<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 [FEE REQUIRED]
    
For the fiscal year ended December 31, 1995
                                       
                                      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:

                                      None

        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, 1996:
                                      None

The number of shares outstanding of the registrant's classes of common stock as
of March 1, 1996:

                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 (J)(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 89% of PACCAR's total revenues 
in 1995.  PACCAR markets these trucks under the "Kenworth," "Peterbilt" and 
"Foden" nameplates.  Domestic Kenworth and Peterbilt trucks are manufactured 
in five 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 PACCAR factories in North 
America.  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 292 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, 1995, PACCAR and its subsidiaries had total assets of 
$4.4 billion and stockholders' equity of $1.3 billion.  For the year ended 
December 31, 1995, PACCAR's consolidated revenues and net income were $4.8 
billion and $252.8 million, respectively.  

     There were six principal competitors, including PACCAR, in the United 
States Class 8 truck market in 1995.  Based on 1995 industry registration 
statistics, PACCAR's Kenworth and Peterbilt combined truck sales accounted 
for approximately 21% of domestic Class 8 new truck registrations.  The 
domestic 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, 1995, the Company employed 248 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.

                                      -3-

<PAGE>

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.

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

     In 1993, the Company initiated a physical damage insurance program 
offered 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, 1995, the largest single customer for Retail Contracts, 
Direct Loans or Leases represented 1.6% of the Company's net receivables, and 
the five largest such accounts amounted to 5.4% of net receivables. 

     At December 31, 1995, the largest Master Note dealer borrowing amounted 
to 8.6% of the Company's net receivables and the five largest dealer notes 
under Master Note receivables amounted to 12.8% 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, 1995, the customer 
concentration was immaterial.

                                      -4-

<PAGE>

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:

                              ALLOWANCE FOR LOSSES
                             (Thousands of Dollars)


<TABLE>
<CAPTION>

                                                     Year Ended December 31 
                                                  ----------------------------
                                                    1995      1994      1993  
                                                  --------  --------   -------
<S>                                                <C>       <C>        <C>
Balance at beginning of period                     $29,900   $24,000   $21,840
Provision for losses                                 4,816     2,473     6,079
Net (losses) recoveries                              1,074     3,427    (3,919)
                                                  --------  --------   -------
Balance at end of period                           $35,790   $29,900   $24,000
                                                  --------  --------   -------
                                                  --------  --------   -------
Ratios:
    Net (losses) recoveries to average 
      net receivables and equipment on 
      operating leases                                 .06%      .21%     (.30%)

    Allowance for losses to period end 
      net receivables and equipment on 
      operating leases                                1.72%     1.69%     1.61%

    Period end gross contracts and leases past
      due (over 60 days) to period end gross
      contracts and lease receivables                  .56%      .23%      .45%

</TABLE>

     For discussion of the allowance for losses, see "Management's Discussion 
and Analysis of Financial Condition and Results of Operations, 1993-1995."

                        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,

                                    -5-

<PAGE>

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.  

                         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.  
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, 1995, the total notional principal amount of 
interest rate contracts outstanding were as follows:  $406.4 million of 
interest rate swaps resulting in a fixed rate payment obligation; $215.0 
million of interest rate swaps resulting in a floating rate payment 
obligation; and $61.9 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.


                                        -6-

<PAGE>

     As of December 31, 1995, PACCAR and the Company together had $345 
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, 1995, the Company had $999.5 million of medium-term 
notes outstanding, $410.5 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.

                            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 the years ended December 31, 1995, 1994, 1993, 1992 and 
1991 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.

                                     -7-

<PAGE>

     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.

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 $2.7 million and $1.3 
million were paid in 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, 1995 has been derived from the Company's audited financial 
statements.

