<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, 1997 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: (425) 468-7100

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

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

     Series H Medium-Term Notes
  $5 Million Due December 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, 1998: None

The number of shares outstanding of the registrant's classes of common stock as
of March 1, 1998:

                 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 whose principal products are heavy-duty
diesel trucks (primarily Class 8 trucks with gross vehicle weight in excess of
33,000 pounds) and related service parts. This business accounted for 91% of
PACCAR's total revenues in 1997. PACCAR markets these trucks under the
"Kenworth", "Peterbilt", "DAF" and "Foden" nameplates primarily through its
dealers. 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 foreign subsidiary companies in Canada, Australia, Mexico,
the Netherlands and, in the United Kingdom, through a wholly-owned US
subsidiary. PACCAR also competes in the North American Class 6/7 markets. These
medium-duty trucks are assembled at a PACCAR factory in Mexico. Other PACCAR
products include industrial winches. 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 independent 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 five other wholly-owned
finance companies.

     As of December 31, 1997, PACCAR and its subsidiaries had total assets of
$5.6 billion and stockholders' equity of $1.5 billion. For the year ended
December 31, 1997, PACCAR's consolidated revenues and net income were $6.8
billion and $345 million, respectively.

     There were five other principal competitors besides PACCAR in the United 
States Class 8 truck market in 1997. Based on 1997 industry registration 
statistics, PACCAR's Kenworth and Peterbilt combined truck sales accounted 
for approximately 21% of domestic Class 8 new truck registrations. There were 
seven other principal competitors in the European medium and heavy commercial 
vehicle market in 1997 including parent companies to three competitors of 
PACCAR in the United States. PACCAR's subsidiary, DAF, had a 9% overall 
market share in Western Europe. Both the domestic and European heavy-duty 
truck markets are highly competitive in price, quality and service. PACCAR is 
not dependent on any single customer for a significant amount of its sales.

     PACCAR's common stock, $1 par value, is traded on the Nasdaq National
Market under the 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 


                                        2
<PAGE>

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; at 7 World Trade Center, 13th
Floor, New York, New York 10048, or through the Commission's internet site at
www.sec.gov.

                             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, 1997, the Company employed 283 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 having 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, 1997, the largest single customer for Retail Contracts,
Direct Loans or Leases represented 1.4% of the Company's net receivables, and
the five largest such accounts amounted to 4.4% of net receivables.

     At December 31, 1997, the Company had four Master Note dealers. Master Note
borrowings totaled 10.5% of the Company's net receivables, while the largest
Master Note dealer's borrowing amounted to 7.0% of the Company's 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, 1997, there was no
significant customer concentration.

Past Due Receivables and Allowance for Losses

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

   The Company maintains an allowance for losses on receivables at a level which
it considers to be adequate to cover management's estimates of 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)
<TABLE>
<CAPTION>

                                                                                        Year Ended December 31

                                                                             ----------------------------------------------
                                                                                  1997           1996            1995
                                                                                  ----           ----            ----
<S>                                                                           <C>              <C>            <C>    

Balance at beginning of period                                                 $  36,000       $  35,790      $  29,900
Provision for losses                                                               6,245           3,279          4,816
Net (losses) recoveries                                                           (4,895)         (3,069)         1,074
                                                                               ----------      ---------      ---------
Balance at end of period                                                       $  37,350       $  36,000      $  35,790
                                                                               =========       =========      =========
Ratios:

   Net (losses) recoveries to average net                                         (.23)%         (.15)%            .06%
        receivables and equipment on operating leases
   Allowance for losses to period end net                                          1.70%          1.70%           1.72%
        receivables and equipment on operating leases
    Period end gross contracts and leases past                                     1.05%           .93%            .56%
        due (over 60 days) to period end gross
        contracts and lease receivables
</TABLE>

     For discussion of the allowance for losses, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations, 1995 - 1997."

                        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 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 PACCAR equity investments. 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 on existing business 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. 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, 1997, the total notional principal amount of interest rate contracts
outstanding were as follows: $550 million of interest rate swaps resulting in a
fixed rate payment obligation; and $15 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, 1997, PACCAR and the Company together had $410 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, 1997, the Company had $964 million of medium-term notes
outstanding, $463 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, 1983, 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
and pays dividends to PACCAR, and may occasionally borrow funds from or lend
money to PACCAR or its Affiliates. Since the directors of the Company are all
executives of PACCAR or its affiliated companies 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 and Affiliates"
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, 1993 - 1997 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 additional
paid-in capital invested in the prior year. Cash dividends of $2.7 million, $2.9
million and $2.7 million were paid in 1997, 1996 and 1995, 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, 1997 has
been derived from the Company's audited financial statements.

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

<TABLE>
<CAPTION>

Balance Sheet Data                                                       As of December 31
------------------
                               ----------------------------------------------------------------------------------

                                    1997            1996             1995             1994            1993
                                    ----            ----             ----             ----            ----
<S>                            <C>             <C>                <C>             <C>             <C>  

Total Assets                   $   2,201,064   $   2,120,612      $ 2,074,405     $ 1,770,769     $ 1,493,880
Total Liabilities                  1,857,660       1,807,559        1,792,934       1,517,436       1,267,130
Stockholder's Equity                 343,404         313,053          281,471         253,333         226,750

</TABLE>

<TABLE>
<CAPTION>

Income Statement Data                                       Year Ended December 31
---------------------
                                  ----------------------------------------------------------------------------------

                                       1997            1996             1995             1994            1993
                                       ----            ----             ----             ----            ----
<S>                                <C>             <C>               <C>              <C>             <C>    

Finance and Insurance Margin       $     82,214    $     79,543      $    74,975      $    67,435     $    58,518
Operating and Other Expenses             25,272          24,084           23,429           22,815          21,990
Provision for Losses                      6,245           3,279            4,816            2,473           6,079
                                   ------------    ------------      -----------      -----------     -----------

Income Before Income Taxes               50,697          52,180           46,730           42,147          30,449

Income Taxes                             19,785          20,321           18,809           16,968          13,446
                                   ------------    ------------      -----------      -----------     -----------

Net Income                         $     30,912    $     31,859      $    27,921      $    25,179     $    17,003
                                   ============    ============      ===========      ===========     ===========

Ratio of Earnings to Fixed                1.50x           1.53x            1.52x            1.67x           1.66x
   Charges (1)

</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
        1.57x, 1.62x, 1.63x, 1.82x and 1.89x for the years 1997 - 1993,
        respectively. See Exhibits 12.1 and 12.2.

                                       9
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS, 1995 - 1997

Results of Operations 1997 Compared to 1996:

     The finance margin increased 3% to $80.4 million for 1997 from $77.9
million in 1996 due primarily to growth in receivable balances. Average
receivables grew 2% to $2,115 million in 1997 from $2,069 million in 1996
reflecting two consecutive years of record new business volume. The increase in
volume for 1997 was led by a 23% increase in trailer and used truck financing,
while new Class 8 financing increased by 4%. The average margin rate on the
receivables declined for the third year due to intense rate competition in the
truck lending market.

     Selling, general and administrative expenses were 5% higher in 1997 than
1996 due to increased staffing costs. The provision for losses increased 91% to
$6.2 million in 1997 from $3.3 million in 1996 due to asset growth and higher
credit losses. The Company experienced net credit losses of $4.9 million in 1997
compared to $3.1 million in 1996 primarily due to higher repossession rates
among owner operator customers. At the end of 1997, the allowance for losses as
a percentage of earning assets remained unchanged from 1996 at 1.70%. 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 1997 decreased 3% to
$30.9 million from $31.9 million in 1996.

1996 Compared to 1995:

     Net income increased 14% to $31.9 million in 1996 from $27.9 million in
1995. The growth resulted primarily from a $3.7 million increase in the finance
margin attributable to growth in receivables. Average receivables increased 10%
to $2,069 million in 1996 from $1,884 million in 1995 due mainly to increases in
new business volume. The provision for losses decreased 32% to $3.3 million from
$4.8 million in 1995 despite the fact that net credit losses totaled $3.1
million compared to net credit recoveries of $1.1 million in 1995. This was due
to a decline in the growth rate of receivables from 18% in 1995 to 10% in 1996
and a decline in the allowance for losses as a percentage of earning assets to
1.70% in 1996 compared to 1.72% in 1995.

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 1997, there were $265 million of such securities available for
issuance. Upon issuance of the remaining securities, the Company expects to
register additional senior debt securities for offering to the public.

     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.

     The Company has evaluated its computer systems and applications and
determined that Year 2000 compliance issues have not had and are not anticipated
in the future to have a material impact on the Company's financial position or
results of operations. The Company and PACCAR have initiated formal
communications with its major suppliers and service providers to determine the
extent to which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own Year 2000 issues.
                                      10
<PAGE>

     Equipment additions for 1997 included $3.5 million for investments in
state-of-the-art software and hardware as part of the Company's continuing
investment to improve the market acceptance and quality of its products and
services. During the next several years, average spending for such systems
improvements at the Company is expected to be higher.

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, 1997 and 1996, and the
related statements of income and retained earnings and cash flows for each of
the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.

                                            /S/ Ernst & Young LLP

Seattle, Washington
February 16, 1998

                                       12
<PAGE>


BALANCE SHEETS
PACCAR Financial Corp.
<TABLE>
<CAPTION>

                                                                           December 31
                                                                     1997                1996
                                                          ------------------- --------------------
                                                                  (Thousands of Dollars)
<S>                                                         <C>                 <C>    
ASSETS

  Cash                                                          $   13,370          $   13,154
  Finance and other receivables net of
     allowance for losses of $37,350 ($36,000 in 1996)           2,136,315           2,059,961
  Equipment on operating leases net of
     depreciation of $16,332 ($18,628 in 1996)                      34,593              35,016
  Other assets                                                      16,786              12,481
                                                          ------------------- --------------------

TOTAL ASSETS                                                  $  2,201,064        $  2,120,612
                                                          ------------------- --------------------


LIABILITIES

  Accounts payable and accrued expenses                         $   36,580          $   37,960
  Payable for finance receivables acquired                          35,799              45,866
  Commercial paper and other short-term borrowings                 759,016             699,616
  Medium-term notes                                                964,000             964,000
  Income taxes - current and deferred                               62,265              60,117
                                                          ------------------- --------------------

  TOTAL LIABILITIES                                              1,857,660           1,807,559
                                                          ------------------- --------------------


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                                                   11,706               9,612
  Retained earnings                                                286,198             257,941
                                                          ------------------- --------------------

  TOTAL STOCKHOLDER'S EQUITY                                       343,404             313,053
                                                          ------------------- --------------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                    $  2,201,064        $  2,120,612
                                                          ------------------- --------------------
</TABLE>



See accompanying notes.


                                       13


<PAGE>


STATEMENTS OF INCOME AND RETAINED EARNINGS
PACCAR Financial Corp.
<TABLE>
<CAPTION>

                                                               Year Ended December 31
                                                         1997          1996            1995
                                                     ------------- ------------- --------------
                                                                (Thousands of Dollars)

<S>                                                   <C>           <C>           <C>       
  Interest and other income                           $  181,152    $ 175,836     $  162,956
  Rentals on operating leases                              9,801       11,767         13,008
                                                     ------------- --------------  -------------

TOTAL FINANCE INCOME                                     190,953      187,603         175,964

  Interest expense                                       101,440       98,536          89,796
  Other borrowing expense                                  1,810        1,803           1,575
  Depreciation expense related
     to operating leases                                   7,319        9,358          10,379
                                                     ------------- -------------- --------------

  TOTAL FINANCE EXPENSES                                 110,569      109,697         101,750
                                                     ------------- -------------- --------------

  FINANCE MARGIN                                          80,384       77,906          74,214

  Insurance premiums earned                                5,726        5,528           4,349
  Insurance claims and underwriting expenses               3,896        3,891           3,588
                                                     ------------- -------------- --------------

  INSURANCE MARGIN                                         1,830        1,637             761

  Selling, general and
     administrative expenses                              25,272       24,084          23,429
  Provision for losses on receivables                      6,245        3,279           4,816
                                                     ------------- -------------- --------------

INCOME BEFORE INCOME TAXES                                50,697       52,180          46,730

  Federal and state income taxes                          19,785       20,321          18,809
                                                     ------------- -------------- --------------

NET INCOME                                                30,912       31,859          27,921

  Retained earnings at beginning of year                 257,941      229,015         203,809
  Cash dividends paid                                     (2,655)      (2,933)         (2,715)
                                                     ------------- -------------- --------------

RETAINED EARNINGS AT END OF YEAR                     $   286,198   $  257,941      $  229,015
                                                     ------------- -------------- --------------
</TABLE>




See accompanying notes.

                                       14
<PAGE>

STATEMENTS OF CASH FLOWS
PACCAR Financial Corp.

<TABLE>
<CAPTION>

                                                                      Year Ended December 31
                                                             1997               1996             1995
                                                         -------------    -------------      -------------
                                                                       (Thousands of Dollars)
<S>                                                      <C>               <C>              <C>  

OPERATING ACTIVITIES:

  Net income                                             $     30,912      $     31,859     $     27,921
  Items included in net income not
     affecting cash:
     Provision for losses on receivables                        6,245             3,279            4,816
     Increase (decrease) in deferred taxes payable              1,573            (3,640)          (5,326)
     Depreciation and amortization                             12,073            14,057           14,271
   (Decrease) increase in payables and other                   (5,208)           12,402            3,899
                                                          -------------    -------------     -----------

NET CASH PROVIDED BY
OPERATING ACTIVITIES                                           45,595            57,957           45,581

INVESTING ACTIVITIES:

  Finance and other receivables acquired                   (1,155,213)       (1,053,350)      (1,045,186)
  Collections on finance and other receivables              1,017,968           942,736          813,215
  Net decrease (increase) in wholesale
     receivables                                               40,857            53,404          (97,943)
  Acquisition of equipment                                    (17,132)          (11,421)         (10,391)
  Proceeds from disposal of equipment                           9,303            11,880            11,636
                                                          -------------    -------------     ------------

NET CASH USED IN
INVESTING ACTIVITIES                                         (104,217)          (56,751)        (328,669)

FINANCING ACTIVITIES:

  Net increase in commercial paper
     and other short-term borrowings                           59,400            41,759          196,681
  Decrease in advances payable to PACCAR                            -                 -          (46,000)
  Proceeds from medium-term notes                             415,000           375,000          458,000
  Payments of medium-term notes                              (415,000)         (410,500)        (328,800)
  Additions to paid-in capital                                  2,093             2,655            2,933
  Payment of cash dividend                                     (2,655)           (2,933)          (2,715)
                                                          ------------      ------------     ------------

NET CASH PROVIDED BY
FINANCING ACTIVITIES                                           58,838             5,981          280,099
                                                          ------------      ------------     ------------

NET INCREASE (DECREASE) IN CASH                                   216             7,187           (2,989)

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

CASH AT END OF YEAR                                        $   13,370        $   13,154         $  5,967
                                                          -------------     ------------      -----------
</TABLE>

See accompanying notes.
                                       15
<PAGE>


NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(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 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 contract term of each operating lease 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.

                                       16
<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(Thousands of Dollars)


Derivative Financial Instruments: The Company enters into interest rate
contracts and cap agreements to manage certain exposures to fluctuations in
interest rates. The Company uses interest rate contracts to better match the
interest rate characteristics of the Company's finance receivables with the
borrowings used to fund those receivables and to limit the Company's exposure to
rising interest rates. Interest rate contracts involve the exchange of fixed and
floating rate interest payments without the exchange of the underlying
principal. Net amounts paid or received are reflected as adjustments to interest
expense. Interest rate cap premiums paid are amortized to interest expense
ratably during the life of the agreement. The fair values of interest rate swap
and cap agreements are not recognized in the financial statements. Realized
gains or losses at the time of maturity, termination or repayment of an interest
rate contract or cap agreement are recorded in a manner consistent with the
original designation of the interest rate contract or cap agreement in view of
the nature of the repayment transaction. It is the Company's intent to hold the
contracts to maturity.

Reclassifications: Certain prior year amounts have been reclassified to conform
to the 1997 presentation.

