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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

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

PACCAR Financial Corp. (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 to reflect the correct identity of the Chief Executive Officer of the Company at the time of the filing of the Form 10-Q. Exhibit 31(a) and Exhibit 32(a) were inadvertently certified by R. Preston Feight, the Chief Executive Officer of PACCAR Inc, the Company’s parent company, and a director of the Company, rather than Harrie C.A.M. Schippers, the Chief Executive Officer of the Company.

No other information included in the Form 10-Q has been modified or updated in any way. This Amendment No. 1 continues to reflect events as of the original filing date of the Form 10-Q and does not reflect any events that may have occurred subsequent to the original filing date.

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30				June 30				June 30				June 30
(Millions of Dollars)	2019		2018		2019		2018			2020	2019			2020	2019
Interest and fee income	$	87.2	$	65.4	$	168.2	$	126.7	$	81.0	$	87.2	$	169.4	$	168.2
Operating lease and rental revenues		96.8		102.2		196.1		203.7		92.1		96.8		188.9		196.1
Used truck sales and other revenues		5.1		7.4		8.8		15.1		8.2		5.1		15.5		8.8

TOTAL INTEREST AND OTHER REVENUES		189.1		175.0		373.1		345.5		181.3		189.1		373.8		373.1

Interest and other borrowing costs		45.5		32.2		87.3		61.1		41.2		45.5		86.4		87.3
Depreciation and other rental expenses		84.1		93.2		167.4		186.4		90.4		84.1		182.9		167.4
Cost of used truck sales and other expenses		3.3		6.6		5.2		13.4		7.5		3.3		13.8		5.2
Selling, general and administrative expenses		15.5		13.9		30.8		27.7		12.2		15.5		26.8		30.8
Provision for losses on receivables		1.2		2.6		4.1		3.8		3.0		1.2		13.2		4.1

TOTAL EXPENSES		149.6		148.5		294.8		292.4		154.3		149.6		323.1		294.8

INCOME BEFORE INCOME TAXES		39.5		26.5		78.3		53.1		27.0		39.5		50.7		78.3

Income taxes		10.2		6.7		19.4		12.9		6.6		10.2		12.4		19.4

NET INCOME	$	29.3	$	19.8	$	58.9	$	40.2	$	20.4	$	29.3	$	38.3	$	58.9
COMPREHENSIVE INCOME	$	23.3	$	21.2	$	49.1	$	44.1	$	19.5	$	23.3	$	19.8	$	49.1
RETAINED EARNINGS AT BEGINNING OF PERIOD	$	1,517.8	$	1,416.5	$	1,488.2	$	1,396.1	$	1,605.8	$	1,517.8	$	1,591.4	$	1,488.2
RETAINED EARNINGS AT END OF PERIOD	$	1,547.1	$	1,436.3	$	1,547.1	$	1,436.3	$	1,626.2	$	1,547.1	$	1,626.2	$	1,547.1

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

BALANCE SHEETS	June 30			December 31		June 30			December 31
	2019			2018*			2020		2019*
(Millions of Dollars)	(Unaudited)					(Unaudited)
ASSETS
Cash	$	39.2		$	74.8	$	29.8		$	53.3
Finance and other receivables, net of allowance for credit losses (2019 - $63.4 and 2018 - $60.7)		6,620.3			6,038.8
Finance and other receivables, net of allowance for credit losses (2020 - $67.9 and 2019 - $60.7)							6,663.3			7,126.7
Due from PACCAR and affiliates		1,525.5			1,581.3		1,653.8			1,557.2
Equipment on operating leases, net of accumulated depreciation (2019 - $622.3 and 2018 - $659.7)		1,396.5			1,459.0
Equipment on operating leases, net of accumulated depreciation (2020 - $620.4 and 2019 - $605.9)							1,329.3			1,427.6
Other assets		259.2			141.4		316.8			276.0

TOTAL ASSETS	$	9,840.7		$	9,295.3	$	9,993.0		$	10,440.8

LIABILITIES
Accounts payable, accrued expenses and other	$	413.8		$	362.7	$	353.8		$	457.1
Due to PACCAR and affiliates		35.0			9.9		46.7			13.9
Commercial paper		1,882.1			1,731.6		1,011.1			1,975.0
Medium-term notes		5,136.9			4,884.4		6,136.0			5,535.2
Deferred taxes and other liabilities		650.2			638.3		658.2			694.2

TOTAL LIABILITIES		8,118.0			7,626.9		8,205.8			8,675.4

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		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		14.5			14.5
Additional paid-in capital		139.1			133.9		146.4			140.9
Retained earnings		1,547.1			1,488.2		1,626.2			1,591.4
Accumulated other comprehensive (loss) income		(9.0	)		.8
Accumulated other comprehensive loss							(30.9	)		(12.4	)

TOTAL STOCKHOLDER'S EQUITY		1,722.7			1,668.4		1,787.2			1,765.4

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	9,840.7		$	9,295.3	$	9,993.0		$	10,440.8

STATEMENTS OF CASH FLOWS (Unaudited)	Six Months Ended						Six Months Ended
	June 30						June 30
(Millions of Dollars)	2019			2018				2020		2019
OPERATING ACTIVITIES
Net income	$	58.9		$	40.2		$	38.3		$	58.9
Items included in net income not affecting cash:
Depreciation and amortization		154.8			174.6			172.7			154.8
Provision for losses on receivables		4.1			3.8			13.2			4.1
Deferred taxes		14.3			5.7			(19.4	)		14.3
Administrative fees for services from PACCAR		5.2			6.1			5.5			5.2
Change in tax-related balances with PACCAR		11.3			137.6			36.1			11.3
Increase in payables and other		37.1			54.5
(Decrease) increase in payables and other								(158.7	)		37.1

NET CASH PROVIDED BY OPERATING ACTIVITIES		285.7			422.5			87.7			285.7

INVESTING ACTIVITIES
Finance and other receivables originated		(1,193.2	)		(1,106.3	)		(986.8	)		(1,193.2	)
Collections on finance and other receivables		924.2			847.5			901.1			924.2
Net increase in wholesale receivables		(322.8	)		(92.6	)
Net decrease (increase) in wholesale receivables								519.5			(322.8	)
Loans to PACCAR and affiliates		(110.0	)		(156.0	)		(210.0	)		(110.0	)
Collections on loans from PACCAR and affiliates		152.0			150.5			70.0			152.0
Net decrease (increase) in other receivables and leases to PACCAR and affiliates		4.0			(52.6	)
Net decrease in other receivables to PACCAR and affiliates								26.5			4.0
Acquisition of equipment for operating leases		(222.0	)		(179.8	)		(142.5	)		(222.0	)
Proceeds from disposal of equipment		94.5			138.3			59.9			94.5
Other		(45.7	)		(26.6	)		20.3			(45.7	)

NET CASH USED IN INVESTING ACTIVITIES		(719.0	)		(477.6	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES								258.0			(719.0	)

FINANCING ACTIVITIES
Net increase (decrease) in short-term commercial paper		150.6			(127.0	)
Net (decrease) increase in short-term commercial paper								(1,024.2	)		150.6
Proceeds from medium-term notes and other commercial paper		997.1			946.5			1,075.0			997.1
Payments of medium-term notes and other commercial paper		(750.0	)		(800.0	)		(420.0	)		(750.0	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		397.7			19.5
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES								(369.2	)		397.7

NET DECREASE IN CASH		(35.6	)		(35.6	)		(23.5	)		(35.6	)

CASH AT BEGINNING OF PERIOD		74.8			62.7			53.3			74.8

CASH AT END OF PERIOD	$	39.2		$	27.1		$	29.8		$	39.2

STATEMENTS OF STOCKHOLDER'S EQUITY (Unaudited)	Three Months ended						Six Months Ended
	June 30						June 30
(Millions of Dollars)		2020		2019				2020		2019
PREFERRED STOCK, $100 par value

Balance at beginning of period	$	31.0		$	31.0		$	31.0		$	31.0
Balance at end of period		31.0			31.0			31.0			31.0

COMMON STOCK, $100 par value

Balance at beginning of period		14.5			14.5			14.5			14.5
Balance at end of period		14.5			14.5			14.5			14.5

ADDITIONAL PAID-IN CAPITAL

Balance at beginning of period		146.0			138.2			140.9			133.9
Investments from PACCAR		.4			.9			5.5			5.2
Balance at end of period		146.4			139.1			146.4			139.1

RETAINED EARNINGS

Balance at beginning of period		1,605.8			1,517.8			1,591.4			1,488.2
Net income		20.4			29.3			38.3			58.9
Cumulative effect of change in accounting principle								(3.5	)
Balance at end of period		1,626.2			1,547.1			1,626.2			1,547.1

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated unrealized net (loss) gain on derivative contracts:
Balance at beginning of period		(30.0	)		(3.0	)		(12.4	)		.8
Net unrealized loss		(.9	)		(6.0	)		(18.5	)		(9.8	)
Balance at end of period		(30.9	)		(9.0	)		(30.9	)		(9.0	)

TOTAL STOCKHOLDER'S EQUITY	$	1,787.2		$	1,722.7		$	1,787.2		$	1,722.7

See Notes to Financial Statements.