                  BALANCE SHEET DATA AND INCOME STATEMENT DATA
                             (Thousands of Dollars)

<TABLE>
<CAPTION>
                                                    As of December 31                 
                           -----------------------------------------------------------------
BALANCE SHEET DATA               1995        1994        1993          1992        1991
                             -----------  ----------  -----------   -----------  -----------
<S>                              <C>         <C>          <C>          <C>         <C>

Total Assets                  $2,074,405  $1,770,769   $1,493,880    $1,169,139   $1,106,522
Total Liabilities              1,792,934   1,517,436    1,267,130       960,702      909,782
Stockholder's Equity             281,471     253,333      226,750       208,437      196,740


INCOME STATEMENT DATA                              Year Ended December 31                              
                           -----------------------------------------------------------------

Finance and Insurance Margin  $   74,975  $   67,435   $   58,518    $   49,224   $   46,754
Operating and Other Expenses      23,429      22,815       21,990        21,968       19,863
Provision for Losses               4,816       2,473        6,079         8,611       21,237
                             -----------  ----------  -----------   -----------  -----------

Income Before Income Taxes and
     Cumulative Effect of
     Change in Accounting 
     Method                       46,730      42,147       30,449        18,645        5,654
 
Income Taxes                      18,809      16,968       13,446         6,948        2,089
                             -----------  ----------  -----------   -----------  -----------

Income Before Cumulative
     Effect of Change in
     Accounting Method            27,921      25,179       17,003        11,697        3,565

Cumulative Effect of 
     Change in Accounting
     Method (1)                        -           -            -             -       11,323
                             -----------  ----------  -----------   -----------  -----------

Net Income                    $   27,921  $   25,179   $   17,003    $   11,697   $   14,888
                             -----------  ----------  -----------   -----------  -----------
                             -----------  ----------  -----------   -----------  -----------
Ratio of Earnings to Fixed
     Charges (2)                   1.52x       1.67x        1.66x         1.38x        1.09x


</TABLE>

(1)  Effective January 1, 1991, the Company adopted Financial Accounting
     Standards Board Statement (FASB) No. 96, "Accounting for Income Taxes." 
     The most significant impact of this Statement was to change the tax rate at
     which deferred taxes were recognized on the balance sheet to the lower rate
     then specified by federal tax laws.  The change resulted in a one-time
     increase in net income of $11,323 in the first quarter of 1991.

                                    -9-

<PAGE>

(2)  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 1.63x, 1.82x, 1.89x, 1.59x
     and 1.26x for the years 1995-1991, respectively.  See Exhibits 12.1 and
     12.2.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS, 1993-1995

RESULTS OF OPERATIONS            

1995 Compared to 1994:

     Pre-tax income increased to $46.7 million from $42.1 million in 1994 
primarily as a result of 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.  The average margin rate on those 
receivables decreased in 1995 due to rate competition in the truck lending 
market.

     Ongoing expense controls helped keep the increase in selling, general 
and administrative expenses under 3%.  The provision for losses increased 
$2.3 million to $4.8 million during 1995 bringing the year-end allowance for 
losses to 1.72% of earning assets.  At the end of 1994, the allowance for 
losses was 1.69% of earning assets.  The higher 1995 provision and allowance 
for losses resulted from continued portfolio growth during 1995 and reflects 
the risks inherent in the financing of heavy-duty trucks.
     
     As a result of the foregoing factors, net income for 1995 improved to 
$27.9 million from $25.2 million in 1994.

1994 Compared to 1993:

     Pre-tax income increased to $42.1 million from $30.4 million in 1993.  
The growth resulted primarily from an $8.4 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 21% to $1.6 billion in 1994 from $1.3 billion in 1993. 
The growth resulted from $1 billion of new business volume related to strong 
domestic heavy-duty truck sales by PACCAR.  The average margin rate on those 
receivables decreased in 1994 due to rate competition in the truck lending 
market.  In addition, the provision for losses decreased from $6.1 million to 
$2.5 million due to high net recoveries in 1994.  As a result, net income for 
1994 was $25.2 million compared to $17.0 million in 1993.

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 1993, the 
Company registered $1 billion of senior debt securities for offering to the 
public.  At the end of 1995, $55 million of such securities was available for 
issuance.  The Company registered $1 billion in senior debt securities in 
early 1996 for offering to the public.

                                   -10-

<PAGE>

     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.

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, 1995 and 1994, and 
the related statements of income and retained earnings and cash flows for 
each of the three years in the period ended December 31, 1995.  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, 1995 and 1994, and the results of its operations and its cash 
flows for each of the three years in the period ended December 31, 1995 in 
conformity with generally accepted accounting principles.  

