UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 20122013

or

For transition period from            to            

Commission File No. 001-11677

PACCAR FINANCIAL CORP.

(Exact name of Registrant as specified in its charter)

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:

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, 2012:2013: None

The number of shares outstanding of the registrant’s classes of common stock as of January 31, 2013:2014:

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

PACCAR Financial Corp.

(Millions of Dollars)

PART I

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’sthe Kenworth and Peterbilt’sPeterbilt 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 commercialPACCAR’s 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, Mexico and Mexico,Brasil, are used world-wideworldwide 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 beguncompleted construction of its new 300,000 square-foot DAF assembly facility in Ponta Grossa, Brasil in October 2013. Brasil is a major truck market with industry sales above six tonnes in 2013 of 149,000 units. During the fourth quarter of 2013, DAF began truck production in Brasil. During 2013, PACCAR completed 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 new280,000 square-foot parts distribution center (PDC) is being constructed in Eindhoven, the Netherlands, established a PDC in Ponta Grossa, Brasil, and will be completeddoubled the warehouse space in the first quarter of 2013.its Lancaster, Pennsylvania PDC. The Company has 16 PDC’s strategically located to support customers in North America, Europe, Australia and South America. Commercial truck manufacturing and related aftermarket parts distribution accounted for 77%76% and 16% of total 20122013 net sales and revenues, respectively.

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 worldwide by a foreign subsidiary headquartered in the Netherlands.Netherlands and is also marketed and distributed by a foreign subsidiary in Brasil. The decision to operate as a subsidiary or as a division is incidental to PACCAR’s Truck Segmentsegment operations and reflects legal, tax and regulatory requirements in the various countries where PACCAR operates.

PACCAR Financial Corp.

(Millions of Dollars)

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.market. PACCAR’s share of the U.S. and Canadian class 8 market was a record 28.9%28.0% of retail sales in 2012.2013. In Europe there are were six principal competitors in the commercial truck market, including parent companies to two competitors of PACCAR in the United States. In 2012,2013, DAF had a record 16.0%16.2% share of the Western and Central European heavy-duty market and a 11.5%record 11.8% share of the light/medium market. These markets are highly competitive in price, quality and service, andservice. 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, 2012,2013, the Company employed 399389 full-time employees, none of whom are represented by a collective bargaining agent.

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 PeterbiltKenworth and KenworthPeterbilt 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.

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 periodsyears ended December 31, 2013, 2012 2011 and 2010.2011.

The Company has contractual arrangements with one customer, Swift Transportation Corporation, that account for 10.8%,11.4% ,10.8% and 11.6% and 11.4% of total Interest and Other Revenue for the periodsyears ended December 31, 2013, 2012 2011 and 2010,2011, 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“Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.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.

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.

PACCAR Financial Corp.

(Millions of Dollars)

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 proceeds 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, 2012,2013, the total notional principal amount of interest rate swap contracts outstanding was $1,249.5,$1,243.0, 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, 2012.2013. Of this amount, $1,000.0 expires in June 2013,2014, $1,000.0 expires in 20162017 and $1,000.0 expires in 2017.2018. PACCAR and the Company intend to replace these credit facilities as they expire with facilities of similar amounts. Credit facilities of $2,060.0$1,868.3 are available for use by the Company and/or PACCAR and certain other PACCAR affiliates. The remaining $940.0$1,131.7 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$374.5 is available for use by PACCAR’s United Kingdom financial subsidiary, $346.4 is available for use by PACCAR’s Canadian financial subsidiary, $230.6 is available for use by PACCAR’s Mexican financial subsidiaries and $172.5$180.2 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 yearsyear ended December 31, 2012 and 2011.2013.

PACCAR Financial Corp.

(Millions of Dollars)

AsThe Company periodically registers debt securities under the Securities Act 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 Notes1933 for offering to the Financial Statements for further information on the Company’s medium-term notes.

public. In November 2012, the Company filed a shelf registration statement under the Securities Act of 1933. In February 2013, the Company issued $500.0 ofto issue medium-term notes under this registration.notes. The shelf registration statement expires in the fourth quarter ofNovember 2015 and does not limit the principal amount of debt securities that may be issued during the period. As of December 31, 2013, the total principal amount of medium-term notes outstanding for the Company was $3,850.0, of which $800.0 was due within 12 months. See “Note G – Borrowings” in the Notes to the Financial Statements for further information on the Company’s medium-term notes.