STATEMENTS OF STOCKHOLDER'S EQUITY (Unaudited)

Six Months Ended

June 30

(Millions of Dollars)

2019

2018

PREFERRED STOCK, $100 par value

Balance at beginning of period

$
31.0

$
31.0

Balance at end of period

31.0

31.0

COMMON STOCK, $100 par value

Balance at beginning of period

14.5

14.5

Balance at end of period

14.5

14.5

ADDITIONAL PAID-IN CAPITAL

Balance at beginning of period

133.9

126.8

Investments from PACCAR

5.2

6.1

Balance at end of period

139.1

132.9

RETAINED EARNINGS

Balance at beginning of period

1,488.2

1,396.1

Net income

58.9

40.2

Balance at end of period

1,547.1

1,436.3

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated unrealized net gain (loss) on derivative contracts:

Balance at beginning of period

.8

1.9

Net unrealized (loss) income

(9.8
)

3.9

Balance at end of period

(9.0
)

5.8

TOTAL STOCKHOLDER'S EQUITY

$
1,722.7

$
1,620.5

See Notes to Financial Statements.

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.

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-02,~~ ~~Leases~~

~~(Topic 842)~~, including subsequently issued ASUs to clarify the implementation guidance in ASU 2016-02. Under the new lease standard, lessees will recognize a right-of-use asset and a lease liability for virtually all leases (other than short-term leases). Lessor accounting is largely unchanged, except for a reduction in the capitalization of certain initial direct costs and the classification of certain cash flows. This ASU may be applied retrospectively in each reporting period presented or modified retrospectively with the cumulative effective adjustment to the opening balance of retained earnings. The Company adopted this ASU on January 1, 2019 on a modified retrospective basis and recognized a $2.4 right-of-use asset and a $2.5 lease liability on its balance sheet as of June 30, 2019.

The Company elected the package of practical expedients for its leases existing prior to the adoption of this ASU that will retain prior conclusions about lease identification, lease classification and initial direct costs under the new standard. For lessee accounting, the Company elected the short-term lease exemption to not recognize right-of-use assets and lease liabilities for any leases with a duration of twelve months or less. For lessor accounting, the Company elected to exclude taxes collected from customers, such as sales and use and value added, from the measurement of lease income and expense.

~~The new standard requires lessors within the scope of ASC 942,~~ ~~Financial Services – Depository and Lending~~, to classify principal payments received from sales-type and direct financing leases in investing activities in the statement of cash flows. The Company continues to present cash receipts from finance leases as an investing cash inflow.

The Company offers finance lease and operating lease contracts to retail customers and dealers. The Company accounts for lease and non-lease components of the contract separately based on the relative stand-alone price of each component. Most of the Company’s finance 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 lease term. Under an operating lease, the lessee has the option to return the equipment to the Company or purchase the equipment at its fair market value at the end of the lease term. The Company determines its estimate of the residual value of leased vehicles by considering the length of the lease term, the truck model, the expected usage of the truck and anticipated market demand. Residual values are reviewed regularly and adjusted if market conditions warrant.

~~In June 2016, the FASB issued ASU~~ 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, including subsequently issued ASUs to clarify the implementation guidance in ASU 2016-13. The amendment introduces new guidance for credit losses on financial assets measured at amortized cost, including finance receivables and trade ~~receivables and held-to-maturity debt securities.~~receivables. Under this new model, expected credit losses ~~will be~~are based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability, replacing the ~~current~~previous incurred loss model. The ASU is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. ~~Early adoption is permitted. This amendment should be applied~~The Company adopted this ASU on January 1, 2020 on a modified retrospective basis as required, with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption.

The ~~Company does not expect~~cumulative effect of the changes made to the Company’s Balance Sheet on January 1, 2020 for the adoption of ~~this~~ ASU 2016-13 was as follows:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional guidance to ~~have~~ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period and will be in effect for a ~~material~~limited time through December 31, 2022. Adoption is permitted at any time. The Company is currently evaluating the impact on its ~~financial statements.~~

~~The FASB also issued the following standards, which are not expected to have a material impact on the Company’s~~ financial statements.

The Company adopted the following standards on January 1, 2020, which had no material impact on the Company’s financial statements.

	June 30			December 31			June 30			December 31
	2019			2018				2020		2019
Retail loans	$	3,591.9		$	3,372.3		$	3,843.6		$	3,774.3
Retail financing leases		1,447.4			1,428.6			1,445.5			1,492.7
Dealer wholesale financing		1,501.8			1,179.0			1,247.2			1,766.7
Dealer master notes		75.5			52.9			123.0			88.7
Operating lease receivables and other		67.1			66.7			71.9			65.0
		6,683.7			6,099.5			6,731.2			7,187.4

Less allowance for credit losses:
Loans and leases		(58.3	)		(56.1	)		(64.5	)		(57.0	)
Dealer wholesale financing		(3.2	)		(3.1	)		(1.5	)		(1.9	)
Operating lease receivables and other		(1.9	)		(1.5	)		(1.9	)		(1.8	)
	$	6,620.3		$	6,038.8		$	6,663.3		$	7,126.7

~~Annual minimum payments due~~Included in Finance and other receivables, net of allowance for credit losses, on ~~finance leases~~the Balance Sheets is accrued interest receivable, net of allowance for credit losses, of $23.1 and ~~a reconciliation~~$18.3 as of ~~the undiscounted cash flows to the net investment in finance leases are as follows:~~June 30, 2020 and December 31, 2019, respectively.

Interest income recognized on finance leases was ~~$15.9~~$16.2 and ~~$31.9~~$32.7 for the three and six months ended June 30, ~~2019, respectively.~~2020, respectively, compared to $15.9 and $31.9 for the same periods in 2019. 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, 0 finance receivables more than 90 days past due were accruing interest at June 30, ~~2019~~2020 or December 31, ~~2018.~~2019. 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 on non-accrual status are applied to interest and principal in accordance with the contractual terms.

The Company continuously monitors the payment performance of 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.

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 a loan or finance lease for credit reasons and grants a concession, the modification is classified as a troubled debt restructuring (TDR). 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. In accordance with FASB statement, Prudential Regulator Guidance Concerning Troubled Debt Restructurings, issued on March 22, 2020, short-term modifications granted to customers were not considered TDRs if they were not past-due and were seeking to manage their liquidity needs because of the effects of the COVID-19 pandemic.

On average, modifications extended contractual terms by approximately three months in 2020 and four months in ~~both~~ 2019, ~~and 2018,~~ and did not have a significant effect on the weighted average term or interest rate of the total portfolio at June 30, ~~2019 or~~2020 and December 31, ~~2018.~~2019.

The Company has developed a systematic methodology for determining the allowance for credit losses for its 2 portfolio segments, retail and wholesale. The retail segment consists of retail loans and 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 periodic reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and, in many cases, obtains 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 that 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 generally 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,~~amortized cost basis, 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 and economic forecasts discussed below.

The Company evaluates finance receivables that are not individually impaired and share similar risk characteristics on a collective basis 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~~conditions, and expected changes in future macroeconomic conditions that affect collectability. Historical credit loss information provides relevant information of expected credit losses. The historical information used includes assumptions regarding the likelihood of collecting current and past due accounts, repossession rates, and 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~~of 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. Adjustments to historical loss information are made for changes in forecasted economic conditions that are specific to the industry and market in which the Company conducts business. The Company utilizes economic forecasts from third party sources and determines expected losses based on historical experience under similar market conditions. After determining the appropriate level of the allowance for credit losses, a provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of ~~incurred~~expected 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 sold individually, which is the lowest unit of account, 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, which generally occurs 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 a partial charge-off. The charge-off is determined by comparing the fair value of the collateral, less ~~cost~~costs to sell, to the ~~recorded investment.~~amortized cost basis.

For the following credit quality disclosures, finance receivables are classified into 2 portfolio segments, wholesale and retail. The retail portfolio is further segmented into dealer retail and customer retail. The dealer wholesale segment consists of truck inventory financing to PACCAR dealers. 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 customer retail segment consists of loans and leases directly to customers for the acquisition of commercial vehicles and related equipment. Customer retail receivables are further segregated between fleet and owner/operator classes. The fleet class consists of retail accounts of customers operating more than five trucks. All other customer retail accounts are considered owner/operator. These two classes have similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk.

Information regarding finance receivables evaluated and the associated allowances determined individually and collectively is as follows:

Dealer

Customer

At June 30, 2019

Wholesale

Retail

Retail

Total

Recorded investment for impaired finance receivables evaluated
individually

$
32.1

$
32.1

Allowance for impaired finance receivables determined
individually

$
4.1

$
4.1

Recorded investment for finance receivables evaluated collectively

$
1,501.8

$
1,313.0

$
3,769.7

$
6,584.5

Allowance for finance receivables determined collectively

$
3.2

$
8.1

$
46.1

$
57.4

	Dealer				Customer
At June 30, 2020	Wholesale		Retail		Retail		Total
Amortized cost basis for impaired finance receivables evaluated individually					$	32.5	$	32.5
Allowance for impaired finance receivables determined individually					$	1.2	$	1.2
Amortized cost basis for finance receivables evaluated collectively	$	1,247.2	$	1,403.8	$	3,975.8	$	6,626.8
Allowance for finance receivables determined collectively	$	1.5	$	7.9	$	55.4	$	64.8

Dealer

Customer

At December 31, 2018

Wholesale

Retail

Retail

Total

Recorded investment for impaired finance receivables evaluated
individually

$
15.4

$
15.4

Allowance for impaired finance receivables determined
individually

$
2.1

$
2.1

Recorded investment for finance receivables evaluated collectively

$
1,179.0

$
1,256.1

$
3,582.3

$
6,017.4

Allowance for finance receivables determined collectively

$
3.1

$
8.4

$
45.6

$
57.1

	Dealer				Customer
At December 31, 2019	Wholesale		Retail		Retail		Total
Amortized cost basis for impaired finance receivables evaluated individually					$	25.2	$	25.2
Allowance for impaired finance receivables determined individually					$	2.3	$	2.3
Amortized cost basis for finance receivables evaluated collectively	$	1,766.7	$	1,411.4	$	3,919.1	$	7,097.2
Allowance for finance receivables determined collectively	$	1.9	$	7.9	$	46.8	$	56.6

The ~~recorded investment~~amortized cost basis for finance receivables that are on non-accrual status is as follows:

	June 30		December 31		June 30		December 31
	2019		2018			2020	2019
Fleet	$	29.7	$	12.1	$	29.2	$	21.8
Owner/operator		2.4		3.3		3.3		3.4

	$	32.1	$	15.4	$	32.5	$	25.2

Impaired loans are summarized below. The impaired loans with a specific reserve represent the unpaid principal balance. The ~~recorded investment~~amortized cost basis of impaired loans as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 was not significantly different than the unpaid principal balance.

	Dealer			Customer Retail
							Owner/
At June 30, 2020	Wholesale		Retail	Fleet			Operator			Total
Impaired loans with a specific reserve				$	19.0		$	2.7		$	21.7
Associated allowance					(.6	)		(.5	)		(1.1	)

Net carrying amount of impaired loans with a specific reserve					18.4			2.2			20.6
Impaired loans with no specific reserve					5.8			.4			6.2

Net carrying amount of impaired loans				$	24.2		$	2.6		$	26.8

Average amortized cost basis for impaired loans*	$	4.9		$	15.8		$	2.8		$	23.5

Dealer

Customer Retail

Owner/

At June 30, 2019

Wholesale

Retail

Fleet

Operator

Total

Impaired loans with a specific reserve

$
5.8

$
2.1

$
7.9

Associated allowance

(1.2
)

(.5
)

(1.7
)

Net carrying amount of impaired loans with a specific reserve

4.6

1.6

6.2

Impaired loans with no specific reserve

3.4

.2

3.6

Net carrying amount of impaired loans

$
8.0

$
1.8

$
9.8

Average recorded investment for impaired loans*

$
13.3

$
2.7

$
16.0

*	Represents the average during the 12 months ended June 30, 2020

	Dealer		Customer Retail
						Owner/
At December 31, 2019	Wholesale	Retail	Fleet			Operator			Total
Impaired loans with a specific reserve			$	4.6		$	2.9		$	7.5
Associated allowance				(.9	)		(.6	)		(1.5	)

Net carrying amount of impaired loans with a specific reserve				3.7			2.3			6.0
Impaired loans with no specific reserve				6.7			.4			7.1

Net carrying amount of impaired loans			$	10.4		$	2.7		$	13.1

Average amortized cost basis for impaired loans*			$	13.3		$	2.7		$	16.0

Dealer

Customer Retail

Owner/

At December 31, 2018

Wholesale

Retail

Fleet

Operator

Total

Impaired loans with a specific reserve

$
5.7

$
2.9

$
8.6

Associated allowance

(1.0
)

(.9
)

(1.9
)

Net carrying amount of impaired loans with a specific reserve

4.7

2.0

6.7

Impaired loans with no specific reserve

4.4

.3

4.7

Net carrying amount of impaired loans

$
9.1

$
2.3

$
11.4

Average recorded investment for impaired loans*

$
21.5

$
1.5

$
23.0

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

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30				June 30				June 30				June 30
	2019		2018		2019		2018		2020		2019		2020		2019
Fleet	$	.1	$	.3	$	.3	$	.6	$	.4	$	.1	$	.7	$	.3
Owner/operator		.1		.1		.1		.1		.1		.1		.1		.1
	$	.2	$	.4	$	.4	$	.7	$	.5	$	.2	$	.8	$	.4

The Company's customers are principally concentrated in the transportation industry in the United States. The Company’s portfolio assets are diversified over a large number of customers and dealers with no single customer or dealer balance representing over 10% of the total portfolio assets as of June 30, ~~2019~~2020 or December 31, ~~2018.~~2019. 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 ratings, 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 there is 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 ~~tables~~table below ~~summarize~~summarizes the amortized cost basis of the Company’s finance receivables bywithin each credit quality indicator by year of origination and portfolio class.

	Dealer				Customer Retail
							Owner/
At June 30, 2019	Wholesale		Retail		Fleet		Operator		Total
At June 30, 2020											2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
Dealer:
Wholesale:
Performing	$	1,500.8	$	1,313.0	$	3,249.9	$	478.5	$	6,542.2													$	1,196.3	$	1,196.3
Watch		1.0				40.6		.7		42.3														50.9		50.9
At-risk						29.7		2.4		32.1
	$	1,501.8	$	1,313.0	$	3,320.2	$	481.6	$	6,616.6													$	1,247.2	$	1,247.2
Retail:
Performing											$	200.3	$	455.5	$	274.8	$	167.9	$	101.0	$	175.5	$	7.9	$	1,382.9
Watch												2.2		11.3		5.9		1.5								20.9
At-risk
											$	202.5	$	466.8	$	280.7	$	169.4	$	101.0	$	175.5	$	7.9	$	1,403.8
Total Dealer											$	202.5	$	466.8	$	280.7	$	169.4	$	101.0	$	175.5	$	1,255.1	$	2,651.0

Customer Retail:
Fleet:
Performing											$	653.0	$	1,313.1	$	755.0	$	381.3	$	219.2	$	98.5			$	3,420.1
Watch												2.7		10.8		15.6		13.5		1.0		.9				44.5
At-risk												.3		10.1		9.8		4.8		3.1		1.2				29.3
											$	656.0	$	1,334.0	$	780.4	$	399.6	$	223.3	$	100.6			$	3,493.9
Owner/Operator:
Performing											$	104.1	$	187.4	$	118.4	$	57.6	$	30.6	$	11.6			$	509.7
Watch												.1		.2		.7		.3		.1		.1				1.5
At-risk												.2		.2		1.1		.6		.4		.7				3.2
											$	104.4	$	187.8	$	120.2	$	58.5	$	31.1	$	12.4			$	514.4
Total Customer Retail											$	760.4	$	1,521.8	$	900.6	$	458.1	$	254.4	$	113.0			$	4,008.3
Total											$	962.9	$	1,988.6	$	1,181.3	$	627.5	$	355.4	$	288.5	$	1,255.1	$	6,659.3

The tables below summarize the amortized cost basis of 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~~substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

	Dealer				Customer Retail						Dealer				Customer Retail
							Owner/										Owner/
At June 30, 2019	Wholesale		Retail		Fleet		Operator		Total
At June 30, 2020											Wholesale		Retail		Fleet		Operator		Total
Current and up to 30 days past due	$	1,501.8	$	1,313.0	$	3,292.5	$	479.6	$	6,586.9	$	1,247.2	$	1,403.8	$	3,484.2	$	511.2	$	6,646.4
31 – 60 days past due						6.9		.9		7.8						3.4		1.2		4.6
Greater than 60 days past due						20.8		1.1		21.9						6.3		2.0		8.3
	$	1,501.8	$	1,313.0	$	3,320.2	$	481.6	$	6,616.6	$	1,247.2	$	1,403.8	$	3,493.9	$	514.4	$	6,659.3

	Dealer				Customer Retail						Dealer				Customer Retail
							Owner/										Owner/
At December 31, 2018	Wholesale		Retail		Fleet		Operator		Total
At December 31, 2019											Wholesale		Retail		Fleet		Operator		Total
Current and up to 30 days past due	$	1,179.0	$	1,256.1	$	3,088.4	$	502.8	$	6,026.3	$	1,766.7	$	1,411.4	$	3,425.2	$	496.2	$	7,099.5
31 – 60 days past due						3.0		1.4		4.4						10.4		2.5		12.9
Greater than 60 days past due						1.1		1.0		2.1						9.0		1.0		10.0
	$	1,179.0	$	1,256.1	$	3,092.5	$	505.2	$	6,032.8	$	1,766.7	$	1,411.4	$	3,444.6	$	499.7	$	7,122.4

The balance of TDRs was ~~$5.7~~$23.0 at June 30, ~~2019~~2020 and ~~$7.8~~$3.2 at December 31, ~~2018.~~2019. At modification date, the pre-modification and post-modification ~~recorded investment~~amortized cost basis balances for finance receivables modified during the periods by portfolio class are as follows:

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30, 2018				June 30, 2018				June 30, 2020				June 30, 2020
	Recorded Investment				Recorded Investment				Amortized cost basis				Amortized cost basis
	Pre-Modification		Post-Modification		Pre-Modification		Post-Modification		Pre-Modification		Post-Modification		Pre-Modification		Post-Modification
Fleet	$	2.9	$	2.9	$	3.0	$	3.0	$	.5	$	.5	$	22.0	$	22.0
Owner/operator										.5		.5		.6		.6
	$	2.9	$	2.9	$	3.0	$	3.0	$	1.0	$	1.0	$	22.6	$	22.6

The effect on the allowance for credit losses from such modifications was not significant at June 30, ~~2019~~2020 and ~~2018.~~2019.

The post-modification ~~recorded investment~~amortized cost basis of finance receivables modified as TDRs during the previous twelve months that subsequently defaulted (i.e., became more than 30 days past due) during the periods by portfolio class are as follows:

There were 0 finance receivables modified as TDRs in the last twelve months that subsequently defaulted and were charged off in the six months ended June 30, ~~2019~~2020 and ~~2018.~~2019.

When the Company determines that 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.~~leases. The Company records the vehicles as used truck inventory included in Other assets on the Balance Sheets. The balance of repossessed units was ~~$1.0~~$8.7 at June 30,~~, 2019~~ 2020 and ~~$1.6~~$7.8 at December 31, ~~2018.~~2019.

Proceeds from the sales of repossessed assets were ~~$7.5~~$16.2 and ~~$9.3~~$7.5 for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, 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 rental expenses on the Statements of Comprehensive Income and Retained Earnings.

Terms of operating leases at origination and the related depreciation, generally range from three to five years. The total future annual minimum rental payments to be received for equipment on non-cancelable operating leases beginning July 1, 2019 of $728.4 are due as follows: $149.2 in remainder of 2019, $248.8 in 2020, $181.4 in 2021, $102.8 in 2022, and $36.5 in 2023 and $9.7 thereafter. Depreciation expense related to equipment on operating leases was $73.3 and $146.6 for the three and six months ended June 30, 2019, respectively, compared to $82.2 and $166.0 for the same periods in 2018. Substantially all equipment on operating leases is manufactured by PACCAR.

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 earnings 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 six months ended June 30, ~~2019~~2020 and full year ~~2018~~2019 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, Australia and ~~Australia.~~Brasil. Loans to these foreign affiliates during ~~2019~~2020 and ~~2018~~2019 were denominated in United States dollars. The foreign affiliates primarily provide financing and leasing of PACCAR manufactured trucks and related equipment sold through the DAF, Kenworth and Peterbilt independent dealer networks in Europe, Mexico, Canada, Australia and ~~Australia.~~Brasil. The Company will not make aggregate loans to the foreign affiliates in excess of the equivalent of $750.0 U.S. 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.

Amounts outstanding at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, including balances with foreign finance affiliates operating in the United Kingdom, the Netherlands, Mexico, Canada, Australia and ~~Australia,~~Brasil, are summarized below:

	June 30		December 31		June 30		December 31
	2019		2018			2020	2019
Due from PACCAR and affiliates
Loans due from PACCAR	$	854.0	$	846.0	$	986.0	$	861.0
Loans due from foreign finance affiliates		643.5		697.5		640.0		651.5
Tax-related receivable due from PACCAR		11.8		23.1				16.5
Receivables		16.2		14.7		27.8		28.2

	$	1,525.5	$	1,581.3	$	1,653.8	$	1,557.2

Due to PACCAR and affiliates
Tax-related payable due to PACCAR					$	19.6
Payables	$	35.0	$	9.9		27.1	$	13.9

	$	35.0	$	9.9	$	46.7	$	13.9

The Company is included in the consolidated federal income tax return of PACCAR. The tax-related receivable due from PACCAR represents the related tax benefit to be settled with PACCAR.

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.

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 4 facilities leased by PACCAR. Lease payments for the use of these facilities are included in the above-mentioned administrative services charged 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 on the balance sheet 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 are included in selling, general and administrative expenses.

The Company’s 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 benefits are based on the actual contribution made on behalf of the participating employees and are included in selling, general and administrative expenses.

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.

	Three Months Ended					Six Months Ended					Three Months Ended						Six Months Ended
	June 30					June 30					June 30						June 30
	2019			2018		2019			2018			2020		2019				2020		2019
Net income	$	29.3		$	19.8	$	58.9		$	40.2	$	20.4		$	29.3		$	38.3		$	58.9
Other comprehensive (loss) income
Derivative contracts (decrease) increase		(6.0	)		1.4		(9.8	)		3.9
Other comprehensive loss
Derivative contracts decrease												(.9	)		(6.0	)		(18.5	)		(9.8	)
Total comprehensive income	$	23.3		$	21.2	$	49.1		$	44.1	$	19.5		$	23.3		$	19.8		$	49.1

Accumulated other comprehensive loss (AOCL) of ~~$9.0~~$30.9 and ~~income of $.8~~$12.4 at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, is comprised of the unrealized net ~~(loss) gain~~loss on derivative contracts, net of taxes. Changes in and reclassifications out of AOCL during the periods are as follows:

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30						June 30						June 30						June 30
	2019			2018			2019			2018				2020		2019				2020		2019
Balance at beginning of period	$	(3.0	)	$	4.4		$	.8		$	1.9		$	(30.0	)	$	(3.0	)	$	(12.4	)	$	.8
Amounts recorded in AOCL
Unrealized (loss) gain on derivative contracts		(7.3	)		2.3			(11.6	)		5.8
Unrealized loss on derivative contracts														(3.4	)		(7.3	)		(27.6	)		(11.6	)
Income tax effect		1.8			(.6	)		2.9			(1.5	)		.9			1.8			6.8			2.9
Amounts reclassified out of AOCL
Interest and other borrowing costs		(.6	)		(.5	)		(1.4	)		(.6	)		2.1			(.6	)		3.0			(1.4	)
Income tax effect		.1			.2			.3			.2			(.5	)		.1			(.7	)		.3

Net other comprehensive (loss) income		(6.0	)		1.4			(9.8	)		3.9
Net other comprehensive loss														(.9	)		(6.0	)		(18.5	)		(9.8	)

Balance at end of period	$	(9.0	)	$	5.8		$	(9.0	)	$	5.8		$	(30.9	)	$	(9.0	)	$	(30.9	)	$	(9.0	)

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.

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 indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.

There were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, ~~2019.~~2020. 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. The Company’s assets and liabilities subject to fair value measurements are as follows:

	June 30		December 31		June 30		December 31
Level 2	2019		2018			2020	2019
Assets:
Impaired loans, net of specific reserves (2019 - $.3 and 2018 - $.6)	$	1.3	$	2.5
Used trucks held for sale		36.5		40.5	$	152.0	$	121.9
Derivative contracts		2.5		4.1		2.6		1.8

Liabilities:
Derivative contracts	$	13.4	$	5.3	$	37.8	$	12.7

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 that are individually evaluated are generally considered collateral dependent. Accordingly, the evaluation of individual reserves on such loans 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 June 30, 2020 and 2019 were $13.4 and ~~2018 were~~ $3.6 ~~and $6.6~~ during the first six months of ~~2019~~2020 and ~~2018,~~2019, respectively. 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.

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 cash which is categorized as Level 1 and fixed rate loans which are categorized as Level 3.

Net Receivables: For floating rate loans, dealer wholesale financings and operating lease and other trade 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 assumptions regarding the credit and ~~liquidity~~market risks to approximate current rates for comparable loans. Finance lease receivables and related allowance for credit losses have been excluded from the accompanying table.

Commercial Paper and Medium-Term Notes: The carrying amounts of the Company’s commercial paper and variable medium-term notes approximate fair value. For fixed rate debt, fair values are estimated using the income approach by discounting cash flows to their present value based on current rates for comparable debt.

The Company’s estimate of fair value for fixed rate loans and debt that are not carried at fair value was as follows:

	June 30, 2019				December 31, 2018				June 30, 2020				December 31, 2019
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value		Amount		Value		Amount		Value
Assets:
Due from PACCAR	$	814.0	$	821.5	$	821.0	$	815.2	$	946.0	$	981.8	$	821.0	$	833.9
Due from foreign finance affiliates		472.0		481.8		472.0		474.2		450.0		461.8		450.0		458.1
Fixed rate loans		3,478.7		3,513.2		3,239.5		3,234.4		3,735.6		3,876.0		3,667.8		3,725.8

Liabilities:
Fixed rate debt	$	4,447.1	$	4,495.3	$	4,394.4	$	4,363.2	$	5,398.4	$	5,586.8	$	4,797.1	$	4,848.3

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 fair value of borrowings. Net amounts paid or received are reflected as adjustments to interest expense.

At June 30, ~~2019,~~2020, the notional amount of these contracts totaled ~~$1,087.1~~$1,073.9 with amounts expiring over the next ~~nine~~8.0 years. Notional maturities for all interest-rate contracts are ~~$100.0~~$165.0 for the remainder of ~~2019, $190.0 for~~ 2020, $327.1 for 2021, ~~$249.6~~$399.6 for 2022, ~~$31.5~~$41.1 for 2023, $60.0 for 2024 and ~~$188.9~~$81.1 thereafter.

The following table presents the balance sheet classification, fair value and gross and net amounts of derivative financial instruments:

	June 30, 2019						December 31, 2018						June 30, 2020						December 31, 2019
Interest-rate contracts:	Assets			Liabilities			Assets			Liabilities			Assets			Liabilities			Assets			Liabilities
Other assets	$	2.5					$	4.1					$	2.6					$	1.8
Accounts payable, accrued expenses and other				$	13.4					$	5.3					$	37.8					$	12.7
Gross amounts recognized in Balance Sheets		2.5			13.4			4.1			5.3			2.6			37.8			1.8			12.7

Less amounts not offset in financial instruments		(1.5	)		(1.5	)		(2.4	)		(2.4	)		(1.4	)		(1.4	)		(.9	)		(.9	)
Pro-forma net amount	$	1.0		$	11.9		$	1.7		$	2.9
Pro forma net amount													$	1.2		$	36.4		$	.9		$	11.8

Certain of the Company’s interest-rate contracts have been designated as cash flow hedges. Changes in the fair value of derivatives designated as cash flow hedges are recorded in Accumulated Other Comprehensive Income (AOCI). The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is 98.0 years.

Amounts in AOCI are reclassified into net income in the same period in which the hedged transaction affects earnings and are presented in the same income statement line as the earnings effect of the hedged transaction. The amount of loss recorded in AOCI at June 30, ~~2019~~2020 that is estimated to be reclassified to interest expense in the following 12 months if interest rates remain unchanged is approximately ~~$.8,~~$10.4, net of taxes. 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.

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. ~~As of June 30, 2019,~~The following table presents the ~~following~~ amounts ~~were~~ recorded on the Balance Sheets related to cumulative basis adjustments for fair value hedges:

The above table excludes the cumulative basis adjustments on discontinued hedge relationships of ~~$(2.0)~~$(1.0) and $(1.5) as of June 30, ~~2019.~~2020 and December 31, 2019, respectively.

The following table presents the amount of expense (income) ~~expense~~ on cash flow and fair value hedges recognized in Interest and other borrowing costs on the Statements of Comprehensive Income and Retained Earnings:

The Company’s effective income tax rate for the second quarter and first half of ~~2019~~2020 was ~~25.8%~~24.4% and ~~24.8%~~24.5%, respectively, compared to ~~25.3%~~25.8% and ~~24.3%~~24.8% for the same periods in ~~2018,~~2019, reflecting ~~higher~~lower state tax expense in ~~2019~~2020 compared to ~~2018.~~2019.

The Company is included in the consolidated federal income tax return of PACCAR. Federal income taxes for the Company are determined on a separate return basis. 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.

	Three Months Ended							Six Months Ended
	June 30							June 30
		2020	2019		% Change				2020	2019		% Change
New business volume by product:
Retail loans and finance leases	$	441.6	$	632.5		(30	)	$	914.2	$	1,087.8		(16	)
Equipment on operating leases		57.7		166.8		(65	)		159.8		259.0		(38	)
Dealer master notes		20.5		35.5		(42	)		63.0		71.0		(11	)

	$	519.8	$	834.8		(38	)	$	1,137.0	$	1,417.8		(20	)
Average earning assets by product:
Retail loans and finance leases	$	5,278.1	$	4,950.6		7		$	5,270.3	$	4,893.0		8
Equipment on operating leases		1,412.9		1,481.1		(5	)		1,438.9		1,478.7		(3	)
Dealer wholesale financing		1,413.2		1,462.1		(3	)		1,590.2		1,334.7		19
Dealer master notes		119.3		67.0		78			104.3		61.7		69

	$	8,223.5	$	7,960.8		3		$	8,403.7	$	7,768.1		8
Revenue by product:
Retail loans and finance leases	$	70.9	$	71.4		(1	)	$	143.7	$	139.8		3
Equipment on operating leases		92.1		96.8		(5	)		188.9		196.1		(4	)
Dealer wholesale financing		9.0		14.4		(38	)		23.6		26.1		(10	)
Dealer master notes		1.0		.8		25			1.9		1.4		36
Used truck sales, other revenues and fees		8.3		5.7		46			15.7		9.7		62

	$	181.3	$	189.1		(4	)	$	373.8	$	373.1

Income before income taxes	$	27.0	$	39.5		(32	)	$	50.7	$	78.3		(35	)

Three Months Ended

Six Months Ended

June 30

June 30

2019

2018

%
Change

2019

2018

%
Change

New business volume by product:

Retail loans and finance leases

$
632.5

$
544.0

16

$
1,087.8

$
959.4

13

Equipment on operating leases

166.8

119.5

40

259.0

194.1

33

Dealer master notes

35.5

69.8

(49
)

71.0

131.6

(46
)

$
834.8

$
733.3

14

$
1,417.8

$
1,285.1

10

Average earning assets by product:

Retail loans and finance leases

$
4,950.6

$
4,438.9

12

$
4,893.0

$
4,385.3

12

Equipment on operating leases

1,481.1

1,569.9

(6
)

1,478.7

1,590.7

(7
)
Dealer wholesale financing

1,462.1

1,022.6

43

1,334.7

983.3

36

Dealer master notes

67.0

21.9

206

61.7

22.1

179

$
7,960.8

$
7,053.3

13

$
7,768.1

$
6,981.4

11

Revenue by product:

Retail loans and finance leases

$
71.4

$
55.8

28

$
139.8

$
108.8

28

Equipment on operating leases

96.8

102.2

(5
)

196.1

203.7

(4
)
Dealer wholesale financing

14.4

8.7

66

26.1

16.3

60

Dealer master notes

.8

.2

300

1.4

.4

250

Used truck sales, other revenues and fees

5.7

8.1

(30
)

9.7

16.3

(40
)

$
189.1

$
175.0

8

$
373.1

$
345.5

8

Income before income taxes

$
39.5

$
26.5

49

$
78.3

$
53.1

47

New business volume from retail loans and finance leases in the second quarter and first half of ~~2019 increased~~2020 decreased to $441.6 and $914.2, respectively, from $632.5 and $1,087.8 ~~respectively, from $544.0 and $959.4~~ in the second quarter and first half of ~~2018~~2019 due to ~~higher retail~~lower sales of PACCAR trucks in ~~2019.~~2020. Equipment on operating leases new business volume ~~increased~~decreased to $57.7 and $159.8 in the second quarter and first half of 2020, respectively, from $166.8 and $259.0 in the second quarter and first half of 2019, ~~respectively, from $119.5~~primarily due to lower fleet business in 2020. Dealer master notes new business volume decreased to $20.5 and ~~$194.1~~$63.0 in the second quarter and first half of ~~2018, primarily due to higher fleet business in 2019. Dealer master notes new business volume decreased to~~2020, respectively, from $35.5 and $71.0 in the second quarter and first half of 2019 ~~respectively, from $69.8 and $131.6 in the second quarter and first half of 2018~~ due to decreased finance volume from dealers.

In the second quarter and first half of ~~2019,~~2020, market share on new PACCAR truck sales ~~was~~increased to 24.9% and 22.9% from 21.4% and 19.9% ~~compared to 21.9% and 20.4%~~ in the second quarter and first half of ~~2018,~~2019, respectively.

The Company’s income before income taxes was $27.0 for the second quarter of 2020 compared to $39.5 for the second quarter of ~~2019 compared to $26.5 for the second quarter of 2018.~~2019. The ~~increase~~decrease in income before income taxes in ~~2019~~2020 was primarily the result of ~~higher finance margin of $8.5 and higher~~lower operating lease margin of ~~$3.7.~~$11.0, lower finance margin of $1.9 and higher provision for losses $1.8, partially offset by lower selling, general and administrative expenses (SG&A) of $3.3.

The Company’s income before income taxes was $50.7 for the first half of 2020 compared to $78.3 for the first half of ~~2019 compared to $53.1 for the first half of 2018.~~2019. The ~~increase~~decrease in income before income taxes in ~~2019~~2020 was primarily the result of ~~higher finance margin of $15.3 and higher~~lower operating lease margin of ~~$11.4.~~$22.7 and higher provision for losses of $9.1, partially offset by lower SG&A of $4.0.

Included in Other assets on the Company’s Balance Sheets are used trucks held for sale, net of impairments, of ~~$121.2~~$222.6 at June 30, ~~2019~~2020 and ~~$73.8~~$180.3 at December 31, ~~2018.~~2019. These trucks are primarily units returned from matured operating leases in the ordinary course of business, and also include trucks acquired from repossessions or through acquisitions of used trucks in trades related to new truck sales.

In the second quarter, the Company recognized losses on used trucks, excluding repossessions, of $13.8 in 2020 and $4.4 in 2019, ~~and $9.4 in 2018,~~ including losses on multiple unit transactions of $3.9 in 2020 and $1.0 in ~~2019 and $4.9 in 2018.~~2019. Used truck losses related to repossessions, which are recognized as credit losses, were nil infor both the second quarter of ~~2019~~2020 compared to ~~$.1 in the~~ second quarter of ~~2018.~~2019.

In the first half, the Company recognized losses on used trucks, excluding repossessions, of $26.9 in 2020 and $6.6 in 2019, ~~and $17.7 in 2018,~~ including losses on multiple unit transactions of $8.7 in 2020 and $2.7 in ~~2019 and $10.2 in 2018.~~2019. Used truck losses (gains) ~~losses~~ related to repossessions, which are recognized as credit losses, were $.1 in the first half of 2020 compared to $(.3) in the first half of ~~2019 compared to $.5 in the first half of 2018.~~2019.

The major factors for the change in interest and fee income, interest and other borrowing costs and finance margin for the three months ended June 30, ~~2019~~2020 are outlined in the table below:

			Interest and								Interest and
	Interest and		Other Borrowing		Finance			Interest and			Other Borrowing			Finance
	Fee Income		Costs		Margin			Fee Income			Costs			Margin
Three Months Ended June 30, 2018	$	65.4	$	32.2	$	33.2
Three Months Ended June 30, 2019								$	87.2		$	45.5		$	41.7
Increase (decrease)
Average finance receivables		11.7				11.7			3.3						3.3
Average receivables from PACCAR and affiliates		2.6				2.6			1.1						1.1
Average debt balances				7.4		(7.4	)					1.0			(1.0	)
Yields		7.5				7.5			(10.6	)					(10.6	)
Borrowing rates				5.9		(5.9	)					(5.3	)		5.3

Total increase		21.8		13.3		8.5
Total decrease									(6.2	)		(4.3	)		(1.9	)

Three Months Ended June 30, 2019	$	87.2	$	45.5	$	41.7
Three Months Ended June 30, 2020								$	81.0		$	41.2		$	39.8

The major factors for the change in interest and fee income, interest and other borrowing costs and finance margin for the six months ended June 30, ~~2019~~2020 are outlined in the table below:

The major factors for the change in operating lease and rental revenues, depreciation and other rental expenses and operating lease margin for the three months ended June 30, ~~2019~~2020 are outlined in the table below:

	Operating Lease			Depreciation						Operating Lease			Depreciation
	and Rental			and Other			Operating			and Rental			and Other			Operating
	Revenues			Rental Expenses			Lease Margin			Revenues			Rental Expenses			Lease Margin
Three Months Ended June 30, 2018	$	102.2		$	93.2		$	9.0
Three Months Ended June 30, 2019										$	96.8		$	84.1		$	12.7
(Decrease) increase
Operating lease impairment					(2.0	)		2.0
Operating lease impairments														5.6			(5.6	)
Results on returned lease assets					(2.9	)		2.9						2.5			(2.5	)
Average operating lease assets		(6.2	)		(4.8	)		(1.4	)		(5.1	)		(4.1	)		(1.0	)
Revenue and cost per asset		.8			.6			.2			.4			2.3			(1.9	)

Total (decrease) increase		(5.4	)		(9.1	)		3.7			(4.7	)		6.3			(11.0	)

Three Months Ended June 30, 2019	$	96.8		$	84.1		$	12.7
Three Months Ended June 30, 2020										$	92.1		$	90.4		$	1.7

The major factors for the change in operating lease and rental revenues, depreciation and other rental expenses and operating lease margin for the six months ended June 30, ~~2019~~2020 are outlined in the table below:

	Operating Lease			Depreciation						Operating Lease			Depreciation
	and Rental			and Other			Operating			and Rental			and Other			Operating
	Revenues			Rental Expenses			Lease Margin			Revenues			Rental Expenses			Lease Margin
Six Months Ended June 30, 2018	$	203.7		$	186.4		$	17.3
Six Months Ended June 30, 2019										$	196.1		$	167.4		$	28.7
(Decrease) increase
Operating lease impairment					(3.7	)		3.7
Operating lease impairments														10.5			(10.5	)
Results on returned lease assets					(7.5	)		7.5						8.3			(8.3	)
Average operating lease assets		(11.6	)		(9.1	)		(2.5	)		(10.2	)		(8.2	)		(2.0	)
Revenue and cost per asset		4.0			1.3			2.7			3.0			4.9			(1.9	)

Total (decrease) increase		(7.6	)		(19.0	)		11.4			(7.2	)		15.5			(22.7	)

Six Months Ended June 30, 2019	$	196.1		$	167.4		$	28.7
Six Months Ended June 30, 2020										$	188.9		$	182.9		$	6.0

Used truck sales and other revenues and cost of used truck sales and other expenses are summarized below for the second quarter and first half of ~~2019~~2020 compared to the second quarter and first half of ~~2018:~~2019:

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30				June 30				June 30				June 30
	2019		2018		2019		2018			2020	2019			2020	2019
Used truck sales and other revenues	$	5.1	$	7.4	$	8.8	$	15.1	$	8.2	$	5.1	$	15.5	$	8.8
Cost of used truck sales and other expenses		3.3		6.6		5.2		13.4		7.5		3.3		13.8		5.2

Results from used trucks and other	$	1.8	$	.8	$	3.6	$	1.7	$	.7	$	1.8	$	1.7	$	3.6

Results from used trucks and other in the second quarter and first half of ~~2019 increased~~2020 decreased by ~~$1.0~~$1.1 and $1.9 from the second quarter and first half of ~~2018,~~2019, primarily due to ~~improved results from the sale of~~higher impairments on used trucks ~~received on trade~~.resulting from lower used truck market prices.

~~PACCAR FINANCIAL CORP. - FORM 10-Q~~The Company’s SG&A decreased in the second quarter to $12.2 in 2020 from $15.5 in 2019, and for the six months to $26.8 in 2020 from $30.8 in 2019. The decrease in both periods was due to lower personnel and related expenses as a result of cost controls. As a percentage of revenues, the Company’s SG&A decreased to 6.7% in the second quarter of 2020 from 8.2% in the same period of 2019, and for the six months, decreased to 7.2% in 2020 from 8.3% in 2019.

The following table summarizes information on the Company's allowance for credit losses on receivables and asset portfolio and presents related ratios:

	Six Months Ended			Year Ended			Six Months Ended			Six Months Ended			Year Ended			Six Months Ended
	June 30			December 31			June 30			June 30			December 31			June 30
	2019			2018			2018			2020			2019			2019
Balance at beginning of period	$	60.7		$	58.4		$	58.4		$	65.4		$	60.7		$	60.7
Provision for losses		4.1			8.6			3.8			13.2			11.7			4.1
Charge-offs		(2.7	)		(8.8	)		(5.2	)		(11.3	)		(13.9	)		(2.7	)
Recoveries		1.3			2.5			.9			.6			2.2			1.3

Balance at end of period	$	63.4		$	60.7		$	57.9		$	67.9		$	60.7		$	63.4

Ratios:
Charge-offs, net of recoveries ($1.4 in 2019) to
average total portfolio ($6,289.4 in 2019)
annualized at June 30, 2019		.04	%		.11	%		.16	%
Charge-offs, net of recoveries ($10.7 in 2020) to
average total portfolio ($6,964.8 in 2020)
annualized at June 30, 2020											.31	%		.18	%		.04	%

Allowance for credit losses ($63.4 in 2019) to period-end
total portfolio ($6,683.7 in 2019)		.95	%		1.00	%		1.03	%
Allowance for credit losses ($67.9 in 2020) to period-end
total portfolio ($6,731.2 in 2020)											1.01	%		.84	%		.95	%

Period-end retail loan and lease receivables past
due over 30 days ($29.7 in 2019) to period-end
retail loan and lease receivables ($5,039.3 in 2019)		.59	%		.14	%		.17	%
due over 30 days ($12.9 in 2020) to period-end
retail loan and lease receivables ($5,289.1 in 2020)											.24	%		.43	%		.59	%

The provision for losses on receivables was $13.2 for the first half of 2020 compared to $4.1 for the first half of 2019, ~~compared~~primarily due to ~~$3.8 for~~a loss on one fleet customer and higher expected losses resulting from weakening economic conditions related to the COVID-19 pandemic.