                             /S/ Ernst & Young, LLP
                                                            


Seattle, Washington
February 2, 1996

                                        -12-

<PAGE>

BALANCE SHEETS                          
PACCAR Financial Corp.                                                 

<TABLE>
<CAPTION>

                                                           December 31 
                                                       1995            1994  
-----------------------------------------------------------------------------
                                                       (Thousands of Dollars)
<S>                                                  <C>          <C>
ASSETS
     Cash                                           $    5,967    $    8,956

     Net finance and other receivables               2,051,135     1,733,253
     Allowance for losses                              (35,790)      (29,900)
-----------------------------------------------------------------------------
                                                     2,015,345     1,703,353
-----------------------------------------------------------------------------

     Equipment on operating leases, net of
         allowance for depreciation of $20,889
         (1994--$15,351)                                40,905        43,500
     Other assets                                       12,188        14,960
-----------------------------------------------------------------------------

TOTAL ASSETS                                        $2,074,405    $1,770,769
-----------------------------------------------------------------------------

LIABILITIES
     Accounts payable and accrued expenses          $   36,461    $   30,237
     Payable for finance receivables acquired           34,504        39,817
     Commercial paper and other short term 
       borrowings                                      657,856       461,175
     Advance payable to PACCAR Inc                           -        46,000
     Medium-term notes                                 999,500       870,300
     Income taxes - current and deferred                64,613        69,907
-----------------------------------------------------------------------------

TOTAL LIABILITIES                                    1,792,934     1,517,436
-----------------------------------------------------------------------------

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                                     6,956         4,024
     Retained earnings                                 229,015       203,809
-----------------------------------------------------------------------------

TOTAL STOCKHOLDER'S EQUITY                             281,471       253,333
-----------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY          $2,074,405    $1,770,769
-----------------------------------------------------------------------------

</TABLE>

See notes to financial statements.

                                        -13-

<PAGE>

STATEMENTS OF INCOME AND RETAINED EARNINGS
PACCAR Financial Corp.

<TABLE>
<CAPTION>

                                                 Year Ended December 31
                                             1995        1994          1993
----------------------------------------------------------------------------
                                                 (Thousands of Dollars)
<S>                                         <C>        <C>           <C>

     Interest and other income              $162,956   $ 128,841    $102,919
     Rentals on operating leases              13,008      12,323      13,039
----------------------------------------------------------------------------
     TOTAL FINANCE INCOME                    175,964     141,164     115,958

     Interest expense                         89,796      62,851      45,815
     Other borrowing expense                   1,575       1,453       1,257
     Depreciation expense related 
         to operating leases                  10,379       9,953      10,432
----------------------------------------------------------------------------
     TOTAL FINANCE EXPENSES                  101,750      74,257      57,504

     FINANCE MARGIN                           74,214      66,907      58,454

     Insurance premiums earned                 4,349       2,869         287
     Insurance claims and underwriting 
       expenses                                3,588       2,341         223
----------------------------------------------------------------------------
     INSURANCE MARGIN                            761         528          64

     Selling, general & 
         administrative expenses              23,429      22,815      21,990
     PROVISION FOR LOSSES                      4,816       2,473       6,079
----------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                    46,730      42,147      30,449
----------------------------------------------------------------------------

     Federal and state income taxes           18,809      16,968      13,446
----------------------------------------------------------------------------

NET INCOME                                    27,921      25,179      17,003
----------------------------------------------------------------------------

     Retained earnings at beginning of year  203,809     179,940     162,937
     Cash dividends paid                      (2,715)     (1,310)          -
----------------------------------------------------------------------------

RETAINED EARNINGS AT END OF YEAR          $  229,015   $ 203,809  $  179,940
----------------------------------------------------------------------------

</TABLE>

See notes to financial statements.

                                         -14-

<PAGE>

STATEMENTS OF CASH FLOWS
PACCAR Financial Corp.

<TABLE>
<CAPTION>
                                                Year Ended December 31     
                                            1995          1994        1993 
----------------------------------------------------------------------------
                                                (Thousands of Dollars)
<S>                                          <C>           <C>         <C>
OPERATING ACTIVITIES:

     Net income                            $  27,921     $25,179     $17,003
     Items included in net income not
          affecting cash:
         Provision for losses on receivables   4,816       2,473       6,079
         Decrease in deferred taxes payable   (5,326)     (5,935)    (13,250)
         Depreciation and amortization        13,546      12,843      12,286
     Increase (decrease) in payables, 
          income taxes and other               4,626        (551)     10,061
----------------------------------------------------------------------------

NET CASH PROVIDED BY
OPERATING ACTIVITIES                          45,583      34,009      32,179
----------------------------------------------------------------------------

INVESTING ACTIVITIES:

     Finance and other receivables 
      acquired                            (1,045,186)   (954,272)   (840,519)
     Collections on finance and other 
      receivables                            824,307     684,011     563,597
     Net decrease (increase) in wholesale 
         receivables                         (97,943)     27,892     (49,747)
     Acquisition of equipment for
         operating leases                    (10,391)    (19,858)    (20,462)
     Disposal of equipment                       544       1,052       5,255
----------------------------------------------------------------------------

NET CASH USED IN
INVESTING ACTIVITIES                        (328,669)   (261,175)   (341,876)
----------------------------------------------------------------------------

FINANCING ACTIVITIES:

     Net increase (decrease) in commercial 
         paper and other short term 
         borrowings                          196,681     (14,037)     49,677
     Net increase (decrease)
         in bank loans                             -     (49,000)     19,000
     Increase (decrease) in advances 
         payable to PACCAR Inc               (46,000)     46,000           -
     Proceeds from medium-term notes         458,000     467,000     359,500
     Payments of medium-term notes          (328,800)   (220,800)   (119,900)
     Additions to paid in capital              2,931       2,715       1,310
     Payment of cash dividend                 (2,715)     (1,310)          -
----------------------------------------------------------------------------

NET CASH PROVIDED BY
FINANCING ACTIVITIES                         280,097     230,568     309,587
----------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH               (2,989)      3,402        (110)

CASH AT BEGINNING OF YEAR                      8,956       5,554       5,664
----------------------------------------------------------------------------

CASH AT END OF YEAR                        $   5,967   $   8,956   $   5,554
----------------------------------------------------------------------------

</TABLE>

See notes to financial statements.

                                      -15-

<PAGE>

NOTES TO FINANCIAL STATEMENTS
PACCAR Financial Corp.
December 31, 1995
(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 judgement of 
management, they are deemed uncollectible (usually upon repossession of the 
collateral). 

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 finance charge 
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 better 
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 the contracts to maturity.  Net 
amounts paid or received are reflected as adjustments to interest expense.

                                      -16-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(Thousands of Dollars)

IMPACT OF NEW ACCOUNTING RULES:  The Company adopted FASB No. 114, 
"Accounting by Creditors for Impairment of a Loan," and FASB No. 118, 
"Accounting for Impairment of a Loan - Income Recognition and Disclosures," 
effective January 1, 1995.  The adoption of these statements did not have a 
material impact on the Company.

RECLASSIFICATIONS:  Certain prior year amounts have been reclassified to 
conform to the 1995 presentations.



                                        -17-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(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     
                                                        1995           1994 
----------------------------------------------------------------------------
<S>                                                    <C>           <C>

Notes and contracts due within:      
 One year                                           $  677,182    $  503,289 
 Two years                                             467,342       420,384 
 Three years                                           312,835       297,551 
 Four years                                            149,355       141,995 
 Five years and beyond                                  39,913        28,703 
----------------------------------------------------------------------------
                                                     1,646,627     1,391,922 

Wholesale financing                                    209,404       111,386
Direct financing leases (Including estimated residual
  values of $15,010 and $23,420)                       315,092       340,950
Interest and other receivables                           9,876        11,151
----------------------------------------------------------------------------

                                                     2,180,999     1,855,409

Unearned interest:
  Notes and contracts                                  (93,654)      (79,008)
  Direct financing leases                              (36,210)      (39,084)
----------------------------------------------------------------------------

                                                      (129,864)     (118,092)
----------------------------------------------------------------------------


Net finance and other receivables                   $2,051,135    $1,737,317
----------------------------------------------------------------------------

</TABLE>

Future minimum lease payments on direct financing leases totaled $300,082 at 
December 31, 1995 and are due as follows:  $101,960 in 1996; $82,220 in 1997; 
$64,993 in 1998; $41,014 in 1999; and $9,895 in 2000 and beyond.

The allowance for losses on receivables is summarized as follows:

<TABLE>
<CAPTION>

                                               1995        1994         1993 
------------------------------------------------------------------------------
<S>                                            <C>          <C>        <C>
Balance at beginning of year                  $29,900      $24,000     $21,840
Provision for losses                            4,816        2,473       6,079
Net (losses) recoveries                         1,074        3,427      (3,919)
------------------------------------------------------------------------------

Balance at end of year                        $35,790      $29,900     $24,000
------------------------------------------------------------------------------

</TABLE>

                                   -18-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(Thousands of Dollars)


At December 31, 1995, the recorded investment in notes and contracts that are 
considered to be impaired was $12,555.  Included in the allowance for losses 
was a specific reserve of $2,100 on these impaired notes and contracts.  The 
average recorded investment in impaired notes and contracts during the year 
ended December 31, 1995 was $9,623.  For the year ended December 31, 1995, 
the Company recognized interest income of $294 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, 1996 are:  $11,529 in 1996; $6,736 in 1997; 
$2,606 in 1998; and $524 in 1999.

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, 1995, 1994 and 1993 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 
$3,144, $3,134 and $3,628 for 1995, 1994 and 1993, respectively, were charged 
to the Company. Beginning July 1993, in lieu of payment, PACCAR began 
recognizing certain of these administrative services as an additional 
investment in the Company.  The Company records the investment as paid-in 
capital.  Beginning in 1994, the Company pays a dividend to PACCAR for the 
paid-in capital invested in the prior year.  Cash  dividends of $2.7 million 
and $1.3 million were paid in 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 $683, $626 and $482 for years 1995, 
1994 and 1993, respectively.

Periodically, the Company borrows funds from PACCAR. At December 31, 1994, 
the Company had outstanding to PACCAR a $46,000 short-term note payable at a 
market rate.  The note was repaid in January 1995.  Commencing January 1, 
1996, the Company may occasionally make market-rate, short-term loans to 
PACCAR to assist in PACCAR's cash management.

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.

                                     -19-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(Thousands of Dollars)


NOTE E--BORROWINGS

     Borrowings are summarized as follows:

<TABLE>
<CAPTION>

                                       Effective
                                          Rate*       1995           1994
----------------------------------------------------------------------------
<S>                                    <C>          <C>           <C>
         Commercial paper                5.9%      $  632,857     $  461,175
         Other short-term borrowings     5.7%          25,000              -
         Advance payable to PACCAR Inc     -                -         46,000
         Fixed rate medium-term notes    6.8%         879,500        645,300
         Floating rate medium-term notes 5.8%         120,000        225,000
----------------------------------------------------------------------------
                                                   $1,657,357     $1,377,475
----------------------------------------------------------------------------

</TABLE>

*The effective rate is the weighted average rate as of December 31, 1995 and
includes the effects of interest rate agreements.  

Principal amounts of medium-term notes due over the next five years beginning 
January 1, 1996 are $410,500 in 1996, $280,000 in 1997, $221,000 in 1998, and 
$88,000 in 1999.

Cash paid for interest expense was $84,208 in 1995, $55,349 in 1994 and 
$45,734 in 1993.

At December 31, 1995, the Company had outstanding 46 interest rate contracts 
with various financial institutions, having a total notional principal amount 
of $683.3 million.  The notional principal declines as follows:  $539.9 
million in 1996, $133.4 million in 1997, and $10.0 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.

For interest rate swaps, the following table presents the notional principal 
amounts, weighted average interest rates, and contractual maturities by class 
of interest rate swap at December 31, 1995.

<TABLE>
<CAPTION>

 Year Ending     Pay: Floating       Pay: Floating        Pay: Fixed    
 December 31    Receive: Fixed      Receive: Floating   Receive:Floating    Total
-----------------------------------------------------------------------------------
<S>                <C>                 <C>                 <C>             <C>
  1996              $95,000              $120,000            $300,300      $515,300
  1997                    -                     -             103,100       103,100
  1998                    -                     -               3,000         3,000
-----------------------------------------------------------------------------------

                    $95,000              $120,000            $406,400      $621,400
-----------------------------------------------------------------------------------

  Wtd average
  pay rate              5.8%                  5.8%                6.1%       
-----------------------------------------------------------------------------------

  Wtd average
  receive rate          6.6%                  4.6%                5.9%       
-----------------------------------------------------------------------------------

</TABLE>

The weighted average pay rate substantially represents the Company's net cost 
of funds rate after the effect of the interest rate swaps as the weighted 
average receive rate offsets the pay rate on associated debt obligations.

                                     -20-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(Thousands of Dollars)

Pay floating, receive fixed swaps effectively convert fixed rate debt to a money
market index.

Pay floating, receive floating swaps effectively convert the floating rate 
medium-term notes to a commercial paper index.  The low receive rate offsets 
a low pay rate on an associated variable rate medium-term note.

Pay fixed, receive floating swaps effectively convert an equivalent amount of 
commercial paper and other variable rate debt to fixed rates.

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, 1995, the unused portion of these credit lines was $345 million. 
The Company compensates banks with fees which are immaterial in amount.

The Company has entered into loan participation programs with various lending 
institutions under which notes, between the Company and the lending 
institutions, are sold by the lending institutions to investors.  These notes 
generally mature within 30 days.  There were no notes outstanding at December 
31, 1995 and 1994.

NOTE G--INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>

                                                 Year Ended December 31 
                                              1995          1994        1993  
------------------------------------------------------------------------------
<S>                                           <C>           <C>        <C>
Current provision 
  Federal                                     $20,149      $19,285     $23,516
  State                                         3,986        3,618       3,180
------------------------------------------------------------------------------
                                               24,135       22,903      26,696

Deferred benefit                               (5,326)      (5,935)    (13,250)
------------------------------------------------------------------------------

                                              $18,809      $16,968     $13,446
------------------------------------------------------------------------------

</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 
                                              1995          1994        1993  
------------------------------------------------------------------------------
<S>                                           <C>           <C>        <C>
Tax at the statutory rate of 35%              $16,355      $14,752     $10,657
Effect of: 
  Rate increases on deferred taxes                  -          364       2,302
  State income taxes and other                  2,454        1,852         487
------------------------------------------------------------------------------
                                              $18,809      $16,968     $13,446
------------------------------------------------------------------------------

</TABLE>

                                        -21-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(Thousands of Dollars)


The change in the federal income tax rate from 34% to 35%, effective January 
1, 1993, increased the 1993 provision for income tax by $2,302.  An increase 
in the Company's effective state income tax rate raised the 1994 provision by 
$364.

Cash paid for income taxes was $18,032 in 1995, $26,583 in 1994 and $20,960
in 1993.

Deferred income tax assets and liabilities consisted of the following:

<TABLE>
<CAPTION>
                                                      As of December 31
                                                     1995           1994
--------------------------------------------------------------------------
<S>                                                <C>            <C>
Deferred tax liabilities                            
  Depreciation                                     $72,457        $74,599
  State income tax                                   8,851          9,098
--------------------------------------------------------------------------
                                                    81,308         83,697

Deferred tax (assets)
  Allowance for doubtful accounts                  (12,527)       (10,465)
  Other                                             (4,200)        (3,325)
--------------------------------------------------------------------------
                                                   (16,727)       (13,790)
--------------------------------------------------------------------------

Net deferred tax liability                         $64,581        $69,907
--------------------------------------------------------------------------

</TABLE>




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 including wholesale financings that 
reprice frequently with no significant change in credit risk, 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 loss provision 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 standing 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.

