<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended December 31, 1996
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For transition period from            to
                           ----------    ----------

Commission File No. 0-12553

                             PACCAR FINANCIAL CORP.
-------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

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

       777 - 106th Avenue N.E., Bellevue, Washington               98004
       --------------------------------------------------------------------
       (Address of Principal Executive Offices)                  (Zip Code)

      Registrant's telephone number, including area code:   (206) 462-4100
                                                           ----------------

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

     Title of Each Class            Name of Each Exchange on Which Registered
     -------------------            -----------------------------------------

  Series H Medium-Term Notes
$5 Million Due February 15, 2000             New York Stock Exchange
----------------------------------  -------------------------------------------

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

                                      None
           -----------------------------------------------------------
                                (Title of Class)

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 periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.  Yes  X   No
                                                 ---     ---

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 1997:
                                      None

The number of shares outstanding of the registrant's classes of common stock as
of March 1, 1997:

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

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

<PAGE>

                                     PART I


ITEM 1.  BUSINESS
                                     GENERAL


PACCAR FINANCIAL CORP.

     PACCAR Financial Corp. (the "Company"), a wholly owned subsidiary of PACCAR
Inc ("PACCAR"), is a Washington corporation organized in 1961 to finance the
sale of PACCAR products.  The Company provides financing and leasing of trucks
and related equipment manufactured primarily by PACCAR and sold through PACCAR's
independent dealers in the United States. The Company also finances dealer
inventories of transportation equipment.

PACCAR

     PACCAR is a multi-national company which designs and manufactures various
types of industrial equipment that are marketed primarily through its dealers.
Heavy-duty diesel trucks (primarily Class 8 trucks with gross vehicle weight in
excess of 33,000 pounds) and related service parts are the principal products of
PACCAR and accounted for 87% of PACCAR's total revenues in 1996.  PACCAR markets
these trucks under the "Kenworth," "Peterbilt" and "Foden" nameplates.  Domestic
Kenworth and Peterbilt trucks are manufactured in four plants in the United
States.  Outside of the U.S., PACCAR manufactures and sells trucks through
wholly owned subsidiary companies in Canada, Australia and Mexico.  Foden trucks
are manufactured and sold in the United Kingdom through a wholly owned U.S.
subsidiary. PACCAR also competes in the North American Class 6/7 markets with
cab-over-engine and conventional models.  These medium-duty trucks are assembled
at a PACCAR factory in Mexico.  Effective November 1996, PACCAR purchased all
outstanding shares of DAF Trucks N.V. (DAF), a Netherlands corporation.  DAF
designs and manufactures medium and heavy commercial vehicles under the DAF
nameplate.  In addition to its Netherlands plant and headquarters, DAF also
manufactures cabs and axles at a plant located in Belgium.  DAF is also the
exclusive distributor in Europe for Class 4/5, cab-over engine trucks
manufactured by Leyland Trucks Ltd. in the United Kingdom.  Other PACCAR
products include industrial winches and oilfield equipment.  PACCAR competes in
the truck parts aftermarket primarily through its dealer network and also sells
general automotive parts and accessories through retail outlets.

     In the United States, Kenworth and Peterbilt trucks are sold to an
independent dealer network, consisting of approximately 300 outlets, for resale
to retail purchasers.  Trucks manufactured in the United States for export are
marketed by a division of PACCAR through an international dealer network.

     In addition to the Company, which provides financing and leasing in the
United States, PACCAR offers similar financing programs for PACCAR products in
Canada, Australia, Mexico and the United Kingdom through four other wholly owned
finance companies.

     As of December 31, 1996, PACCAR and its subsidiaries had total assets of
$5.3 billion and stockholders' equity of $1.4 billion.  For the year ended
December 31, 1996, PACCAR's consolidated revenues and net income were $4.6
billion and $201 million, respectively.

     There were six principal competitors, including PACCAR, in the United
States Class 8 truck market in 1996.  Based on 1996 industry registration
statistics, PACCAR's Kenworth and Peterbilt combined truck sales accounted for
approximately 21% of domestic Class 8 new truck registrations.  There were also
six principal competitors in the European medium and heavy commercial vehicle
market in 1996 including parent companies to three competitors of PACCAR in the
United States.  Both the domestic and European heavy-duty truck market is highly
competitive in price, quality and service.  PACCAR is not dependent on any
single customer for a significant amount of its sales.

                                       -2-

<PAGE>

     PACCAR's common stock, $12 par value, is traded in the over-the-counter
market under the NASDAQ symbol "PCAR."   PACCAR is subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission").  All reports, proxy statements and other information filed
by PACCAR with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661; and at 7 World Trade Center, 13th
Floor, New York, New York 10048.

                             BUSINESS OF THE COMPANY

     The Company operates primarily in one industry segment, truck and related
equipment financing.  The Company provides financing for dealers' sales of
Kenworth and Peterbilt trucks in the United States.  In addition, the Company
provides financing for dealers' purchases of new Class 6, 7 and 8 trucks and
used trucks, regardless of make or model.  Financing is also provided for truck
trailers and allied equipment such as mixer and dump bodies attached to the
truck.

     The Company currently conducts business with most PACCAR dealers.  The
volume of the Company's business is significantly affected by PACCAR's sales and
competition from other financing sources.

     As of December 31, 1996, the Company employed 258 full-time employees, none
of whom are represented by a collective bargaining agent.  The Company considers
relations with its employees to be good.

THE COMPANY'S PRODUCTS

RETAIL RECEIVABLES

     RETAIL CONTRACTS.  The Company purchases contracts ("Retail Contracts")
from dealers and receives  assignments of the contracts and a first lien
security interest in the vehicles financed.  Collateral for vehicles sold to
leasing companies may also include an assignment of leases and rentals due.
Retail Contracts purchased by the Company have fixed or floating interest rates.

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

MASTER NOTE

     These contracts are an alternative form of retail financing offered to
selected dealers for new and used trucks.  Retail installment contracts
originated by the dealer for new or used trucks and meeting the Company's
requirements as to form, terms and creditworthiness for Retail Contracts are
pledged to the Company as collateral for direct, full recourse loans by the
Company to the dealer ("Master Note").  Master Note contracts have fixed or
floating interest rates.