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, 20122013 and 2011, respectively.December 31, 2012. The $218.0 loan due to PACCAR was repaid upon maturity in February 2014. The Company had $428.4$653.6 and $170.1$428.4 outstanding in loans due from PACCAR as of December 31, 20122013 and 2011,2012, respectively. In addition, the Company periodically loans funds to certain foreign finance and leasing affiliates of PACCAR. The Company had $360.6$429.6 and $219.6$360.6 outstanding in loans due from foreign finance and leasing affiliates of PACCAR as of December 31, 20122013 and 2011,2012, 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’sthe DAF, Kenworth and Peterbilt’sPeterbilt 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 assureensure 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, 2013, 2012 and 2011 was met without assistance. 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.

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.

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.

PACCAR Financial Corp.

(Millions of Dollars)

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.

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.

Information Technology

The Company relies on information technology systems, including the internet and other computer systems, which may be subject to disruptions during the process of upgrading or replacing software, databases or components; power outages; hardware failures; computer viruses; or outside parties attempting to disrupt the Company’s business or gain unauthorized access to the Company’s electronic data. The Company maintains excellent protections to guard against such events. If the Company’s computer systems were to be damaged, disrupted or breached, it could result in negative impact on the Company’s operating results and also could cause reputational damage, business disruption or the disclosure of confidential data.

Not applicable.

PACCAR Financial Corp.

(Millions of Dollars)

The Company’s principal office is located in the corporate headquarters building of PACCAR (owned by PACCAR) at 777 106^thAvenue 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.

PACCAR Financial Corp.

(Millions of Dollars)

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.

Not applicable.

PART II

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 20122013 or 2010.2012. Dividends in the amount of $117.0 were declared and paid to PACCAR in 2011.

PACCAR Financial Corp.

(Millions of Dollars)

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

Income Statement Data

PACCAR Financial Corp.

(Millions of Dollars)

Results of Operations

20122013 Compared to 2011:2012:

New Business Volume

New business volume from retail loans and direct financing leases in 2012 increased 15%2013 decreased 12% from 20112012 due to higherlower retail sales of PACCAR trucks in 2012. Equipment2013 and a lower share of retail sales financed due to increased competition. Financial services market share on operating lease new business volumePACCAR trucks was 27.4% and 29.0% in 2013 and 2012, was comparable to 2011.respectively. Dealer master notes new business volume in 2012 increased $36.72013 decreased $16.2 from 2011,2012, attributable to higherlower new truck sales resulting in increaseddecreased finance volume from dealers.

Income Before Income Taxes

The Company’s income before income taxes was $159.4 in 2013 compared to $133.6 in 2012 compared to $112.4 in 2011.2012. The increase in income before income taxes in 20122013 was primarily the result of a higher finance margin of $30.9 and a higher operating lease margin of $1.2, partially offset by$9.4, a higherlower provision for credit losses of $6.6.$6.8 and a higher finance margin of $6.5.

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 20122013 compared to 20112012 are summarized below:

The major factors for the change in operating lease and rental revenues, depreciation and other rental expenses and operating lease margin in 20122013 compared to 20112012 are summarized below:

PACCAR Financial Corp.

(Millions of Dollars)

Used truck sales and other revenuerevenues and costCost of used truck sales and other expenses are summarized below for 20122013 compared to 2011:2012:

Used truck sales and other revenuerevenues and Cost of used truck sales and other expenses increaseddecreased due to a higherlower volume of trucks acquired from PACCAR truck division customers as part of new truck sales packages during 2012.2013. Used truckstruck gains decreasedincreased due to a declinean improvement in truck values in the second half of 2012.2013.