Charge-offs, net of recoveries, increased to $10.7 in the first half of ~~2018, reflecting continued good portfolio performance.~~2020 from $1.4 in the first half of 2019, primarily due to a charge-off of the above mentioned fleet customer.

Retail loan and lease receivables past due over 30 days at June 30, ~~2019~~2020 was ~~.59%~~.24% compared to ~~.14%~~.43% at December 31, ~~2018~~2019 and ~~.17%~~.59% at June 30, ~~2018,~~2019, reflecting ~~two~~one fleet ~~customers becoming~~customer that was past due in 2019. The Company continues to focus on maintaining low past due balances.

The estimation methods and factors considered for determining the allowance during the periods included in this filing have been ~~consistently applied.~~applied in accordance with ASU 2016-13 which the Company adopted on January 1, 2020. See “Note A – Basis of Presentation” and “Note B – Finance and Other Receivables” for additional discussion regarding the Allowance for Credit Losses.

The Company modifies loans and finance leases in the normal course 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. 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 a loan or finance lease for credit reasons and grants a concession, the modification is classified as a troubled debt restructuring (TDR).

The post-modification balance of accounts modified during the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 are summarized below:

	Six Months Ended					Six Months Ended					Six Months Ended					Six Months Ended
	June 30, 2019					June 30, 2018					June 30, 2020					June 30, 2019
	Recorded		% of Total			Recorded		% of Total			Amortized		% of Total			Amortized		% of Total
	Investment		Portfolio*			Investment		Portfolio*			Cost Basis		Portfolio*			Cost Basis		Portfolio*
Commercial	$	105.0		3.2	%	$	68.6		2.5	%	$	100.3		3.0	%	$	105.0		3.2	%
Insignificant Delay		28.4		.8	%		20.8		.7	%		1,309.3		38.9	%		28.4		.8	%
Credit - No Concession		.3					2.6		.1	%		9.5		.3	%		.3
Credit - TDR		.1					3.0		.1	%		22.6		.7	%		.1
	$	133.8		4.0	%	$	95.0		3.4	%	$	1,441.7		42.9	%	$	133.8		4.0	%

Modification activity increased to $1,441.7 in the first half of 2020 compared to $133.8 in the first half of 2019, ~~compared to the first half of 2018,~~ primarily due to the increase in Insignificant Delay modifications ~~for commercial reasons~~ reflecting ~~higher volumes of refinancing. The~~an increase in ~~modifications for insignificant delay reflects more fleet~~ customers requesting payment relief for up to three months. Of the $1,309.3 Insignificant Delay modifications, $1,262.6 or 96% were payment relief for customers that were not past-due and were seeking to manage their liquidity needs because of the effects of the COVID-19 pandemic. The Credit – TDR modifications increased in the first half of 2020 compared to the first half of 2019, primarily due to the contract modification for two fleet customers.

Substantially all modifications related to the COVID-19 pandemic were completed in the six months ended June 30, 2020. The Company has received further customer requests for contract modifications in July 2020 due to the COVID-19 pandemic representing approximately 1% of the retail portfolio. These requests will be evaluated for creditworthiness.

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 $2.1 of accounts during the second quarter of 2020, $.5 of accounts during the fourth quarter of 2019 and $.1 of accounts during the second quarter of 2019 ~~$3.2 of accounts during the fourth quarter of 2018 and $2.9 of accounts during the second quarter of 2018~~ 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 June 30, ~~2019,~~2020, December 31, ~~2018~~2019 and June 30, ~~2018.~~2019. The effect on the allowance for credit losses from such modifications was not significant at June 30, ~~2019,~~2020, December 31, ~~2018~~2019 and June 30, ~~2018.~~2019.

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:

	June 30				December 31				June 30				June 30				December 31				June 30
	2019				2018				2018				2020				2019				2019
Retail loans	$	3,591.9	54	%	$	3,372.3	55	%	$	3,194.6	57	%	$	3,843.6	57	%	$	3,774.3	52	%	$	3,591.9	54	%
Retail leases		1,447.4	22	%		1,428.6	24	%		1,347.4	24	%		1,445.5	21	%		1,492.7	21	%		1,447.4	22	%
Dealer wholesale financing		1,501.8	22	%		1,179.0	19	%		1,006.4	18	%		1,247.2	19	%		1,766.7	25	%		1,501.8	22	%
Dealer master notes		75.5	1	%		52.9	1	%		23.8				123.0	2	%		88.7	1	%		75.5	1	%
Operating lease receivables and other		67.1	1	%		66.7	1	%		72.1	1	%		71.9	1	%		65.0	1	%		67.1	1	%

Total portfolio	$	6,683.7	100	%	$	6,099.5	100	%	$	5,644.3	100	%	$	6,731.2	100	%	$	7,187.4	100	%	$	6,683.7	100	%

Retail loans ~~and retail leases~~ increased to ~~$3,591.9 and $1,447.4~~$3,843.6 at June 30, ~~2019~~2020 from ~~$3,372.3 and $1,428.6~~$3,774.3 at December 31, ~~2018,~~2019, reflecting new business volume exceeding collections.

Retail leases decreased to $1,445.5 at June 30, 2020 from $1,492.7 at December 31, 2019, reflecting collections exceeding new business volume.

Dealer wholesale financing balances ~~increased~~decreased to ~~$1,501.8~~$1,247.2 at June 30, ~~2019~~2020 from ~~$1,179.0~~$1,766.7 at December 31, ~~2018~~2019 due to ~~higher~~lower dealer new truck inventory.

Dealer master notes were ~~$75.5~~$123.0 at June 30, ~~2019~~2020 compared to ~~$52.9~~$88.7 at December 31, ~~2018.~~2019. Dealers may pay the loans early or make additional draws up to specified balances of the contracts pledged to the Company. As of June 30, ~~2019,~~2020, the underlying pledged contracts were ~~$112.8,~~$159.7, upon which the dealers have available ~~$11.2~~$14.1 as potential additional borrowing capacity.

The Company’s deferred income tax ~~provision~~benefit for the first half of ~~2019~~2020 was ~~$14.3~~$19.4 compared to ~~$5.7~~deferred income tax provision of $14.3 for the first half of ~~2018.~~2019. The Company’s net deferred tax liability ~~increased~~decreased to ~~$644.7~~$653.4 at June 30, ~~2019~~2020 from ~~$633.6~~$679.9 at December 31, ~~2018,~~2019, primarily due to ~~higher~~lower benefits from accelerated depreciation. Deferred taxes are impacted by new business volume and the accelerated depreciation deduction rate under U.S. federal and state 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 ~~2019.~~2020.

~~Truck industry Class 8 retail~~The Company continues to provide financing and leasing services and related support to customers during the COVID-19 pandemic. The size of the portfolio will be affected by the amount of new truck financing volume. Depending on the length and depth of the economic weakness associated with the pandemic, lower truck sales volume would result in lower volumes of new business. The lower level of economic activity is affecting some industries more than others. The Company does not have a concentration of exposure in any one segment or industry. Although past-dues and credit losses are at low levels, continued economic weakness could result in lower freight volumes which could adversely impact customers’ operating results and cash flows. The Company has granted a large number of loan modifications to customers seeking to conserve cash in this uncertain environment. Substantially all modifications related to the COVID-19 pandemic were completed in the ~~U.S. in 2019 are expected~~six months ended June 30, 2020. The modifications, which generally provided payment relief for up to ~~be 260,000-280,000 units compared~~three months, were evaluated and granted to 250,500 units in 2018. Average earning assets are expected to grow 8-10% in 2019 as increased new business financing from truck sales is projected to exceed customer collections. Current good levels of freight tonnage, freight rates and fleet utilization are contributing to customers’ profitability and cash flow.credit worthy customers on a case-by-case basis. If ~~current freight transportation conditions decline due to weaker~~ economic conditions ~~then~~further worsen, it would likely lead to more credit modification requests, higher past due accounts, ~~truck repossessions and~~increased provision for credit losses, ~~would likely increase from the current low levels~~ and ~~new business volume would likely decline.~~ lower used truck values. See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect this outlook.

A 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 2018, the Company filed a shelf registration statement to issue medium-term notes. The shelf registration statement expires in November 2021 and does not limit the principal amount of debt securities that may be issued during the period.

The Company participates with PACCAR and certain other PACCAR affiliates in committed bank facilities of $3,000.0 at June 30, ~~2019.~~2020. Of this amount, $1,000.0 expires in June ~~2020,~~2021, $1,000.0 expires in June 2023 and $1,000.0 expires in June 2024. PACCAR and the Company intend to replace these credit facilities on or before expiration with facilities of similar amounts and duration.

Of the $3,000.0 credit facilities, ~~$1,992.0~~$2,087.0 is available for use by the Company and/or PACCAR and PACCAR Financial Europe. The remaining ~~$1,008.0~~$913.0 is allocated to PACCAR and other non-U.S. PACCAR financial subsidiaries. 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 six months ended June 30, ~~2019.~~2020.

The Company issues commercial paper and medium-term notes to fund its financing and leasing operations. The total principal amounts of commercial paper and medium-term notes outstanding for the Company as of June 30, ~~2019~~2020 were ~~$1,884.4~~$1,011.3 and ~~$5,150.0,~~$6,150.0, respectively.

The Company believes its current investment grade credit ratings of A+/A1, committed bank facilities, collections on existing loans and leases 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 to maintain its liquidity and financial stability. In the event of a decrease in the Company’s credit ratings or a disruption in the financial markets, the Company may not be able to refinance its maturing debt in the financial markets. In such circumstances, the Company would be exposed to liquidity risk to the degree that the timing of debt maturities differs from the timing of receivable collections from customers. The Company believes its various sources of liquidity, including committed bank facilities, would continue to provide it with sufficient funding resources to service its maturing debt obligations.

Other information on liquidity, sources of capital, and contractual cash commitments as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (the ~~“2018~~“2019 Annual Report”) continues to be relevant.

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future results of operations or financial position and any other statement that does not relate to any historical or current fact. Such statements are based on currently available operating, financial and other information and 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 or reduced market share; changes in competitive factors; changes affecting the profitability of truck owners and operators; price changes impacting equipment costs and residual values; changes in interest rates and other operating costs; insufficient liquidity in the capital markets and availability of other funding sources; cybersecurity risks to the Company’s information technology systems; pandemics; litigation involving the Company or affiliated entities; and legislation and governmental regulation.

The Company’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the ~~end of the~~ period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no ~~significant~~ changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

For information regarding risk factors, refer to Part I, Item 1A as presented in the ~~2018~~2019 Annual Report. There have been no material changes in the Company’s risk factors during the six months ended June 30, ~~2019~~2020 except for the following:

~~Certain financing provided by~~The COVID-19 pandemic and various governmental responses to contain the outbreak have resulted in a significant reduction in global economic activity. National and local governments have issued various stay-at-home orders, travel restrictions and border closures affecting consumers and businesses. These restrictions have been lifted to various degrees in different locations, but are subject to being re-imposed. PACCAR’s operations have been designated as essential businesses in many jurisdictions as they support the transport of food, medical supplies and other essential materials which means PACCAR and the Company may operate under certain conditions including ensuring employee health and safety is maintained.

The full extent and duration of the adverse effect on the Company’s business is uncertain and depends on the severity of the pandemic and how quickly and to ~~dealers~~what extent global and ~~retail customers,~~local economies are able to recover from the effects of the pandemic. Prolonged unemployment, changes in consumer behavior as a result of COVID-19, as well as ~~financing extended to~~other pandemic related economic factors such as business failures, lower housing and construction starts, lower automobile sales and disruptions in financial markets could have further adverse effects on PACCAR’s truck production, resulting in lower new business volume for the Company, ~~are based on variable interest rate contracts which utilize LIBOR, to establish applicable contract interest rates. The Company~~and may also ~~utilizes hedging instruments~~cause higher finance portfolio past dues, credit losses and has line of credit arrangements which reference LIBOR. In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced it intends to stop compelling banks to submit rates for calculation of LIBOR after 2021. At this time it is not clear if LIBOR will continue to exist, and if not, what alternative benchmark rate will replace LIBOR. Any new benchmark rate will likely not exactly replicate LIBOR, which could impact currently active contracts which terminate after 2021.

~~Substantially all~~used truck losses. Other unforeseen impacts of the COVID-19 pandemic could also impact the Company’s ~~contracts which reference LIBOR including dealer wholesale financing contracts, medium-term notes, hedging instruments~~business and line of credit arrangements include fall-back language that specifies the methods to establish contract interest rates in the absence of LIBOR, or provide for the use of an alternative benchmark rate should LIBOR be discontinued.

The Company has retail loan and lease contracts with customers of approximately $80 million that extend beyond 2021 and do not contain fall-back language or provide for the use of an alternative benchmark rate. The Company will seek to amend these contracts to allow for the use of an alternative benchmark rate.

Changes to benchmark rates may have an uncertain impact on finance receivables and other financial obligations, the interest rates on our current or future cost of funds and/or access to capital markets. The Company does not expect any changes to the use of LIBOR as a benchmark rate will have a material impact on the results of operations.

Items 2, 3 and 4 are omitted pursuant to Form 10-Q General Instructions (H)(2)(b).

For Item 5, there was no reportable information during the six months ended June 30, ~~2019.~~2020.

Exhibit Number	Exhibit Description		Form	Date of First Filing	Exhibit Number	File Number
(3)	Articles of incorporation and by-laws:
	(i)	Restated Articles of Incorporation of the Company, as amended	10-K	February 26, 2015	~~3(i)~~3.1	001-11677
	(ii)	Restated by-laws of the Company	10-Q	August 7, 2014	3(c)	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.	S-3	November 20, 2009	4.1	333-163273
	(b)	Forms of Medium-Term Note, Series N	S-3	November 7, 2012	4.2 and 4.3	333-184808
	(c)	Forms of Medium-Term Note, Series O	S-3	November 5, 2015	4.2 and 4.3	333-207838
	(d)	Forms of Medium-Term Note, Series P	S-3	November 2, 2018	4.2 and 4.3	333-228141
	(e)	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Act of 1934	10-K	February 19, 2020	4(e)	001-11677
(10)	Material contracts:
	(a)	Support Agreement between the Company and PACCAR dated as of June 19, 1989. (P)	S-3	June 23, 1989	28.1	33-29434
(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)		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
(101.SCH)		Inline XBRL Taxonomy Extension Schema Document*
(101.CAL)		Inline XBRL Taxonomy Extension Calculation Linkbase Document*
(101.DEF)		Inline XBRL Taxonomy Extension Definition Linkbase Document*
(101.LAB)		Inline XBRL Taxonomy Extension Label Linkbase Document*
(101.PRE)		Inline XBRL Taxonomy Extension Presentation Linkbase Document*
(104)		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)*

Pursuant to the requirements 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.

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

777 – 106th Ave. N.E., Bellevue, Washington	98004
(Address of principal executive offices)	(Zip code)


		Page

PART I.	FINANCIAL INFORMATION:

ITEM 1.	FINANCIAL STATEMENTS:
	Statements of Comprehensive Income and Retained Earnings — Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019 (Unaudited)	43
	Balance Sheets — June 30, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019	54
	Statements of Cash Flows — Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019 (Unaudited)	65
	Statements of Stockholder’s Equity — Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019 (Unaudited)	76
	Notes to Financial Statements (Unaudited)	87
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2220
ITEM 4.	CONTROLS AND PROCEDURES	2927

PART II.	OTHER INFORMATION:

ITEM 1.	LEGAL PROCEEDINGS	3028
ITEM 1A.	RISK FACTORS	3028
ITEM 6.	EXHIBITS	3028

EXHIBIT INDEX		3129

SIGNATURES		3230

STANDARD	DESCRIPTION	~~EFFECTIVE DATE~~
2018-13*2018-13	Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for		~~January 1, 2020~~
	~~Requirements for~~ Fair Value Measurement.
2018-15*2018-15	Intangibles - Goodwill and Other -– Internal-Use Software (Subtopic 350-40): Customer's Accounting for		~~January 1, 2020~~
	~~Accounting for~~ Implementation Costs Incurred in a Cloud Computing Arrangement
	That is a Service Contract.
2019-12
* The Company will adopt onIncome Taxes (Topic 740): Simplifying the ~~effective date.~~

At June 30, 2019	Finance Leases
Remainder of 2019	$	254.3
2020		417.8
2021		334.7
2022		236.9
2023		171.8
Thereafter		111.4
		1,526.9
Unguaranteed residual values		67.7
Unearned interest on finance leases		(147.2	)
Net investment in finance leases	$	1,447.4

			Cumulative Basis Amount
	Carrying Amount of		Included in the
Hedged Balance Sheet Line Item	the Hedged Liabilities		Carrying Amount
Medium-term notes	$	90.6	$	.6

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

	BALANCE AT DECEMBER 31, 2019		CHANGE DUE TO NEW STANDARD			BALANCE AT JANUARY 1, 2020
BALANCE SHEETS
ASSETS
Finance and other receivables, net of allowance for credit losses	$	7,126.7	$	(4.7	)	$	7,122.0
LIABILITIES
Deferred taxes and other liabilities	$	694.2	$	(1.2	)	$	693.0
STOCKHOLDER'S EQUITY
Retained earnings	$	1,591.4	$	(3.5	)	$	1,587.9


~~Notes to Financial Statements (Unaudited)~~	~~(Millions of Dollars)~~Accounting for Income Taxes.


~~Notes to Financial Statements (Unaudited)~~	~~(Millions of Dollars)~~

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

		PACCAR Financial Corp.
		(Registrant)

Date	~~November 27, 2019~~August 3, 2020	/s/ Craig R. Gryniewicz
		Craig R. Gryniewicz
		President
		(Authorized Officer)

		/s/ Yi Zhang
		Yi Zhang
		Controller
		(Chief Accounting Officer)