New Accounting Pronouncements: In 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standard No. 130, Comprehensive
Income (Statement 130), which establishes standards for reporting comprehensive
income. The Company is required to adopt Statement 130 in 1998. The Company does
not expect the impact of Statement 130 to be material.

                                       17
<PAGE>


NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(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:
<TABLE>
<CAPTION>

                                                                      December 31
                                                                 1997            1996
                                                            --------------- ------------
<S>                                                         <C>               <C>   
Notes and contracts due within:

   One year                                                 $   755,461       $  730,346
   Two years                                                    513,867          485,406
   Three years                                                  346,027          318,541
   Four years                                                   176,638          162,118
   Five years and beyond                                         61,872           42,327
                                                            --------------- ---------------
                                                              1,853,865        1,738,738

Wholesale financing                                             115,143          156,000
Direct financing leases (including estimated residual
   values of $8,802 and $10,650)                                328,037          329,233
Interest and other receivables                                    8,306            8,475
                                                            --------------- ---------------

                                                              2,305,351        2,232,446

Unearned interest:

   Notes and contracts                                          (93,247)         (98,409)
   Direct financing leases                                      (38,439)         (38,076)
                                                            --------------- ---------------

                                                               (131,686)        (136,485)
                                                            --------------- ---------------


Net finance and other receivables                            $ 2,173,665       $ 2,095,961
                                                            --------------- ---------------
</TABLE>

Future minimum lease payments on direct financing leases totaled $319,235 at
December 31, 1997; and are due as follows: $106,291 in 1998; $87,747 in 1999;
$66,495 in 2000; $43,414 in 2001; and $15,288 in 2002 and beyond.

The allowance for losses on receivables is summarized as follows:
<TABLE>
<CAPTION>


                                     1997           1996         1995
                                  -------------- ------------- -----------
<S>                               <C>            <C>           <C>   

Balance at beginning of year      $  36,000      $  35,790     $ 29,900
Provision for losses                  6,245          3,279        4,816
Net (losses) recoveries              (4,895)        (3,069)       1,074
                                  -------------- ------------- -----------

Balance at end of year            $  37,350      $  36,000     $ 35,790
                                  -------------- ------------- -----------
</TABLE>

                                       18
<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(Thousands of Dollars)


At December 31, 1997 and 1996, the recorded investments in notes and contracts
that were considered to be impaired were $20,353 and $15,221, respectively.
Included in the allowance for losses were specific reserves of $5,172 and $3,593
on these impaired notes and contracts. The average recorded investment in
impaired notes and contracts during the years ended December 31, 1997 and 1996,
was $27,021 and $16,429, respectively. For the years ended December 31, 1997
and 1996, the Company recognized interest income of $963 and $716 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 43 months. Future annual minimum rental
payments to be received for transportation equipment on operating leases
beginning January 1, 1998 are: $7,538 in 1998; $5,358 in 1999; $2,773 in 2000
and $331 in 2001.

NOTE D--TRANSACTIONS WITH PACCAR AND AFFILIATES

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, 1997, 1996 and 1995, 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 
$1,976, $2,676 and $3,126 for 1997, 1996 and 1995, respectively, were charged 
to the Company. In lieu of current year 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 $2.7 million, $2.9 million, and $2.7 million were paid in 1997, 
1996 and 1995, 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 $820, $791, and $683 for years 1997, 1996 and 1995,
respectively.

Periodically, the Company borrows funds from PACCAR and makes market-rate short
and medium-term loans to PACCAR. At December 31, 1997, 1996 and 1995, there were
no outstanding loans for the Company from or to PACCAR.

                                       19
<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(Thousands of Dollars)