WHOLESALE CONTRACTS

     The Company provides wholesale financing for new and used truck and trailer
inventories for dealers ("Wholesale Contracts").  Wholesale Contracts are
secured by the inventories financed.  The amount of credit extended by the
Company for each truck is generally limited to the invoice price of new
equipment and to the wholesale value of used equipment.  Interest under
Wholesale Contracts is based upon floating rates.

                                       -3-

<PAGE>

LEASES

     The Company offers lease contracts ("Leases") where it is treated as the
owner of the equipment for tax purposes and generally retains the tax
depreciation.  The lessee is responsible for the payment of property and sales
taxes, licenses, maintenance and other operating items.  The lessee is obligated
to maintain the equipment and to insure the equipment against casualty and
liability losses.

     Most of the Company's 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.

INSURANCE

     The Company offers physical damage insurance through PACCAR dealers who are
licensed insurance agents.  The Company retains the premium revenues and loss
exposure for the policies which are issued through an unrelated insurance
carrier.

     The Company also offers wholesale physical damage insurance on new trucks,
used trucks and trailer inventory to dealers which have Wholesale Contracts with
the Company.  Through a retention program, the Company retains premium revenues
and annual loss exposure up to that year's premium revenues.  Losses beyond
premium revenues for that year are reinsured by an unrelated insurance carrier.



          CUSTOMER CONCENTRATION, PAST DUE ACCOUNTS AND LOSS EXPERIENCE

CUSTOMER CONCENTRATION

     At December 31, 1996, the largest single customer for Retail Contracts,
Direct Loans or Leases represented 1.9% of the Company's net receivables, and
the five largest such accounts amounted to 5.5% of net receivables.

     At December 31, 1996, the largest Master Note dealer borrowing amounted to
7.9% of the Company's net receivables and the four total Master Note receivables
amounted to 11.5% of net receivables.  Master Note receivables are secured by
numerous retail installment contracts which offset the amount of dealer
concentration.

     With respect to wholesale financing, at December 31, 1996, the customer
concentration was not significant.

PAST DUE RECEIVABLES AND ALLOWANCE FOR LOSSES

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

     The Company maintains an allowance for losses on receivables at a level
which it considers to be adequate based on management's estimates of future
losses.  The following table summarizes the activity in the Company's allowance
for losses on receivables and presents related ratios:

                                       -4-

<PAGE>



                              Allowance for Losses
                              --------------------
                             (Thousands of Dollars)


                                                       Year Ended December 31
                                              ---------------------------------
                                                 1996         1995        1994
                                             ---------    ---------   ---------
Balance at beginning of period               $  35,790    $  29,900   $  24,000
Provision for losses                             3,279        4,816       2,473
Net (losses) recoveries                         (3,069)       1,074       3,427
                                             ---------    ---------   ---------
Balance at end of period                     $  36,000    $  35,790   $  29,900
                                             ---------    ---------   ---------
                                             ---------    ---------   ---------

Ratios:
  Net (losses) recoveries to average net
     receivables and equipment on
     operating leases                           (.15)%         .06%        .21%

  Allowance for losses to period end net
     receivables and equipment on operating
     leases                                      1.70%        1.72%       1.69%

  Period end gross contracts and leases past
     due (over 60 days) to period end gross
     contracts and lease receivables              .93%         .56%        .23%

     For discussion of the allowance for losses, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations, 1994 - 1996."

                        COMPETITION AND ECONOMIC FACTORS

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

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

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

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

                                       -5-

<PAGE>

                         REGULATIONS AND SIMILAR MATTERS

     In certain states, the Company is subject to retail installment sales or
installment loan statutes and related regulations, the terms of which vary from
state to state.  These laws may require the Company to be licensed as a sales
finance company and may regulate disclosure of finance charges and other terms
of retail installment contracts.  The Company is also subject to some of the
provisions of federal law relating to discrimination in the granting of credit.

                                SOURCES OF FUNDS

     The operations of the Company are financed by borrowings, retained
earnings, and equity investments by PACCAR.  The Company's profitable
acquisition of additional receivables is dependent upon its ability to raise
funds at competitive rates in the public and private debt markets.  The
receivables and leases that are financed are either fixed rate or floating rate,
with a term of generally five years or less.

     To reduce the risk of changes in interest rates that could affect interest
margins, the Company obtains funds with interest rate characteristics similar to
the corresponding assets.  Fixed rate assets are funded primarily with publicly
offered fixed rate medium-term notes and commercial paper.  Floating rate assets
are funded primarily with commercial paper with maturities of three months or
less.  As a result, the Company's interest margin does not change significantly
as interest rates change.

     The Company enters into over-the-counter interest rate contracts as a tool
to achieve its matched funding objectives and to reduce total borrowing costs
relative to its primary borrowing sources--commercial paper and fixed rate
medium-term notes.  Fixed interest rate swaps, matched to floating rate
borrowings, are used to lock in the funding cost of fixed rate assets.  Floating
interest rate swaps, matched to either fixed or floating rate debt, are used to
convert to a floating rate index more appropriate to the Company's floating rate
assets, often at a funding cost lower than the cost of commercial paper.
Interest rate caps are occasionally purchased to hedge the floating rate funding
cost of floating rate assets that have a maximum yield.  As of December 31,
1996, the total notional principal amount of interest rate contracts outstanding
were as follows:  $406.1 million of interest rate swaps resulting in a fixed
rate payment obligation; and $37.3 million of interest rate caps.  The notional
amount is used to measure the volume of these contracts and does not represent
exposure to credit loss.  The Company's risk in these transactions is the cost
of replacing, at current market rates, these contracts in the event of default
by the counterparty.  Management believes the risk of incurring such losses is
remote, and any losses would be immaterial.  The permitted types of interest
rate contracts, their transaction limits and related approval authorizations
have been established by the Company's senior management and Board of Directors.
The interest rate contracts outstanding are regularly reported to and reviewed
by the Company's senior management.

     As of December 31, 1996, PACCAR and the Company together had $375 million
of unused, confirmed bank lines of credit that are reviewed annually for
renewal.  These lines are maintained primarily to support the Company's short-
term borrowings.  Neither PACCAR nor the Company is liable for any borrowings of
the other under these lines of credit.

     As of December 31, 1996, the Company had $964.0 million of medium-term
notes outstanding, $415.0 million of which was due within 12 months.  See "Note
E--Borrowings" in the Notes to Financial Statements for medium-term note
maturities.