The provision for losses on receivables was $2.3 in 2012 increased2013 compared to $9.1 from $2.5 in 20112012 primarily due to higher recoveries of accounts charged off in prior years and a lower portfolio growth of 7% in 2013 compared to 34% in 2012.

Allowance for Losses

Retail loan and lease receivables past due over 30 days at December 31, 20122013 was .35% compared to .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, 2011.2012. The Company continues to focus on maintaining low past-due balances. The allowance for losses as a percentage of the total portfolio

Charge offs decreased $10.4 to 1.22% at December 31,$6.5 in 2013 from $16.9 in 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.customer in 2012. The Company modified this customer contract in a troubled debt restructuring which included the satisfaction of a partial satisfactionportion of this customer’s account and modification of the remaining receivable. Recoveries increased $4.9 to $6.7 in 2013 from $1.8 in 2012 mainly due to the recoveries from this large customer.

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:

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.restructurings (TDR).

The post-modification balances of accounts modified during 2013 and 2012 are summarized below:

Total modification activity increased in 2013 compared to 2012 due to higher commercial modifications and insignificant delay modifications. Commercial modifications increased to $178.1 in 2013 from $154.1 in 2012 due to higher volume of end-of-contract refinancing in 2013. Insignificant delay modifications increased to $69.7 in 2013 from $44.1 in 2012 primarily due to granting one large fleet customer a one-month extension. This was partially offset by lower credit modifications due to improved portfolio performance. Credit – TDR modifications decreased to $2.6 in 2013 from $21.3 in 2012 as 2012 included a contract modification of a large customer.

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 no accounts during the fourth quarter of 2013 and $3.2 of accounts during the fourth quarter of 2012 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:

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, 2013 and 2012. The effect on the allowance for credit losses from such modifications was not significant at December 31, 2013 and 2012. See “Critical Accounting Policies”, “Note A – Significant Accounting Policies” and “Note B – Finance and Other Receivables” for additional discussion regarding the Allowance for Losses.

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:

Retail loans and retail leases increased to $2,442.5 and $1,421.1 compared to $2,242.1 and $1,303.3 at December 31, 2013 and 2012, respectively, due to new business volume exceeding collections.

Dealer wholesale financing balances decreased to $578.0 at December 31, 2013 compared to $641.7 at December 31, 2012 due to lower dealer new truck inventory.

Dealer master notes increased to $105.1 at December 31, 2013 compared to $92.4 at December 31, 2012, due to new business volume exceeding repayments. 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, 2013, the underlying pledged contracts were $148.8 upon which the dealers have available $23.1 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 37.8% for 2013 compared to 37.4% for 2012, reflecting higher state tax expenses in 2013.

During 2013, the Company’s deferred income tax provision was $71.8 compared to $46.1 for 2012 due to higher benefits from accelerated depreciation. The Company’s net deferred tax liability increased to $802.9 at December 31, 2013 from $728.2 at December 31, 2012. The increase in the deferred tax liability primarily relates to the high volume of leased equipment placed into service in 2013 for which a fifty percent bonus 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. The difference in the timing of depreciation for financial statement and income tax purposes does not impact operating results and is not expected to have a significant impact on liquidity in 2014.

PACCAR Financial Corp.

(Millions of Dollars)

2012 Compared to 2011:

New Business Volume

New business volume from retail loans and direct financing leases in 2012 increased 21% from 2011 due to higher retail sales of PACCAR trucks in 2012. 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.

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:

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:

PACCAR Financial Corp.

(Millions of Dollars)

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

Used truck sales and other revenues 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 truck 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

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 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. 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.

PACCAR Financial Corp.

(Millions of Dollars)

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 TDR.

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

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 RestructuringTDR modifications increased to $21.3 in 2012 from $12.9 in 2011 due to a contract modification of a large customer.

When the Company modifies a 30+ days past-due account, the customer is 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 continued to not make payments, the pro forma percentage of retail loan and lease accounts 30+ days past due would have been as follows:

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.

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:

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.

PACCAR Financial Corp.

(Millions of Dollars)

2011 Compared to 2010:

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.

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:

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:

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:

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

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.

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:

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: