	(163.5	)	$	19.0
State		5.2			.1			3.8
	$	3.8		$	(163.4	)	$	22.8
Deferred provision (benefit)
Federal	$	42.9		$	201.1		$	4.8
State		3.2			6.7			(8.5	)
	$	46.1		$	207.8		$	(3.7	)
	$	49.9		$	44.4		$	19.1

A reconciliation between the statutory federal income tax rate to the actual provision for income taxes is shown below:

	Year ended December 31
	2012		2011		2010
Statutory rate		35.0%		35.0%		35.0%
Effect of:
State		1.9%		3.9%		(5.1%)
Other		.5%		.6%		.3%
		37.4%		39.5%		30.2%

Cash paid (received) for income taxes was $2.2 in 2012, ($5.2) in 2011 and $30.6 in 2010.

Deferred income tax assets (liabilities) consisted of the following:

	As of December 31
	2012			2011
Deferred tax assets:
Allowance for losses on receivables	$	20.0		$	22.3
Derivative liability		4.7			4.9
Other		12.1			5.4
Deferred tax liabilities:
Asset capitalization and depreciation	$	(765.0	)	$	(714.0	)
Net deferred tax liability	$	(728.2	)	$	(681.4	)

XML

Impaired Loans and Specific Reserve (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Impaired [Line Items]
Impaired loans with specific reserve	$ 13.7	$ 17.9
Associated allowance	(1.8)	(4.2)
Net carrying amount of impaired loans	11.9	13.7
Average recorded investment	16.7	20.1
Dealer Wholesale Financing
Financing Receivable, Impaired [Line Items]
Impaired loans with specific reserve
Associated allowance
Net carrying amount of impaired loans
Average recorded investment
Retail | Fleet
Financing Receivable, Impaired [Line Items]
Impaired loans with specific reserve	9.4	10.8
Associated allowance	(0.7)	(2.4)
Net carrying amount of impaired loans	8.7	8.4
Average recorded investment	11.3	10.1
Retail | Owner/Operator
Financing Receivable, Impaired [Line Items]
Impaired loans with specific reserve	4.3	7.1
Associated allowance	(1.1)	(1.8)
Net carrying amount of impaired loans	3.2	5.3
Average recorded investment	5.4	9.4
Retail | Dealer
Financing Receivable, Impaired [Line Items]
Impaired loans with specific reserve
Associated allowance
Net carrying amount of impaired loans
Average recorded investment		$ 0.6

XML

Reconciliation Between Statutory Federal Income tax Rate to Actual Provision for Income Taxes (Detail)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Rate Reconciliation [Line Items]
Statutory rate	35.00%	35.00%	35.00%
Effect of State	1.90%	3.90%	(5.10%)
Effect of Other	0.50%	0.60%	0.30%
Effective Income Tax Rate, Continuing Operations, Total	37.40%	39.50%	30.20%

XML

Finance and Other Receivables (Tables)

12 Months Ended

Dec. 31, 2012

Finance and Other Receivables

The Company’s finance and other receivables are as follows:

	December 31			December 31
	2012			2011
Retail loans	$	2,242.1		$	1,807.2
Retail direct financing leases		1,451.8			1,245.1
Dealer wholesale financing		641.7			576.5
Dealer master notes		92.4			104.2
Interest and other receivables		32.4			33.0
Unearned interest - finance leases		(148.5	)		(124.7	)
Total portfolio	$	4,311.9		$	3,641.3
Less allowance for losses:
Loans, leases and other		(47.8	)		(54.3	)
Dealer wholesale financing		(3.9	)		(3.4	)
Operating lease and other trade receivables		(1.1	)		(1.1	)
Total portfolio, net of allowance for losses	$	4,259.1		$	3,582.5

Annual Minimum Payments Due on Loans and Leases

Annual minimum payments due on loans and leases are as follows:

Beginning January 1, 2013	Loans		Finance leases
2013	$	716.9	$	345.4
2014		562.9		300.1
2015		470.9		256.5
2016		338.2		240.1
2017		211.7		161.2
Thereafter		33.9		100.9

Allowance for Credit Losses

The allowance for credit losses is summarized as follows:

	2012
			Retail
	Wholesale		Customer			Dealer		Other*			Total
Balance at January 1	$	3.4	$	44.4		$	9.9	$	1.1		$	58.8
Provision for losses		.5		7.6			.8		.2			9.1
Charge offs				(16.7	)				(.2	)		(16.9	)
Recoveries				1.8								1.8
Balance at December 31	$	3.9	$	37.1		$	10.7	$	1.1		$	52.8

	2011
			Retail
	Wholesale		Customer			Dealer		Other*			Total
Balance at January 1	$	1.5	$	50.8		$	8.2	$	1.2		$	61.7
Provision for losses		1.9		(1.2	)		1.7		.1			2.5
Charge offs				(8.4	)				(.2	)		(8.6	)
Recoveries				3.2								3.2
Balance at December 31	$	3.4	$	44.4		$	9.9	$	1.1		$	58.8

	2010
				Retail
	Wholesale			Customer			Dealer			Other*			Total
Balance at January 1	$	1.7		$	64.4		$	8.6		$	1.0		$	75.7
Provision for losses		(.2	)		16.2			(.4	)		1.5			17.1
Charge offs					(34.7	)					(1.3	)		(36.0	)
Recoveries					4.9									4.9
Balance at December 31	$	1.5		$	50.8		$	8.2		$	1.2		$	61.7

* Operating lease and other trade receivables

Finance Receivables Evaluated and Determined Collectively and Individually

Information regarding finance receivables evaluated collectively and individually is as follows:

			Retail
At December 31, 2012	Wholesale		Customer		Dealer		Total
Recorded investment for impaired finance receivables evaluated individually	$		$	18.5	$	.1	$	18.6
Allowance for finance receivables evaluated individually	$		$	2.1	$		$	2.1
Recorded investment for finance receivables evaluated collectively	$	641.7	$	2,405.8	$	1,213.4	$	4,260.9
Allowance for finance receivables evaluated collectively	$	3.9	$	35.0	$	10.7	$	49.6

			Retail
At December 31, 2011	Wholesale		Customer		Dealer		Total
Recorded investment for impaired finance receivables evaluated individually	$		$	51.6	$	.4	$	52.0
Allowance for finance receivables evaluated individually	$		$	18.1	$	.1	$	18.2
Recorded investment for finance receivables evaluated collectively	$	576.5	$	1,961.0	$	1,018.8	$	3,556.3
Allowance for finance receivables evaluated collectively	$	3.4	$	26.3	$	9.8	$	39.5

Impaired Loans and Specific Reserve

Impaired loans with no specific reserve were $2.9 and nil at December 31, 2012 and 2011, respectively. Impaired loans with a specific reserve are summarized below. The impaired loans with specific reserve represent the unpaid principal balance.

		Retail Customer
At December 31, 2012	Wholesale	Fleet			Owner/ Operator			Retail Dealer	Total
Impaired loans with specific reserve	$	$	9.4		$	4.3		$	$	13.7
Associated allowance			(.7	)		(1.1	)			(1.8	)
Net carrying amount of impaired loans	$	$	8.7		$	3.2		$	$	11.9
Average recorded investment	$	$	11.3		$	5.4		$	$	16.7

		Retail Customer
At December 31, 2011	Wholesale	Fleet			Owner/ Operator			Retail Dealer		Total
Impaired loans with specific reserve	$	$	10.8		$	7.1		$		$	17.9
Associated allowance			(2.4	)		(1.8	)				(4.2	)
Net carrying amount of impaired loans	$	$	8.4		$	5.3		$		$	13.7
Average recorded investment	$	$	10.1		$	9.4		$	.6	$	20.1

Interest Income Recognized on Cash Basis

During the period the loans above were considered impaired, interest income recognized on a cash basis is as follows:

	2012		2011		2010
Interest income recognized:
Wholesale	$		$		$
Retail Customer
Fleet		.5		.6		.5
Owner/Operator		.5		.6		.1
Retail Dealer
	$	1.0	$	1.2	$	.6

Finance Receivables by Credit Quality Indicator

The table below summarizes the Company’s finance receivables by credit quality indicator and portfolio class.

			Retail Customer
At December 31, 2012	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Performing	$	641.7	$	2,008.8	$	385.7	$	1,207.1	$	4,243.3
Watch				10.9		.4		6.3		17.6
At-risk				14.0		4.5		.1		18.6
Total	$	641.7	$	2,033.7	$	390.6	$	1,213.5	$	4,279.5

			Retail Customer
At December 31, 2011	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Performing	$	576.5	$	1,595.6	$	347.9	$	1,010.9	$	3,530.9
Watch				17.1		.4		7.9		25.4
At-risk				44.2		7.4		.4		52.0
Total	$	576.5	$	1,656.9	$	355.7	$	1,019.2	$	3,608.3

Financing Receivables by Aging Category

The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the Company considers the entire contractual account balance past due when any installment is over 30 days past due. Substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

			Retail Customer
At December 31, 2012	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Current and up to 30 days past-due	$	641.7	$	2,025.9	$	386.9	$	1,213.5	$	4,268.0
31 – 60 days past-due				2.2		.7				2.9
Greater than 60 days past-due				5.6		3.0				8.6
Total	$	641.7	$	2,033.7	$	390.6	$	1,213.5	$	4,279.5

			Retail Customer
At December 31, 2011	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Current and up to 30 days past-due	$	576.5	$	1,623.3	$	350.1	$	1,019.2	$	3,569.1
31 – 60 days past-due				1.4		.9				2.3
Greater than 60 days past-due				32.2		4.7				36.9
Total	$	576.5	$	1,656.9	$	355.7	$	1,019.2	$	3,608.3

Recorded Investment of Finance Receivables

At modification date, the pre-and post-modification recorded investment balances are as follows:

	2012				2011
	Recorded Investment				Recorded Investment
	Pre-Modification		Post-Modification		Pre-Modification		Post-Modification
Fleet	$	29.2	$	21.0	$	10.8	$	10.8
Owner/Operator		.3		.3		2.1		2.1
	$	29.5	$	21.3	$	12.9	$	12.9

XML

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Assets and Liabilities Fair Value Measurements

Derivative contracts are measured on a recurring basis. These assets and liabilities are outlined in the table below:

Level 2	December 31 2012		December 31 2011
Assets:
Impaired loans	$	14.8	$	13.7
Used trucks held for sale		12.4
Liabilities:
Derivative contracts	$	12.5	$	13.0

Carrying Amount and Fair Value Fixed-Rate Loans and Fixed-Rate Debt

The Company’s estimate of fair value for fixed-rate loans and debt that are not carried at fair value at December 31, 2012 and December 31, 2011 were as follows:

	December 31				December 31
	2012				2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Assets:
Due from PACCAR	$	314.4	$	315.3	$	125.4	$	126.9
Due from foreign finance affiliates		216.6		217.0		49.6		50.1
Fixed rate loans		2,175.6		2,221.7		1,732.8		1,761.3
Liabilities:
Due to PACCAR	$	218.0	$	233.6	$	415.0	$	442.0
Fixed rate debt		2,001.1		2,023.0		900.3		907.3

XML

Credit Arrangements - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
Line of Credit Facility [Line Items]
Amount of credit facility	$ 3,000.0
Credit facility available amount	2,060.0
Foreign Subsidiaries
Line of Credit Facility [Line Items]
Credit facility available amount	940.0
Foreign Subsidiaries | PACCAR Canadian financial subsidiary
Line of Credit Facility [Line Items]
Credit facility available amount	323.8
Foreign Subsidiaries | PACCAR Mexican financial subsidiaries
Line of Credit Facility [Line Items]
Credit facility available amount	231.2
Foreign Subsidiaries | PACCAR United Kingdom financial subsidiary
Line of Credit Facility [Line Items]
Credit facility available amount	212.5
Foreign Subsidiaries | PACCAR Australian financial subsidiary
Line of Credit Facility [Line Items]
Credit facility available amount	172.5
Line Of Credit Expires June 2013
Line of Credit Facility [Line Items]
Amount of credit facility	1,000.0
Line of Credit Expires 2016
Line of Credit Facility [Line Items]
Amount of credit facility	1,000.0
Line Of Credit Expires 2017
Line of Credit Facility [Line Items]
Amount of credit facility	$ 1,000.0

XML

Amounts Outstanding Including Foreign Finance Affiliates (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Due from PACCAR and affiliates
Direct financing leases due from affiliate	$ 13.9	$ 13.8
Loans due from affiliates	1,049.8	627.7
Due to PACCAR and affiliates
Loans due to PACCAR	218.0	415.0
Loans due to affiliates	253.1	451.7
PACCAR Inc
Due from PACCAR and affiliates
Loans due from affiliates	428.4	170.1
Foreign Finance Affiliates
Due from PACCAR and affiliates
Loans due from affiliates	360.6	219.6
Receivables
Due from PACCAR and affiliates
Loans due from affiliates	246.9	224.2
Payables
Due to PACCAR and affiliates
Loans due to affiliates	$ 35.1	$ 36.7

XML

Balance Sheets (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Finance and other receivables, allowance for losses	$ 52.8	$ 58.8
Equipment on operating leases, accumulated depreciation	$ 355.3	$ 313.0
Preferred stock, par value	$ 100	$ 100
Preferred stock, noncumulative and nonvoting	6.00%	6.00%
Preferred stock, shares authorized	450,000	450,000
Preferred stock, shares issued	310,000	310,000
Preferred stock, shares outstanding	310,000	310,000
Common Stock, par value	$ 100	$ 100
Common Stock, shares authorized	200,000	200,000
Common Stock, shares issued	145,000	145,000
Common Stock, shares outstanding	145,000	145,000

XML

Finance and Other Receivables

12 Months Ended

Dec. 31, 2012

Finance and Other Receivables

NOTE B – FINANCE AND OTHER RECEIVABLES

The Company’s finance and other receivables are as follows:

	December 31			December 31
	2012			2011
Retail loans	$	2,242.1		$	1,807.2
Retail direct financing leases		1,451.8			1,245.1
Dealer wholesale financing		641.7			576.5
Dealer master notes		92.4			104.2
Interest and other receivables		32.4			33.0
Unearned interest - finance leases		(148.5	)		(124.7	)
Total portfolio	$	4,311.9		$	3,641.3
Less allowance for losses:
Loans, leases and other		(47.8	)		(54.3	)
Dealer wholesale financing		(3.9	)		(3.4	)
Operating lease and other trade receivables		(1.1	)		(1.1	)
Total portfolio, net of allowance for losses	$	4,259.1		$	3,582.5

Annual minimum payments due on loans and leases are as follows:

Beginning January 1, 2013	Loans		Finance leases
2013	$	716.9	$	345.4
2014		562.9		300.1
2015		470.9		256.5
2016		338.2		240.1
2017		211.7		161.2
Thereafter		33.9		100.9

Estimated residual values included with finance leases amounted to $47.6 in 2012 and $42.0 in 2011. Repayment experience indicates substantially all of dealer wholesale financing will be repaid within one year. In addition, repayment experience indicates that some loans, leases and other finance receivables will be paid prior to contract maturity, while others may be extended or modified.

For the following credit quality disclosures, financial receivables are classified as dealer wholesale, dealer retail and customer retail segments. Customer retail receivables are further segregated between fleet and owner/operator classes. Each individual class has similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk. The wholesale segment consists of truck inventory financing to PACCAR dealers. The customer retail segment consists of loans and leases directly to customers for the acquisition of commercial vehicles and related equipment. The dealer retail segment consists of loans and leases to participating dealers and franchises that use the proceeds to fund customers’ acquisition of commercial vehicles and related equipment. The fleet class consists of customer retail accounts operating more than five trucks. All other customer retail accounts are considered owner/operator.

Allowance for Credit Losses

The allowance for credit losses is summarized as follows:

	2012
			Retail
	Wholesale		Customer			Dealer		Other*			Total
Balance at January 1	$	3.4	$	44.4		$	9.9	$	1.1		$	58.8
Provision for losses		.5		7.6			.8		.2			9.1
Charge offs				(16.7	)				(.2	)		(16.9	)
Recoveries				1.8								1.8
Balance at December 31	$	3.9	$	37.1		$	10.7	$	1.1		$	52.8

	2011
			Retail
	Wholesale		Customer			Dealer		Other*			Total
Balance at January 1	$	1.5	$	50.8		$	8.2	$	1.2		$	61.7
Provision for losses		1.9		(1.2	)		1.7		.1			2.5
Charge offs				(8.4	)				(.2	)		(8.6	)
Recoveries				3.2								3.2
Balance at December 31	$	3.4	$	44.4		$	9.9	$	1.1		$	58.8

	2010
				Retail
	Wholesale			Customer			Dealer			Other*			Total
Balance at January 1	$	1.7		$	64.4		$	8.6		$	1.0		$	75.7
Provision for losses		(.2	)		16.2			(.4	)		1.5			17.1
Charge offs					(34.7	)					(1.3	)		(36.0	)
Recoveries					4.9									4.9
Balance at December 31	$	1.5		$	50.8		$	8.2		$	1.2		$	61.7

* Operating lease and other trade receivables

Information regarding finance receivables evaluated collectively and individually is as follows:

			Retail
At December 31, 2012	Wholesale		Customer		Dealer		Total
Recorded investment for impaired finance receivables evaluated individually	$		$	18.5	$	.1	$	18.6
Allowance for finance receivables evaluated individually	$		$	2.1	$		$	2.1
Recorded investment for finance receivables evaluated collectively	$	641.7	$	2,405.8	$	1,213.4	$	4,260.9
Allowance for finance receivables evaluated collectively	$	3.9	$	35.0	$	10.7	$	49.6

			Retail
At December 31, 2011	Wholesale		Customer		Dealer		Total
Recorded investment for impaired finance receivables evaluated individually	$		$	51.6	$	.4	$	52.0
Allowance for finance receivables evaluated individually	$		$	18.1	$	.1	$	18.2
Recorded investment for finance receivables evaluated collectively	$	576.5	$	1,961.0	$	1,018.8	$	3,556.3
Allowance for finance receivables evaluated collectively	$	3.4	$	26.3	$	9.8	$	39.5

The recorded investment for finance receivables that are on non-accrual status in the wholesale segment and the fleet, owner/operator, and retail dealer portfolio classes as of December 31, 2012 are nil, $14.0, $4.5, and $.1, and as of December 31, 2011 were nil, $44.2, $7.4, and $.4, respectively.

Impaired Loans

Impaired loans with no specific reserve were $2.9 and nil at December 31, 2012 and 2011, respectively. Impaired loans with a specific reserve are summarized below. The impaired loans with specific reserve represent the unpaid principal balance.

		Retail Customer
At December 31, 2012	Wholesale	Fleet			Owner/ Operator			Retail Dealer	Total
Impaired loans with specific reserve	$	$	9.4		$	4.3		$	$	13.7
Associated allowance			(.7	)		(1.1	)			(1.8	)
Net carrying amount of impaired loans	$	$	8.7		$	3.2		$	$	11.9
Average recorded investment	$	$	11.3		$	5.4		$	$	16.7

		Retail Customer
At December 31, 2011	Wholesale	Fleet			Owner/ Operator			Retail Dealer		Total
Impaired loans with specific reserve	$	$	10.8		$	7.1		$		$	17.9
Associated allowance			(2.4	)		(1.8	)				(4.2	)
Net carrying amount of impaired loans	$	$	8.4		$	5.3		$		$	13.7
Average recorded investment	$	$	10.1		$	9.4		$	.6	$	20.1

During the period the loans above were considered impaired, interest income recognized on a cash basis is as follows:

	2012		2011		2010
Interest income recognized:
Wholesale	$		$		$
Retail Customer
Fleet		.5		.6		.5
Owner/Operator		.5		.6		.1
Retail Dealer
	$	1.0	$	1.2	$	.6

Credit Quality

The Company’s customers are principally concentrated in the transportation industry in the United States. The Company’s portfolio is diversified over a large number of customers and dealers with no single customer or dealer balances over 7% of the total portfolio. The Company has contractual arrangements with one customer, Swift Transportation Corporation, that account for 10.8%, 11.6% and 11.4% of total Interest and Other Revenue for the periods ended December 31, 2012, 2011 and 2010, respectively. The Company retains as collateral a security interest in the related equipment.

At the inception of each contract, the Company considers the credit risk based on a variety of credit quality factors including; prior payment experience, customer financial information, credit-rating agency, loan-to-value ratios and other internal metrics. On an ongoing basis, the Company monitors credit quality based on past-due status and collection experience as the Company has found a meaningful correlation between the past-due status of customers and the risk of loss.

The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in accordance with the contractual terms and are not considered high risk. Watch accounts include accounts 31 to 90 days past-due and large accounts that are performing but are considered to be high-risk. Watch accounts are not impaired. At-risk accounts are accounts that are impaired, including TDRs, accounts over 90 days past-due and other accounts on non-accrual status. The Company uses historical data and known trends, to categorize each credit quality indicator.

The table below summarizes the Company’s finance receivables by credit quality indicator and portfolio class.

			Retail Customer
At December 31, 2012	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Performing	$	641.7	$	2,008.8	$	385.7	$	1,207.1	$	4,243.3
Watch				10.9		.4		6.3		17.6
At-risk				14.0		4.5		.1		18.6
Total	$	641.7	$	2,033.7	$	390.6	$	1,213.5	$	4,279.5

			Retail Customer
At December 31, 2011	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Performing	$	576.5	$	1,595.6	$	347.9	$	1,010.9	$	3,530.9
Watch				17.1		.4		7.9		25.4
At-risk				44.2		7.4		.4		52.0
Total	$	576.5	$	1,656.9	$	355.7	$	1,019.2	$	3,608.3

The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the Company considers the entire contractual account balance past due when any installment is over 30 days past due. Substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

			Retail Customer
At December 31, 2012	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Current and up to 30 days past-due	$	641.7	$	2,025.9	$	386.9	$	1,213.5	$	4,268.0
31 – 60 days past-due				2.2		.7				2.9
Greater than 60 days past-due				5.6		3.0				8.6
Total	$	641.7	$	2,033.7	$	390.6	$	1,213.5	$	4,279.5

			Retail Customer
At December 31, 2011	Wholesale		Fleet		Owner/ Operator		Retail Dealer		Total
Current and up to 30 days past-due	$	576.5	$	1,623.3	$	350.1	$	1,019.2	$	3,569.1
31 – 60 days past-due				1.4		.9				2.3
Greater than 60 days past-due				32.2		4.7				36.9
Total	$	576.5	$	1,656.9	$	355.7	$	1,019.2	$	3,608.3

Troubled Debt Restructurings

The Company modifies loans and finance leases as a normal part of its operations. The Company’s modifications typically resulted in granting more time to pay the contractual amounts owed and charging a fee and additional interest for the modification. The Company rarely forgives principal or accrued interest and may require principal and accrued interest payments at the time of modification. When the Company modifies loans and finance leases for customers in financial difficulty and grants a concession, the modifications are classified as TDRs.

During 2012, the pre-modification and post-modification recorded investments were $29.5 and $21.3, respectively. The decrease in the post-modification recorded investment in 2012 reflects a contract modification of one large customer that resulted in a finance receivable charge off of $8.2. For the year ended December 31, 2011, there was no change in the recorded investment for loans and leases modified as TDRs.

At modification date, the pre-and post-modification recorded investment balances are as follows:

	2012				2011
	Recorded Investment				Recorded Investment
	Pre-Modification		Post-Modification		Pre-Modification		Post-Modification
Fleet	$	29.2	$	21.0	$	10.8	$	10.8
Owner/Operator		.3		.3		2.1		2.1
	$	29.5	$	21.3	$	12.9	$	12.9

The balance of TDRs was $11.0 and $11.4 at December 31, 2012 and 2011, respectively.

The post-modification recorded investment of finance receivables modified as TDRs during the previous twelve months that subsequently defaulted (i.e. became more than 30 days past-due) in the year ended December 31, 2012 was $3.6 and nil for fleet and owner/operator, respectively. The TDRs that subsequently defaulted did not significantly impact the Company’s allowance for losses at December 31, 2012.

Repossessions

When the Company determines a customer is not likely to meet its contractual commitments, the Company repossesses the vehicles which serve as collateral for the loans, finance leases and equipment under operating lease. The Company records the vehicles as used truck inventory included in Other assets on the Balance Sheets. The balance of repossessed inventory at December 31, 2012 and 2011 was $10.4 and $1.0, respectively. Proceeds from the sales of repossessed assets were $11.3, $16.9, and $56.3 for the years ended December 31, 2012, 2011 and 2010, respectively. These amounts are included in Proceeds from disposal of equipment on the Statements of Cash Flows. Write downs of repossessed equipment on operating leases are recorded as impairments and included in Depreciation and other expense on the Statements of Income.

Unamortized Loan Origination Costs

The unamortized loan origination costs at December 31, 2012 and 2011 were $12.2 and $10.4, respectively. These amounts are included in Other assets on the Balance Sheets.

XML

Commitment And Contingencies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Commitment And Contingencies [Line Items]
Outstanding commitments to fund new loan and lease transactions	$ 247.6
Commitments expiration term	1 year

XML

Quarterly Results (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information

	QUARTER
	First		Second		Third		Fourth
2012
Interest and other revenue	$	117.0	$	121.1	$	128.7	$	143.7
Income before income taxes		31.8		34.4		35.5		31.9
Net income		19.0		20.7		22.0		22.0
2011
Interest and other revenue	$	98.2	$	106.6	$	110.9	$	114.1
Income before income taxes		23.5		26.3		30.5		32.1
Net income		14.6		16.2		18.3		18.9

XML

Pre and Post Modification Recorded Investment (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financing Receivable, Modifications [Line Items]
Pre-Modification	$ 29.5	$ 12.9
Post-Modification	21.3	12.9
Retail | Fleet
Financing Receivable, Modifications [Line Items]
Pre-Modification	29.2	10.8
Post-Modification	21.0	10.8
Retail | Owner/Operator
Financing Receivable, Modifications [Line Items]
Pre-Modification	0.3	2.1
Post-Modification	$ 0.3	$ 2.1

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Description of Operations and Basis of Presentation

Description of Operations and Basis of Presentation: PACCAR Financial Corp. (the “Company”), is a wholly-owned subsidiary of PACCAR Inc (“PACCAR”). The Company primarily provides financing of PACCAR-manufactured trucks and related equipment sold by authorized dealers. The Company also finances dealer inventories of transportation equipment and franchises Kenworth and Peterbilt dealerships to engage in full-service and finance leasing. The operations of the Company are fundamentally affected by its relationship with PACCAR.