     An indenture of the Company dated as of December 1, 1984, as amended by a
first supplemental indenture dated June 19, 1989 (Exhibit 4.1), with respect to
the Company's medium-term notes which are publicly issued from time to time,
contains restrictions limiting secured debt which may be incurred by the Company
and any subsidiary.

                                       -6-

<PAGE>

                            RELATIONSHIP WITH PACCAR

GENERAL

     The operations of the Company are fundamentally affected by its
relationship with PACCAR.  Sales of PACCAR products are the Company's principal
source of financing business.  The Company receives administrative support from
PACCAR and may occasionally pay dividends to, borrow funds from or lend money to
PACCAR.  Since the directors of the Company are all executives of PACCAR or its
affiliates and PACCAR is the sole owner of the Company's outstanding voting
common stock, PACCAR can determine the course of the Company's business.  See
"Note D--Transactions with PACCAR" in the Notes to Financial Statements.

SUPPORT AGREEMENT

     The Company and PACCAR are parties to a Support Agreement which obligates
PACCAR to provide, when required, financial assistance to the Company to assure
that the Company maintains a ratio of net earnings available for fixed charges
to fixed charges (as defined) of at least 1.25 to 1 for any fiscal year.  The
Support Agreement also requires PACCAR to own, directly or indirectly, all
outstanding voting stock of the Company.  The required ratio for each of the
years ended December 31, 1992 - 1996 was met without assistance.

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

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


ITEM 2.  PROPERTIES

     The Company's principal office is located in the corporate headquarters
building of PACCAR (owned by PACCAR) at 777 - 106th Avenue N.E., Bellevue,
Washington 98004.

     Other offices of the Company are located in leased premises.  Annual lease
rentals for offices in the aggregate are not material in relation to expenses as
a whole.

ITEM 3.   LEGAL PROCEEDINGS

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

                                       -7-

<PAGE>

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.



                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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

     The Company began in 1994 to pay a dividend to PACCAR for the paid-in
capital invested in the prior year.  Cash dividends of $2.9 million, $2.7
million and $1.3 million were paid in 1996, 1995 and 1994, respectively.


                                       -8-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The following table summarizes selected financial data for the Company and
should be read in conjunction with the more detailed financial statements
included under "Financial Statements and Supplementary Data."  The information
with respect to each of the five years in the period ended December 31, 1996 has
been derived from the Company's audited financial statements.

<TABLE>
<CAPTION>

                                            Balance Sheet Data and Income Statement Data
                                            --------------------------------------------
                                                       (Thousands of Dollars)

                                                            As of December 31
                               ----------------------------------------------------------------------------
Balance Sheet Data                   1996            1995            1994            1993             1992
------------------             ------------    ------------    ------------    ------------    ------------
<S>                            <C>             <C>             <C>             <C>             <C>
Total Assets                   $  2,120,612    $  2,074,405    $  1,770,769    $  1,493,880    $  1,169,139
Total Liabilities                 1,807,559       1,792,934       1,517,436       1,267,130         960,702
Stockholder's Equity                313,053         281,471         253,333         226,750         208,437


Income Statement Data                                     Year Ended December 31
---------------------          ----------------------------------------------------------------------------
Finance and Insurance Margin   $     79,543    $     74,975    $     67,435    $     58,518    $     49,224
Operating and Other Expenses         24,084          23,429          22,815          21,990          21,968
Provision for Losses                  3,279           4,816           2,473           6,079           8,611
                               ------------    ------------    ------------    ------------    ------------

Income Before Income Taxes           52,180          46,730          42,147          30,449          18,645

Income Taxes                         20,321          18,809          16,968          13,446           6,948

Net Income                     $     31,859    $     27,921    $     25,179    $     17,003    $     11,697
                               ------------    ------------    ------------    ------------    ------------
                               ------------    ------------    ------------    ------------    ------------
Ratio of Earnings to Fixed
  Charges (1)                        1.53x            1.52x           1.67x           1.66x           1.38x

</TABLE>

(1)  For purposes of this ratio, earnings consist of income from operations plus
     fixed charges.  Fixed charges consist of interest expense plus one-third of
     rent expense (which is deemed representative of an interest factor).  The
     method of computing the ratio of earnings to fixed charges shown above
     complies with SEC reporting requirements but differs from the method called
     for in the Support Agreement between the Company and PACCAR.  The ratios
     computed pursuant to the Support Agreement were 1.62x, 1.63x, 1.82x, 1.89x
     and 1.59x for the years 1996 - 1992, respectively.  See Exhibits 12.1 and
     12.2.

                                       -9-

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS, 1994 - 1996

      RESULTS OF OPERATIONS

1996 Compared to 1995:

     Pre-tax income increased 12% to $52.2 million for 1996 from $46.7 million
in 1995 primarily as a result of a $3.7 million increase in the finance margin
attributable to higher average balances of receivables, partially offset by a
decrease in the average margin rate earned on those receivables.  Average
outstanding receivables grew 10% from $1.9 billion for 1995 to $2.1 billion for
1996 reflecting two consecutive years of $1.1 billion in new business volume.
The average margin rate on the receivables declined for the second year due to
rate competition in the truck lending market.  Pre-tax income also benefited
from a $.9 million increase in the insurance margin due to growth in the
company's physical damage insurance program.

     Selling, general and administrative expenses rose only 3% from the 1995
level, as continuing expense controls were in place.  The provision for losses
decreased 32% to $3.3 million from $4.8 million in 1995.  The decline resulted
from a slow-down in the growth rate of receivables and equipment on operating
leases from 17.7% in 1995 to 1.9% in 1996.  The Company experienced net credit
losses of $3.1 million in 1996 compared to net credit recoveries of $1.1 million
in 1995.  Although 1996 net credit losses were low by historical standards, the
change from 1995 reflected lower rates of recoveries and a more difficult
operating environment, particularly in the used truck market.  At the end of
1996, the allowance for losses was 1.70% of earning assets compared to 1.72% at
the end of 1995.  The level of the allowance reflects the risks inherent in the
financing of commercial highway transportation equipment.

As a result of the foregoing factors, net income for 1996 improved to $31.9
million from $27.9 million in 1995.


1995 Compared to 1994:

     Pre-tax income increased to $46.7 million from $42.1 million in 1994.  The
growth resulted primarily from a $7.3 million increase in the finance margin
attributable to the growth in receivables, partially offset by a decrease in the
average margin rate earned on those receivables.  Average receivables increased
18% to $1.9 billion in 1995 from $1.6 billion in 1994. The growth resulted from
$1.1 billion of new business volume related to strong domestic heavy-duty truck
sales by PACCAR.  In addition, the provision for losses increased from $2.5
million to $4.8 million due to the high rate of receivables growth.  As a
result, net income for 1995 was $27.9 million compared to $25.2 million in 1994.


FUNDING AND LIQUIDITY

     The Company manages its capital structure consistent with industry
standards.  Since 1983, the Company has registered senior debt securities under
the Securities Act of 1933 for offering to the public.  In 1996, the Company
registered $1 billion of senior debt securities for offering to the public.  At
the end of 1996, there were $680 million of such securities available for
issuance.

     The Company believes that it has sufficient financial capabilities,
including internally generated funds, access to public and private debt markets,
lines of credit and other financial resources, to fund current business needs
and service debt maturities.

                                      -10-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements of the Company and related schedules described
under Item 14, "Exhibits, Financial Statement Schedules, and Reports on Form 8-
K," are included following this page.




                                      -11-

<PAGE>

                Report of Ernst & Young LLP, Independent Auditors


Board of Directors
PACCAR Inc and PACCAR Financial Corp.



We have audited the accompanying balance sheets of PACCAR Financial Corp. (a
wholly owned subsidiary of PACCAR Inc) as of December 31, 1996 and 1995, and the
related statements of income and retained earnings and cash flows for each of
the three years in the period ended December 31, 1996.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PACCAR Financial Corp. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.


                                             /S/ Ernst & Young LLP




Seattle, Washington
February 7, 1997

                                      -12-

<PAGE>

BALANCE SHEETS
PACCAR Financial Corp.


                                                             December 31
                                                          1996          1995
------------------------------------------------------------------------------
                                                       (Thousands of Dollars)
ASSETS
  Cash                                                $   13,154    $    5,967

  Net finance and other receivables                    2,095,961     2,051,135
  Allowance for losses                                  (36,000)      (35,790)
------------------------------------------------------------------------------
                                                       2,059,961     2,015,345
------------------------------------------------------------------------------

  Equipment on operating leases, net of
     allowance for depreciation of $18,628
     (1995--$20,889)                                      35,016        40,905
  Other assets                                            12,481        12,188
------------------------------------------------------------------------------

TOTAL ASSETS                                          $2,120,612    $2,074,405
------------------------------------------------------------------------------
------------------------------------------------------------------------------

LIABILITIES

  Accounts payable and accrued expenses               $   56,092    $   36,461
  Payable for finance receivables acquired                27,734        34,504
  Commercial paper and other short term borrowings       699,616       657,856
  Medium-term notes                                      964,000       999,500
  Income taxes - current and deferred                     60,117        64,613
------------------------------------------------------------------------------

TOTAL LIABILITIES                                      1,807,559     1,792,934
------------------------------------------------------------------------------
------------------------------------------------------------------------------

STOCKHOLDER'S EQUITY
  Preferred stock, par value $100 per share
     6% noncumulative and nonvoting
     450,000 shares authorized,
     310,000 shares issued and outstanding                31,000        31,000
  Common stock, par value $100 per share
     200,000 shares authorized,
     145,000 shares issued and outstanding                14,500        14,500
  Paid in capital                                          9,612         6,956
  Retained earnings                                      257,941       229,015
------------------------------------------------------------------------------

TOTAL STOCKHOLDER'S EQUITY                               313,053       281,471
------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY            $2,120,612    $2,074,405
------------------------------------------------------------------------------
------------------------------------------------------------------------------

See notes to financial statements.

                                      -13-

<PAGE>


STATEMENTS OF INCOME AND RETAINED EARNINGS
PACCAR Financial Corp.

                                                     Year Ended December 31
                                                 1996       1995          1994
------------------------------------------------------------------------------
                                                    (Thousands of Dollars)
  Interest and other income                   $175,836    $162,956    $128,841
  Rentals on operating leases                   11,767      13,008      12,323
------------------------------------------------------------------------------
  TOTAL FINANCE INCOME                         187,603     175,964     141,164

  Interest expense                              98,536      89,796      62,851
  Other borrowing expense                        1,803       1,575       1,453
  Depreciation expense related
     to operating leases                         9,358      10,379       9,953
------------------------------------------------------------------------------
  TOTAL FINANCE EXPENSES                       109,697     101,750      74,257

  FINANCE MARGIN                                77,906      74,214      66,907

  Insurance premiums earned                      5,528       4,349       2,869
  Insurance claims and underwriting expenses     3,891       3,588       2,341
------------------------------------------------------------------------------
  INSURANCE MARGIN                               1,637         761         528

  Selling, general &
     administrative expenses                    24,084      23,429      22,815
  Provision for losses on receivables            3,279       4,816       2,473
------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                      52,180      46,730      42,147
------------------------------------------------------------------------------

  Federal and state income taxes                20,321      18,809      16,968
------------------------------------------------------------------------------

NET INCOME                                      31,859      27,921      25,179
------------------------------------------------------------------------------

  Retained earnings at beginning of year       229,015     203,809     179,940
  Cash dividends paid                           (2,933)     (2,715)     (1,310)
------------------------------------------------------------------------------

RETAINED EARNINGS AT END OF YEAR              $257,941    $229,015    $203,809
------------------------------------------------------------------------------
------------------------------------------------------------------------------

See notes to financial statements.

                                      -14-

<PAGE>

STATEMENTS OF CASH FLOWS
PACCAR Financial Corp.

                                                  Year Ended December 31
                                                 1996       1995        1994
------------------------------------------------------------------------------
                                                    (Thousands of Dollars)
OPERATING ACTIVITIES:

  Net income                                 $  31,859   $  27,921   $  25,179
  Items included in net income not
        affecting cash:
     Provision for losses on receivables         3,279       4,816       2,473
     Decrease in deferred taxes payable         (3,640)     (5,326)     (5,935)
     Depreciation and amortization              14,057      14,271      13,254
  Increase (decrease) in payables,
        income taxes and other                  12,402       3,899        (962)
------------------------------------------------------------------------------

NET CASH PROVIDED BY
OPERATING ACTIVITIES                            57,957      45,581      34,009
------------------------------------------------------------------------------

INVESTING ACTIVITIES:

  Finance and other receivables
     acquired                               (1,053,350) (1,045,186)   (954,272)
  Collections on finance and other
     receivables                               942,736     813,215     676,758
  Net decrease (increase) in wholesale
     receivables                                53,404     (97,943)     27,892
  Acquisition of equipment for
     operating leases                          (11,421)    (10,391)    (19,858)
  Proceeds from disposal of equipment           11,880      11,636       8,305
------------------------------------------------------------------------------

NET CASH USED IN
INVESTING ACTIVITIES                           (56,751)   (328,669)   (261,175)
------------------------------------------------------------------------------

FINANCING ACTIVITIES:

  Net increase (decrease) in commercial
        paper and other short term
        borrowings                              41,759     196,681     (14,037)
  Net decrease in bank loans                         -           -     (49,000)
  Increase (decrease) in advances
     payable to PACCAR Inc                           -     (46,000)     46,000
  Proceeds from medium-term notes              375,000     458,000     467,000
  Payments of medium-term notes               (410,500)   (328,800)   (220,800)
  Additions to paid in capital                   2,655       2,933       2,715
  Payment of cash dividend                      (2,933)     (2,715)     (1,310)
------------------------------------------------------------------------------

NET CASH PROVIDED BY
FINANCING ACTIVITIES                             5,981     280,099     230,568
------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH                  7,187      (2,989)      3,402

CASH AT BEGINNING OF YEAR                        5,967       8,956       5,554
------------------------------------------------------------------------------

CASH AT END OF YEAR                          $  13,154   $   5,967   $   8,956
------------------------------------------------------------------------------
------------------------------------------------------------------------------


See notes to financial statements.

                                      -15-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1996
(Thousands of Dollars)


NOTE A--SUMMARY OF ACCOUNTING POLICIES

INDUSTRY:  PACCAR Financial Corp. (the "Company"), a wholly owned subsidiary of
PACCAR Inc ("PACCAR"), provides financing of trucks and related equipment
manufactured primarily by PACCAR and sold by authorized dealers.  The Company
also finances dealer inventories of transportation equipment.  The operations of
the Company are fundamentally affected by its relationship with PACCAR.  Sales
of PACCAR products are the Company's principal source of financing business.

Due to the nature of the Company's business, customers are concentrated in the
transportation industry throughout the United States.  The Company's receivables
and direct financing lease portfolio are not concentrated in any geographic
region.  Generally, all receivables are collateralized by the equipment being
financed.  The risk of credit losses related to this concentration has been
considered in establishing the allowance for losses.

USE OF ESTIMATES:  The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect amounts reported and disclosed in the financial
statements.  Actual results could differ from the amounts estimated by
management.

ESTIMATED CREDIT LOSSES:  The provision for losses on net finance and other
receivables is charged to income in an amount sufficient to maintain the
allowance for losses at a level considered adequate to cover estimated losses.
Receivables are charged to this allowance when, in the judgment of management,
they are deemed uncollectible (usually upon repossession of the collateral).  On
certain retail contracts acquired from the dealers, the dealer retains
liability, up to specified limits, for the credit loss on the sale of a
repossessed vehicle.  The amount and collectibility of dealer recourse
provisions have been considered in establishing the allowance for credit losses.

REVENUE RECOGNITION:  Revenue from net finance receivables and other receivables
is recognized using the interest method.  Certain loan origination costs are
deferred and amortized to interest and other income.  For operating leases,
income is recognized on a straight line basis over the lease term.

Recognition of income is suspended when management determines that collection of
future income is not probable (generally after 90 days past due).  Recognition
is resumed if the receivable becomes contractually current and collection doubts
are removed.

EQUIPMENT:  Equipment on operating leases is recorded at cost and depreciated on
a straight-line basis over the term of each operating lease based upon its
estimated useful life of five years to an estimated residual value.

INCOME TAXES:  The Company is included in the consolidated federal income tax
return of PACCAR.  Any related tax liability is paid by the Company to PACCAR
and any related tax benefit is paid by PACCAR to the Company.

INTEREST RATE CONTRACTS:  The Company enters into interest rate contracts which
generally involve the exchange of fixed or floating rate interest payment
obligations without the exchange of the underlying principal amounts.  These
contracts are used to effectively change the terms of debt to match the interest
rate characteristics of the Company's receivables and thereby reduce the effect
of interest rate fluctuations on the Company's income.  It is the Company's
intent to hold these contracts to maturity.  Net amounts paid or received are
reflected as adjustments to interest expense.

RECLASSIFICATIONS:  Certain prior year amounts have been reclassified to conform
to the 1996 presentation.

                                      -16-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1996
(Thousands of Dollars)

NOTE B--RECEIVABLES

Terms for substantially all finance and other receivables range up to 60 months.
Experience of the Company has shown that some receivables will be paid prior to
contractual maturity and others will be extended or renewed.  Accordingly, the
maturities of receivables presented here should not be regarded as a forecast of
future collections.

The Company's finance and other receivables are as follows:
                                                            December 31
                                                        1996           1995
-----------------------------------------------------------------------------
Notes and contracts due within:
  One year                                        $    730,346    $   677,182
  Two years                                            485,406        467,342
  Three years                                          318,541        312,835
  Four years                                           162,118        149,355
  Five years and beyond                                 42,327         39,913
-----------------------------------------------------------------------------
                                                     1,738,738      1,646,627

Wholesale financing                                    156,000        209,404
Direct financing leases (Including
  estimated residual values of
  $10,650 and $15,010)                                 329,233        315,092
Interest and other receivables                           8,475          9,876
-----------------------------------------------------------------------------

                                                     2,232,446      2,180,999

Unearned interest:
  Notes and contracts                                  (98,409)       (93,654)
  Direct financing leases                              (38,076)       (36,210)
-----------------------------------------------------------------------------

                                                      (136,485)      (129,864)
------------------------------------------------------------------------------

Net finance and other receivables                 $  2,095,961    $ 2,051,135
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------


Future minimum lease payments on direct financing leases totaled $318,583 at
December 31, 1996; and are due as follows:  $107,760 in 1997; $87,548 in 1998;
$67,058 in 1999; $40,546  in 2000; and $15,671 in 2001 and beyond.

The allowance for losses on receivables is summarized as follows:

                                               1996         1995         1994
-----------------------------------------------------------------------------
Balance at beginning of year               $ 35,790    $  29,900     $ 24,000
Provision for losses                          3,279        4,816        2,473
Net (losses) recoveries                      (3,069)       1,074        3,427
-----------------------------------------------------------------------------
Balance at end of year                     $ 36,000    $  35,790     $ 29,900
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------

                                     -17-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1996
(Thousands of Dollars)

At December 31, 1996 and 1995, the recorded investments in notes and contracts
that are considered to be impaired were $15,221 and $12,555 respectively.
Included in the allowance for losses were specific reserves of $3,593 and $2,100
on these impaired notes and contracts.  The average recorded investment in
impaired notes and contracts during the years ended December 31, 1996 and 1995,
were $16,429 and $9,623 respectively.  For the years ended December 31, 1996 and
1995, the Company recognized interest income of $716 and $294 respectively, on
those impaired loans, all of which was recognized using the cash basis method of
income recognition.


NOTE C--OPERATING LEASES


Terms of operating leases range up to 44 months.  Future annual minimum rental
payments to be received for transportation equipment on operating leases
beginning January 1, 1997 are: $8,787 in 1997; $5,034 in 1998; $2,846 in 1999
and $703 in 2000.


NOTE D--TRANSACTIONS WITH PACCAR

The Company has a Support Agreement with PACCAR that requires, among other
provisions, that PACCAR maintain a ratio of earnings to fixed charges, as
defined, for the Company of at least 1.25 to 1 for any fiscal year, and that
PACCAR own all outstanding voting stock of the Company.  The required ratio of
1.25 to 1 for the years ended December 31, 1996, 1995 and 1994 was met without
assistance.

PACCAR charges the Company for certain administrative services it provides.
These costs are charged to the Company based upon the Company's specific use of
the services and PACCAR's cost.  Management considers these charges reasonable
and not significantly different from the costs that would be incurred if the
Company were on a stand-alone basis.  Fees for services of $2,676, $3,126 and
$3,134 for 1996, 1995 and 1994, respectively, were charged to the Company.
Beginning July 1993, in lieu of payment, PACCAR recognizes certain of these
administrative services as an additional investment in the Company.  The Company
records the investment as paid-in capital.  The Company pays a dividend to
PACCAR for the paid-in capital invested in the prior year.  Cash dividends of
$2.9 million, $2.7 million, and $1.3 million were paid in 1996, 1995 and 1994,
respectively.

The Company's employees are covered by a defined benefit pension plan, an
unfunded postretirement medical and life insurance plan and a defined
contribution plan sponsored by PACCAR.  Separate allocations of plan assets,
defined benefit accumulated plan benefits and defined contribution plan benefits
relating to the Company have not been made.  Expenses charged to the Company by
PACCAR for these plans were $791, $683, and $626 for years 1996, 1995 and 1994,
respectively.

Periodically, the Company borrows funds from PACCAR Inc and makes market-rate
short term loans to PACCAR Inc.  At December 31, 1996 and 1995, there were no
outstanding loans for the Company from or to PACCAR Inc.

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.


                                      -18-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1996
(Thousands of Dollars)

NOTE E--BORROWINGS

     Borrowings are summarized as follows:

                                        Effective
                                          Rate*           1996          1995
-----------------------------------------------------------------------------
    Commercial paper                      5.55%     $   642,616   $   632,857
    Other short-term borrowings           5.46%          57,000        25,000
    Fixed rate medium-term notes          6.33%         834,000       879,500
    Floating rate medium-term notes       5.31%         130,000       120,000
-----------------------------------------------------------------------------
                                                    $ 1,663,616   $ 1,657,357
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------

*The effective rate is the weighted average rate as of December 31, 1996 and
includes the effects of interest rate agreements.

Principal amounts of medium-term notes due over the next five years beginning
January 1, 1997 are $415,000 in 1997, $293,000 in 1998, $193,000 in 1999,
$63,000 in 2000, and $0 in 2001.

Cash paid for interest was $102,414 in 1996, $84,208 in 1995, and $55,349 in
1994.

At December 31, 1996, the company had outstanding 41 interest rate contracts
with various financial institutions consisting of $406.1 million of interest
rate swaps and $37.3 million of interest rate caps, for a total notional
principal amount of $443.4 million.  The notional principal of these contracts
matures as follows:  $316.6 million in 1997 and $126.8 million in 1998.  The
notional amount is used to measure the volume of these contracts and does not
represent exposure to credit loss.  The Company's risk in these transactions is
the cost of replacing, at current market rates, these contracts in the event of
default by the counterparty.  Management believes the risk of incurring such
losses is remote, and any losses would be immaterial.

The Company had $406.1 million of interest rate swaps in which the Company pays
a fixed rate and receives a floating rate in return.  These swaps effectively
convert an equivalent amount of commercial paper and other variable rate debt to
fixed rates.  Of these swaps, $296.1 million matures in 1997 and $110.0 million
matures in 1998.

At December 31, 1996, the weighted average pay rate of 5.9% substantially
represents the Company's net cost of funds rate after the effect of the interest
rate swaps as the weighted average receive rate of 5.6% offsets the pay rate on
associated debt obligations.

NOTE F-- CREDIT ARRANGEMENTS

The Company and PACCAR together have lines of credit arrangements with various
commercial banks that are reviewed annually for renewal.  These lines are
maintained primarily to support the Company's short-term borrowings.  At
December 31, 1996, the unused portion of these credit lines was $375 million.
The Company compensates banks with fees which are immaterial in amount.

The Company has entered into facility agreements with various lending
institutions, under which the lending institutions may sell a participation or
assign all or a portion of the note to other institutions.  These notes
generally mature within 30 days.  At December 31, 1996 there were $32 million in
notes outstanding, compared with no notes outstanding at December 31, 1995.

                                      -19-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1996
(Thousands of Dollars)

NOTE G--INCOME TAXES

The provision for income taxes consists of the following:

                                                 Year Ended December 31
                                          1996           1995             1994
------------------------------------------------------------------------------

Current provision
  Federal                            $  20,531     $   20,149     $     19,285
  State                                  3,430          3,986            3,618
------------------------------------------------------------------------------
                                        23,961         24,135           22,903

Deferred benefit                        (3,640)        (5,326)          (5,935)
------------------------------------------------------------------------------

                                     $  20,321     $   18,809     $     16,968
------------------------------------------------------------------------------
------------------------------------------------------------------------------

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

                                                 Year Ended December 31
                                          1996           1995             1994
------------------------------------------------------------------------------

Tax at the statutory rate of 35%     $  18,263     $   16,355     $     14,752
Effect of:
  Rate increases on deferred taxes           -              -              364
  State income taxes and other           2,058          2,454            1,852
------------------------------------------------------------------------------

                                     $  20,321     $   18,809     $     16,968
------------------------------------------------------------------------------
------------------------------------------------------------------------------

An increase in the Company's effective state income tax rate raised the 1994
provision by $364.