                                      -22-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(Thousands of Dollars)


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, 1995 are as follows:

<TABLE>
<CAPTION>

                                                     As of December 31     
                                              1995                     1994   
                                   -----------------------   -----------------------
                                     Carrying      Fair       Carrying        Fair  
                                      Amount       Value       Amount        Value  
                                   ----------   ----------   ----------   ----------
<S>                                 <C>          <C>          <C>          <C>
Cash                               $    5,967   $    5,967   $    8,956   $    8,956
Net receivables                     1,742,419    1,755,196    1,407,670    1,383,881
Commercial paper, bank loans and
 advance to PACCAR                    657,857      657,857      507,175      507,175
Medium-term notes                     999,500    1,009,343      870,300      845,784

</TABLE>

The Company's intent is to hold interest rate contracts until maturity.  If 
recorded at fair value at December 31, 1995, the Company's off-balance-sheet 
financial instruments (interest rate contracts) would represent gross assets 
of $445 and offsetting gross liabilities of $2,013, resulting in a net 
liability of $1,568.  If recorded at fair value at December 31, 1994, the 
Company's off-balance-sheet financial instruments would have reflected a net 
asset balance of $3,044.

NOTE I--QUARTERLY RESULTS  (Unaudited)

<TABLE>
<CAPTION>

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

1994
----

Gross income                     $32,279      $34,843     $37,145    $39,766
Income before income taxes         9,294       10,696      11,588     10,569
Net income                         5,673        6,451       6,867      6,188

</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.

                                    -23-


<PAGE>

NOTES TO FINANCIAL STATEMENTS (Continued)
PACCAR Financial Corp.
(Thousands of Dollars)


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The directors and executive officers of the Company at February 1, 1996, 
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>

Charles M. Pigott (66)         Chairman and Director.  Chairman, Chief
                               Executive Officer and Director of PACCAR. Also a
                               director of The Boeing Company, Chevron
                               Corporation and Seattle Times Company.  Charles
                               M. Pigott is the father of Mark C. Pigott, a
                               director of the Company.

T. Ronald Morton (49)          President and Director.  President of the
                               Company since August 1988.  Senior Vice
                               President of PACCAR since June 1995.

G. Don Hatchel (51)            Vice President and Director.  Vice President-
                               Controller of PACCAR since January 1991.  

David J. Hovind (55)           Director.  President and Director of PACCAR
                               since January 1992. Executive Vice President of
                               PACCAR from July 1987 to January 1992.

Mark C. Pigott (41)            Director.  Vice Chairman of PACCAR since January
                               1995.  Executive Vice President of PACCAR from
                               December 1993 to January 1995. Senior Vice
                               President of PACCAR from December 1990 to
                               December 1993.  Mark C. Pigott is the son of
                               Charles M. Pigott, a director of the Company.

James L. Shiplet (57)          Director.  President of PACCAR Leasing
                               Corporation since September 1987.  

Michael A. Tembreull (49)      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.  

John J. Waggoner (47)          Director.  Treasurer of PACCAR since May 1991. 
                               Director of Strategic Analysis of PACCAR from
                               July 1989 to May 1991. 

</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.  

                                       -24-

<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

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

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 J(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, 1995 AND 1994 AND FOR THE YEARS ENDED DECEMBER 31,
         1995, 1994, AND 1993

           Balance Sheets -- December 31, 1995 and 1994

           Statements of Income and Retained Earnings -- Years Ended December
           31, 1995, 1994 and 1993

           Statements of Cash Flows -- Years Ended December 31, 1995, 1994 and
           1993

           Notes to Financial Statements -- December 31, 1995

     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 1995

There were no reports on Form 8-K for the quarter ended December 31, 1995.

                                       -25-

<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, 1996

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/ Ron E. Ranheim                      Treasurer
          ---------------------------
          Ron E. Ranheim

(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*
            Charles M. Pigott*
            Mark C. Pigott*
            James L. Shiplet*
            Michael A. Tembreull*
            John J. Waggoner*

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

                                         -26-

<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).

                                       -27-

<PAGE>

 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 the years ended
         December 31, 1995 and 1994.

 12.2    Statement re computation of ratio of earnings to fixed charges of the
         Company pursuant to the Support Agreement with PACCAR for the years
         ended December 31, 1995 and 1994.

 12.3    Statement re computation of ratio of earnings to fixed charges of
         PACCAR and subsidiaries pursuant to SEC reporting requirements for
         the years ended December 31, 1995 and 1994.

 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, 1995.

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

                                       -28-