The Company may periodically make market-rate short and medium-term loans to
other PACCAR finance subsidiaries (the "Affiliates"), the repayment of which may
sometimes be guaranteed by PACCAR. The aggregate of all loans to the Affiliates
which are not guaranteed by PACCAR will not exceed the equivalent of 50 million
United States dollars. These Affiliates are PACCAR Financial Limited ("PFL",
operating in the United Kingdom), PACCAR Financial Services Ltd. ("PFS",
operating in Canada), and PACCAR Financial Pty. Ltd. ("PFPL", operating in
Australia), and the loans will be in Sterling, Canadian dollars, or Australian
dollars, respectively. The Company will fully hedge any currency exposure
resulting from these loans. Each of these Affiliates has a support agreement
with PACCAR which obligates PACCAR to provide, when required, financial
assistance to such Affiliate to insure that the ratio of net earnings available
for fixed charges to fixed charges (as defined in the agreement) is at least
1.25 to 1, in the case of PFS and PFL, or 1.20 to 1, in the case of PFPL, for
any fiscal year. The required ratio for each Affiliate for the years ended
December 31, 1997, 1996 and 1995, was met without assistance. At December 31,
1997, 1996, and 1995, there were no outstanding loans from the Company to any
Affiliate.

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.

NOTE E--BORROWINGS

   Borrowings are summarized as follows:
<TABLE>
<CAPTION>

                                         Effective
                                           Rate*        1997           1996
                                       ------------ ------------ -------------
     <S>                                   <C>      <C>          <C>   

      Commercial paper                     5.75%    $   715,016  $   642,616
      Other short-term borrowings          5.78%         44,000       57,000
      Fixed rate medium-term notes         6.37%        789,000      834,000
      Floating rate medium-term notes      5.70%        175,000      130,000
                                       ------------ ------------ -------------

             Total                         6.03%    $ 1,723,016  $ 1,663,616
                                       ------------ ------------ -------------
</TABLE>

*The effective rate is the weighted average rate as of December 31, 1997 and
includes the effects of interest rate agreements.

Principal amounts of medium-term notes due over the next five years beginning
January 1, 1998 are $463,000 in 1998, $223,000 in 1999, $193,000 in 2000,
$75,000 in 2001, and $10,000 in 2002.

Cash paid for interest (net of swap interest received) was $101,845 in 1997,
$102,414 in 1996, and $84,208 in 1995.

At December 31, 1997, the Company had outstanding 44 interest rate contracts
with various financial institutions consisting of $550 million of interest rate
swaps and $15 million of interest rate caps, for a total notional principal
amount of $565 million. The notional principal of these contracts matures as
follows: $361 million in 1998, $180 million in 1999, and $24 million in 2000.
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.

At December 31, 1997, the interest rate swap weighted average pay rate of 6.03%
substantially represents the Company's net cost of funds rate after the effect
of the interest rate swaps. The weighted average receive rate of 5.97% offsets
the pay rate on associated debt obligations.

                                       20
<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(Thousands of Dollars)


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, 1997, the unused portion of these credit lines was $410 million. The Company
compensates the banks for providing lines of credit with fees that are
immaterial.

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, 1997, there were $19 million in notes
outstanding, compared with $32 million at December 31, 1996.

                                       21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(Thousands of Dollars)

NOTE G--INCOME TAXES

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>

                                       Year Ended December 31
                                  1997         1996        1995
                              ------------- ---------- ------------
<S>                          <C>            <C>        <C>    
Current provision

  Federal                     $   15,279    $  20,531  $   20,149
  State                            2,934        3,430       3,986
                              ------------- ---------- ------------
                                  18,213       23,961      24,135

Deferred expense (benefit)         1,572      (3,640)      (5,326)
                              ------------- ---------- ------------

                              $   19,785    $  20,321  $   18,809
                              ------------- ---------- ------------
</TABLE>

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

<TABLE>
<CAPTION>
                                              Year Ended December 31
                                         1997         1996     1995
                                       ---------- ----------- ----------
<S>                                    <C>        <C>         <C>  

Tax at the statutory rate of 35%       $ 17,743   $  18,263   $ 16,355
Effect of state income taxes and other    2,042       2,058      2,454
                                       ---------- ----------- ----------
                                       $ 19,785   $  20,321   $ 18,809
                                       ---------- ----------- ----------
</TABLE>

Cash paid for income taxes was $17,386 in 1997, $23,802 in 1996, and $18,032 in
1995.