Cash paid for income taxes was $23,802 in 1996, $18,032 in 1995, and $26,583 in
1994.

Deferred income tax assets and liabilities consisted of the following:


                                                   As of December 31
                                                  1996           1995
----------------------------------------------------------------------
Deferred tax liabilities
  Depreciation                                 $ 70,329      $  72,457
  State income tax                                8,492          8,851
----------------------------------------------------------------------
                                                 78,821         81,308
Deferred tax (assets)
  Allowance for doubtful accounts              (12,600)        (12,527)
  Other                                         (5,280)         (4,200)
----------------------------------------------------------------------
                                               (17,880)        (16,727)

-----------------------------------------------------------------------

Net deferred tax liability                     $ 60,941      $  64,581
----------------------------------------------------------------------
----------------------------------------------------------------------

                                      -20-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1996
(Thousands of Dollars)

NOTE H--FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

CASH:  The carrying amount reported in the balance sheets approximates fair
value.

NET RECEIVABLES:  For floating rate loans and wholesale financings, fair values
are based on carrying values.  For fixed rate loans, fair values are estimated
using discounted cash flow analyses applying interest rates currently being
offered for loans with similar terms to borrowers of similar credit quality.
The carrying amount of accrued interest and other receivables approximates their
fair value.  Direct financing leases and the related allowance for losses are
not included in net receivables.

OFF-BALANCE-SHEET INSTRUMENTS:  Fair values for the Company's interest rate
contracts are based on costs which would be incurred to terminate existing
agreements and enter into new agreements with similar notional amounts, maturity
dates and counterparties' credit standings at current market interest rates.

COMMERCIAL PAPER, BANK LOANS AND MEDIUM-TERM NOTES:  The carrying amount of the
Company's commercial paper, bank loans and floating rate medium-term notes
approximates their fair value.  The fair value of the Company's fixed rate
medium-term notes is estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.

The carrying amount of trade payables and receivables approximate their fair
value and have been excluded from the accompanying table.

The carrying amounts and fair values of the Company's financial instruments at
December 31, 1996 and 1995 are as follows:

                                                As of December 31
                                          1996                     1995
                               -----------------------   ----------------------
                                Carrying        Fair      Carrying       Fair
                                 Amount         Value      Amount        Value
                               ----------   ----------   ----------  ----------
Cash                           $   13,154   $   13,154   $    5,967  $    5,967
Net receivables                 1,775,005    1,757,758    1,742,419   1,755,196
Commercial paper and
  bank loans                      699,616      699,616      657,857     657,857
Medium-term notes                 964,000      962,482      999,500   1,009,343


The Company's intent is to hold interest rate contracts until maturity.  If
recorded at fair value at December 31, 1996, the Company's off-balance-sheet
financial instruments (interest rate contracts) would represent gross assets of
$193 and offsetting gross liabilities of $618, resulting in a net liability of
$425.  If recorded at fair value at December 31, 1995, the Company's off-
balance-sheet financial instruments would have reflected a net liability balance
of $1,568.

                                      -21-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1996
(Thousands of Dollars)


NOTE I--QUARTERLY RESULTS  (Unaudited)

                                                      QUARTER
                                   --------------------------------------------
                                   First        Second       Third      Fourth
                                  -------       -------     -------     -------
1996
----
Gross income                      $48,196       $48,155     $48,369     $48,411
Income before income taxes         13,152        12,971      13,133      12,924
Net income                          8,035         7,919       8,018       7,887

1995
----
Gross income                      $41,565       $43,976     $45,781     $48,991
Income before income taxes         10,319        11,456      12,080      12,875
Net income                          6,168         6,839       7,221       7,693


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

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


                                      -22-

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The directors and executive officers of the Company at February 14, 1997,
their ages, current positions with the Company and principal occupations during
the past five years are set forth in the following table.  The table also shows
directorships held by a director in public corporations.

                                       DIRECTORS AND EXECUTIVE OFFICERS

                                    Present Position and Other Position(s)
 NAME AND AGE                            Held During Last Five Years
---------------------         ------------------------------------------------

Mark C. Pigott (43)           Chairman and Director.  Chairman, Chief 
                              Executive Officer, and Director of PACCAR; Vice
                              Chairman of PACCAR from January 1995 to December
                              1996; Executive Vice President of PACCAR from 
                              December 1993 to January 1995; previously Senior
                              Vice President of PACCAR.

T. Ronald Morton (50)         President and Director.  President of the Company
                              since August 1988. Senior Vice President of 
                              PACCAR since June 1995.

G. Don Hatchel (52)           Vice President and Director.  Vice President-
                              Controller of PACCAR since January 1991.

David J. Hovind (56)          Director.  President and Director of PACCAR since
                              January 1992. Executive Vice President of PACCAR
                              from July 1987 to January 1992.

Ronald E. Ranheim (52)        Director.  Treasurer of PACCAR since July 1996.
                              Treasurer of PFC from March 1986 to July 1996.

James L. Shiplet (58)         Director.  President of PACCAR Leasing Corporation
                              since September 1987.

Michael A. Tembreull (50)     Director.  Vice Chairman of PACCAR since January
                              1995.  Executive Vice President of PACCAR from
                              January 1992 to January 1995.  Senior Vice
                              President of PACCAR from September 1990 to January
                              1992.

     The directors of the Company are elected annually by PACCAR.  All officers
are elected annually by the Board of Directors or appointed by the Board of
Directors or the Chairman to serve at the pleasure of the Board or until their
successors are elected or appointed.

ITEM 11. EXECUTIVE COMPENSATION

     This item is omitted pursuant to Form 10-K General Instruction I(1) and
(2)(c).

                                      -23-

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITIES OF THE COMPANY

     PACCAR owns beneficially and of record 100% of the outstanding preferred
stock (310,000 shares, $100 par value) and common stock (145,000 shares, $100
par value) of the Company.