In 2000, PACCAR transferred the stock of the Company to PACCAR Financial Services Corporation (“PFSC”), a wholly-owned subsidiary of PACCAR. In December 2011, PFSC was dissolved by means of a statutory merger with and into PACCAR Financial Corp., making the Company a direct subsidiary of PACCAR. The merger was accounted for using the pooling of interest method because the Company and PFSC were under common control of PACCAR. Under this method of accounting, the results and cash flows of the pre-merged Company and PFSC and their assets and liabilities are combined at the amounts at which they were previously recorded as if they had been part of the Company since the beginning of the periods shown. There was no material impact to the financial statements for all years presented.

Due to the nature of the Company’s business, customers are concentrated in the transportation industry throughout the United States. Generally, all receivables are collateralized by the equipment being financed. The risk of credit losses related to this concentration has been considered in establishing the allowance for losses.

Use of Estimates

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Finance and Other Receivables

Finance and Other Receivables:

Loans – Loans represent fixed- or floating-rate loans to customers or dealers collateralized by the vehicles purchased or financed and are recorded at amortized cost.

Finance leases – Finance leases are retail direct financing leases and sales-type finance leases, which lease equipment to retail customers and dealers. These leases are reported as the sum of minimum lease payments receivable and estimated residual value of the property subject to the contracts, reduced by unearned interest which is shown separately.

Dealer wholesale financing – Dealer wholesale financing is floating-rate wholesale loans to Kenworth and Peterbilt dealers for new and used trucks and are recorded at amortized cost. The loans are collateralized by the trucks being financed.

Interest and other – Interest and other receivables are interest on loans and leases and other amounts due within one year in the normal course of business.

Allowance for Losses

Allowance for Losses:

The Company continuously monitors the payment performance of all its finance receivables. For large retail finance customers and dealers with wholesale financing, the Company regularly reviews their financial statements and makes site visits and phone contact as appropriate. If the Company becomes aware of circumstances that could cause those customers or dealers to face financial difficulty, whether or not they are past due, the customers are placed on a watch list.

The Company modifies loans and finance leases as a normal part of its operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification.

When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms. When the Company modifies loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings (TDRs). The Company does not typically grant credit modifications for customers that do not meet minimum underwriting standards since the Company normally repossesses the financed equipment in these circumstances. When such modifications do occur, they are considered TDRs.

On average, modifications extended contractual terms by four months in 2012 and nine months in 2011 and did not have a significant effect on the weighted average term or interest rate of the total portfolio at December 31, 2012 or 2011.

The Company has developed a systematic methodology for determining the allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail loans and direct finance leases, net of unearned interest. The wholesale segment consists of truck inventory financing loans to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company requires monthly reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and, in many cases, obtains personal guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest generally over 36 to 60 months and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves.

The Company individually evaluates certain finance receivables for impairment. Finance receivables which are evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered probable the Company will be unable to collect all contractual interest and principal payments as scheduled. In addition, all retail loans and leases which have been classified as TDRs and all customer accounts over 90-days past due are considered impaired. Generally, impaired accounts are on non-accrual status. Impaired accounts classified as TDRs which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments.

Impaired receivables are considered collateral dependent. Large balance retail and all wholesale impaired receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s loss exposure, no reserve is recorded. Small balance impaired receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.

For finance receivables that are not individually impaired, the Company collectively evaluates and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past-due account data and current market conditions. Information used includes assumptions regarding the likelihood of collecting current and past-due accounts, repossession rates, the recovery rate on the underlying collateral based on used truck values and other pledged collateral or recourse. The Company has developed a range of loss estimates for its portfolio based on historical experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is determined as probable based on current market conditions and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. After determining the appropriate level of the allowance for credit losses, the provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent in the portfolio.

In determining the fair value of the collateral, the Company uses a pricing matrix and categorizes the fair value as Level 2 in the hierarchy of fair value measurement. The pricing matrix is reviewed quarterly and updated as appropriate. The pricing matrix considers the make, model and year of the equipment as well as recent sales prices of comparable equipment through wholesale channels to the Company’s dealers (principal market). The fair value of the collateral also considers the overall condition of the equipment.

Accounts are charged off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). Typically the timing between the repossession and charge off is not significant. In cases where repossession is delayed (e.g., for legal proceedings), the Company records partial charge offs. The charge off is determined by comparing the fair value of the collateral, less cost to sell, to the recorded investment.