Deferred income tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
                                          As of December 31
                                        1997            1996

                                      ----------- --------------
<S>                                  <C>           <C>
Deferred tax liabilities:

   Depreciation                       $   71,748   $   70,329
   State income tax                        8,621        8,492
                                      ----------- --------------
                                          80,369       78,821

Deferred tax (assets):

   Allowance for doubtful accounts       (13,073)     (12,600)
   Other                                  (4,783)      (5,280)
                                      ----------- --------------
                                         (17,856)     (17,880)

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

Net deferred tax liability            $   62,513   $   60,941
                                      ----------- --------------
</TABLE>
                                       22

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(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 or currency exchange 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, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>

                                                 1997                        1996
                                       -----------------------     ----------------------
                                       Carrying           Fair      Carrying       Fair
                                        Amount            Value       Amount       Value
                                        ------            -----       ------       ------ 
<S>                                    <C>            <C>          <C>          <C>    
Cash                                   $  13,370      $  13,370    $  13,154    $  13,154
Net receivables                        1,852,525      1,839,437    1,775,005    1,763,657
Commercial paper and bank loans          759,016        759,016      699,616      699,616
Medium-term notes                        964,000        964,709      964,000      962,482

</TABLE>


The Company's intent is to hold interest rate contracts until maturity. If
recorded at fair value at December 31, 1997, the Company's off-balance-sheet
financial instruments (interest rate contracts) would represent gross assets of
$92 and offsetting gross liabilities of $835, resulting in a net liability of
$743. If recorded at fair value at December 31, 1996, the Company's
off-balance-sheet financial instruments would have reflected a net liability
balance of $425.
                                       23
<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1997
(Thousands of Dollars)


NOTE I--QUARTERLY RESULTS  (Unaudited)
<TABLE>
<CAPTION>

                                                      QUARTER

                                  -----------------------------------------------------
                                   First         Second         Third        Fourth
                                   -----         ------         -----        ------
1997
<S>                               <C>            <C>          <C>         <C>    

Gross income                      $ 48,317       $48,322      $ 49,320    $  50,720
Income before income taxes          12,744        12,791        12,916       12,246
Net income                           7,782         7,805         7,882        7,443

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

</TABLE>




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.

                                       24
<PAGE>



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The directors and executive officers of the Company at February 14, 1998,
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
<TABLE>
<CAPTION>

                                    Present Position and Other Position(s)
   Name and Age                         Held During Last Five Years

 ------------------        ----------------------------------------------------
<S>                        <C>     

Mark C. Pigott (44)        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 (51)      President and Director. President of the Company
                           since August 1988. Senior Vice President of PACCAR
                           since June 1995.

G. Don Hatchel (53)        Vice President and Director. Vice
                           President-Controller of PACCAR since January 1991.

David J. Hovind (57)       Director. President and Director of PACCAR since
                           January 1992. Executive Vice President of PACCAR from
                           July 1987 to January 1992.

Ronald E. Ranheim (53)     Director. Treasurer of PACCAR since July 1996.
                           Treasurer of PFC from March 1986 to July 1996.

James L. Shiplet (59)      Director. President of PACCAR Leasing Corporation
                           since September 1987.

Michael A. Tembreull (51)  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.
</TABLE>

     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).

                                       25
<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, 1997 and 1996 and for the Years Ended December 31, 1997,
      1996, and 1995

           Balance Sheets -- December 31, 1997 and 1996

           Statements of Income and Retained Earnings -- Years Ended December
           31, 1997, 1996 and 1995

           Statements of Cash Flows -- Years Ended December 31, 1997, 1996 
           and 1995

           Notes to Financial Statements -- December 31, 1997

     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 1997

There were no reports on Form 8-K for the quarter ended December 31, 1997.

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<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
                               
                                  ---------------------
                                    T. Ronald Morton
                                    President

Date:  March 18, 1998

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

                                                       President
          --------------------------
          T. Ronald Morton
       
(2)   Principal Financial Officer

                                                       Treasurer
         ---------------------------
         Patricia A. Donohoe

(3)   Principal Accounting Officer

                                                       Controller
          --------------------------
          Michael T. Barkley

(4)   A Majority of the Board of Directors:

          --------------------------
          T. Ronald Morton

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

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

                                       27
<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 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).

  4.3       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).

  4.4       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).

  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, 1997.

  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, 1997.

  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, 1997.
 
                                       28
<PAGE>


  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, 1997. 

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

                                       29