SECURITIES OF PACCAR

     This item is omitted pursuant to Form 10-K General Instruction I(1) and
(2)(c).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     See generally "Relationship with PACCAR," "Selected Financial Data" and
"NOTE D--Transactions with PACCAR" in the Notes to Financial Statements.


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

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

     AT DECEMBER 31, 1996 AND 1995 AND FOR THE YEARS ENDED DECEMBER 31, 1996, 
     1995, AND 1994

     Balance Sheets -- December 31, 1996 and 1995

     Statements of Income and Retained Earnings -- Years Ended December 31,
     1996, 1995 and 1994

     Statements of Cash Flows -- Years Ended December 31, 1996, 1995 and 1994

     Notes to Financial Statements -- December 31, 1996

  All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or have been otherwise disclosed and,
therefore, have been omitted.

     Listing of Exhibits

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

(b) REPORTS ON FORM 8-K FILED IN THE FOURTH QUARTER OF 1996

There were no reports on Form 8-K for the quarter ended December 31, 1996.

                                      -24-

<PAGE>

                                   SIGNATURES

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

                    PACCAR Financial Corp.



                    By  /s/ T. Ronald Morton
                        ------------------------
                        T. Ronald Morton
                        President

Date:  March 18, 1997

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

(1)  Principal Executive Officer


     /s/ T. Ronald Morton                         President
     ----------------------------
     T. Ronald Morton

(2)  Principal Financial Officer


     /s/ Patricia A. Donohoe                      Treasurer
     ----------------------------
     Patricia A. Donohoe

(3)  Principal Accounting Officer

     /s/ Michael T. Barkley                       Controller
     ----------------------------
     Michael T. Barkley

(4)  A Majority of the Board of Directors:

      /s/ T. Ronald Morton
     ----------------------------
     T. Ronald Morton

     G. Don Hatchel*
     David J. Hovind*
     Mark C. Pigott*
     Ronald E. Ranheim
     James L. Shiplet*
     Michael A. Tembreull*

*By  /s/ T. Ronald Morton
     ----------------------------
       T. Ronald Morton
       Attorney-in-Fact

                                      -25-

<PAGE>

                             PACCAR Financial Corp.
                                  EXHIBIT INDEX


3.1       Restated Articles of Incorporation of the Company, as amended
          (incorporated by reference to Exhibit 3.1 to the Company's Form 10-K
          dated March 26, 1985.  Amendment incorporated by reference to Exhibit
          19.1 to the Company's Quarterly Report on Form 10-Q dated August 13,
          1985, File Number 0-12553).

3.2       By-Laws of the Company, as amended (incorporated by reference to
          Exhibit 3.2 to the Company's Registration Statement on Form 10 dated
          October 20, 1983, File Number 0-12553).

4.1       Indenture for Senior Debt Securities dated as of December 1, 1983 and
          first Supplemental Indenture dated as of June 19, 1989 between the
          Company and Citibank, N.A. (incorporated by reference to Exhibit 4.1
          to the Company's Annual Report on Form 10-K dated March 26, 1984, File
          Number 0-12553 and Exhibit 4.2 to the Company's Registration Statement
          on Form S-3 dated June 23, 1989, Registration Number 33-29434).

4.2       Forms of Medium-Term Note, Series E (incorporated by reference to
          Exhibits 4.3A, 4.3B and 4.3C to the Company's Registration Statement
          on Form S-3 dated June 23, 1989, Registration Number 33-29434, and
          Forms of Medium-Term Note, Series E, incorporated by reference to
          Exhibit 4.3B.1 to the Company's Current Report on Form 8-K dated
          December 19, 1991, under Commission File Number 0-12553).

          Letter of Representation among the Company, Citibank, N.A. and the
          Depository Trust Company, Series E, dated July 6, 1989 (incorporated
          by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-
          K dated March 29, 1990, File Number 0-12553).

4.3       Forms of Medium-Term Note, Series F (incorporated by reference to
          Exhibits 4.3A, 4.3B and 4.3C to the Company's Registration Statement
          on Form S-3 dated May 26, 1992, Registration Number 33-48118).

          Form of Letter of Representation among the Company, Citibank, N.A. and
          the Depository Trust Company, Series F (incorporated by reference to
          Exhibit 4.4 to the Company's Registration Statement on Form S-3 dated
          May 26, 1992, Registration Number 33-48118).

4.4       Forms of Medium-Term Note, Series G (incorporated by reference to
          Exhibits 4.3A and 4.3B to the Company's Registration Statement on Form
          S-3 dated December 8, 1993, Registration Number 33-51335).

          Form of Letter of Representation among the Company, Citibank, N.A. and
          the Depository Trust Company, Series G (incorporated by reference to
          Exhibit 4.4 to the Company's Registration Statement on Form S-3 dated
          December 8, 1993, Registration Number 33-51335).

4.5       Forms of Medium-Term Note, Series H (incorporated by reference to
          Exhibits 4.3A and 4.3B to the Company's Registration Statement on Form
          S-3 dated March 11, 1996, Registration Number 333-01623).

          Form of Letter of Representation among the Company, Citibank, N.A. and
          the Depository Trust Company, Series H (incorporated by reference to
          Exhibit 4.4 to the Company's Registration Statement on Form S-3 dated
          March 11, 1996, Registration Number 333-01623).

10.1      Support Agreement between the Company and PACCAR dated as of June 19,
          1989  (incorporated by reference to Exhibit 28.1 to the Company's
          Registration Statement on Form S-3 dated June 23, 1989, Registration
          Number 33-29434).

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12.1      Statement re computation of ratio of earnings to fixed charges of the
          Company pursuant to SEC reporting requirements for each of the five
          years in the period ended December 31, 1996.

12.2      Statement re computation of ratio of earnings to fixed charges of the
          Company pursuant to the Support Agreement with PACCAR for each of the
          five years in the period ended December 31, 1996.

12.3      Statement re computation of ratio of earnings to fixed charges of
          PACCAR and subsidiaries pursuant to SEC reporting requirements for
          each of the five years in the period ended December 31, 1996.

24.1      Consent of Independent Auditors.

25.1      Power of attorney of certain officers and directors.

27        Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c)
          for the year ended December 31, 1996.

Other exhibits listed in Item 601 of Regulation S-K are not applicable.



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