Revenue Recognition

Revenue Recognition: Interest income from finance and other receivables is recognized using the interest method. Certain loan origination costs are deferred and amortized to interest income over the expected life of the contracts, generally 36 to 60 months, using the straight-line method which approximates the interest method. For operating leases, rental revenue is recognized on a straight-line basis over the lease term.

Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at December 31, 2012 or December 31, 2011. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is impaired or on non-accrual status are applied to interest and principal in accordance with the contractual terms.

The Company recognizes revenue on the sale of used trucks acquired from PACCAR truck division customers as part of new truck sales packages when the used trucks are invoiced and delivered to a customer.

Equipment on Operating Leases

Equipment on Operating Leases: Equipment on operating leases is recorded at cost and is depreciated on the straight-line basis to its estimated residual value. Residual values are reviewed regularly and adjusted if market conditions warrant.

Restricted Cash

Restricted Cash: Restricted cash consists of cash proceeds from the sale of eligible assets set aside for the acquisition of replacement assets under the Company’s like-kind exchange tax program. Restricted cash is classified within Other assets. The changes in restricted cash balances are reflected as an investing activity in the Statement of Cash Flows as they relate to sales and purchases of revenue earning assets.

Derivative Financial Instruments

Derivative Financial Instruments: Derivative financial instruments are used to hedge exposures to fluctuations in interest rates. Certain derivative instruments designated as either cash flow hedges or fair value hedges are subject to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as economic hedges. The Company’s policies prohibit the use of derivatives for speculation or trading. At the inception of each hedge relationship, the Company documents its risk management objectives, procedures and accounting treatment.

The Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same master netting agreements. The Company is not required to post or receive collateral under these agreements. Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company had no material exposures to default at December 31, 2012.

The Company uses regression analysis to assess effectiveness of interest-rate contracts on a quarterly basis. All components of the derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings. Hedge accounting is discontinued prospectively when the Company determines that a derivative financial instrument has ceased to be a highly effective hedge.

Income Taxes

Income Taxes: The Company is included in the consolidated federal income tax return of PACCAR. Income taxes for the Company are determined on a separate return basis, and any related tax liability is paid by the Company to PACCAR and any related tax benefit is paid by PACCAR to the Company. State income taxes, where the Company files combined tax returns with PACCAR, are determined on a blended statutory rate, which is substantially the same as the rate computed on a separate return basis. As of December 31, 2012, the United States Internal Revenue Service has completed examinations of PACCAR’s tax returns for all years through 2008. PACCAR’s tax returns remain subject to examination in most jurisdictions for the years ranging from 2009 through 2012.

Preferred Stock

Preferred Stock: The Company’s Articles of Incorporation provide that the 6%, noncumulative, nonvoting preferred stock (100% owned by PACCAR) is redeemable only at the option of the Company’s Board of Directors.

New Accounting Pronouncements

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. While many of the amendments were clarifications to the existing guidance and are intended to align U.S. GAAP and IFRS, the ASU changed some fair value measurement principles and disclosure requirements. The Company adopted ASU 2011-04 in the first quarter of 2012. The impact of adoption reduced the allowance for credit loss for the impaired finance receivables by $2.5 at March 31, 2012, including $1.9 for impaired leases and $.6 for impaired loans.

The FASB issued ASU 2011-05, Presentation of Comprehensive Income, in June 2011, which was subsequently amended by ASU 2011-12 in December 2011. The new guidance requires entities to present components of net income and comprehensive income in either a combined financial statement or in two separate but consecutive statements of net income and comprehensive income. The Company adopted ASU 2011-05 as amended in the first quarter of 2012. The Company has elected to present components of net income combined with a total for comprehensive income in a single continuous statement in its interim financial statements and two separate consecutive statements of net income and comprehensive income in its annual financial statements.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires disclosure of additional information about reclassification adjustments from other comprehensive income. The ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company will provide the new disclosures in 2013.

In January 2013, the FASB issued ASU 2013-01 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, an update of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The ASUs require entities with derivatives, repurchase agreements and securities borrowing and lending transactions that are either offset on the balance sheet, or subject to a master netting arrangement, to provide expanded disclosures about the nature of the rights of offset. The updated ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company will provide the expanded disclosures in 2013.

Troubled Debt Restructuring Policy

The Company modifies loans and finance leases as a normal part of its operations. The Company’s modifications typically resulted in granting more time to pay the contractual amounts owed and charging a fee and additional interest for the modification. The Company rarely forgives principal or accrued interest and may require principal and accrued interest payments at the time of modification. When the Company modifies loans and finance leases for customers in financial difficulty and grants a concession, the modifications are classified as TDRs.