PACCAR Financial Corp.
10/30/2025 | Press release | Distributed by Public on 10/30/2025 14:11
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Millions of Dollars)
Results of Operations
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
September 30 |
September 30 |
|||||||||||||||||||||||
|
2025 |
2024 |
% Change |
2025 |
2024 |
% Change |
|||||||||||||||||||
|
New business volume by product: |
||||||||||||||||||||||||
|
Retail loans and finance leases |
$ |
836.9 |
$ |
893.4 |
(6 |
) |
$ |
2,306.2 |
$ |
2,320.3 |
(1 |
) |
||||||||||||
|
Equipment on operating leases |
2.6 |
43.8 |
(94 |
) |
25.6 |
222.0 |
(88 |
) |
||||||||||||||||
|
Dealer master notes |
54.6 |
54.4 |
150.1 |
169.7 |
(12 |
) |
||||||||||||||||||
|
$ |
894.1 |
$ |
991.6 |
(10 |
) |
$ |
2,481.9 |
$ |
2,712.0 |
(8 |
) |
|||||||||||||
|
New loan and lease unit volume: |
||||||||||||||||||||||||
|
Retail loans and finance leases |
5,450 |
6,500 |
(16 |
) |
15,400 |
16,000 |
(4 |
) |
||||||||||||||||
|
Equipment on operating leases |
10 |
300 |
(97 |
) |
160 |
1,300 |
(88 |
) |
||||||||||||||||
|
5,460 |
6,800 |
(20 |
) |
15,560 |
17,300 |
(10 |
) |
|||||||||||||||||
|
Average earning assets by product: |
||||||||||||||||||||||||
|
Retail loans and finance leases |
$ |
7,804.6 |
$ |
7,237.7 |
8 |
$ |
7,632.8 |
$ |
6,975.8 |
9 |
||||||||||||||
|
Dealer wholesale financing |
2,860.6 |
2,603.1 |
10 |
2,963.0 |
2,276.7 |
30 |
||||||||||||||||||
|
Dealer master notes |
522.5 |
465.0 |
12 |
524.1 |
465.9 |
12 |
||||||||||||||||||
|
Average finance receivables |
11,187.7 |
10,305.8 |
9 |
11,119.9 |
9,718.4 |
14 |
||||||||||||||||||
|
Equipment on operating leases |
476.4 |
662.0 |
(28 |
) |
509.2 |
638.9 |
(20 |
) |
||||||||||||||||
|
$ |
11,664.1 |
$ |
10,967.8 |
6 |
$ |
11,629.1 |
$ |
10,357.3 |
12 |
|||||||||||||||
|
Revenue by product: |
||||||||||||||||||||||||
|
Retail loans and finance leases |
$ |
152.2 |
$ |
129.6 |
17 |
$ |
442.0 |
$ |
365.7 |
21 |
||||||||||||||
|
Equipment on operating leases |
33.0 |
45.4 |
(27 |
) |
108.3 |
140.1 |
(23 |
) |
||||||||||||||||
|
Dealer wholesale financing |
39.3 |
38.8 |
1 |
118.5 |
97.8 |
21 |
||||||||||||||||||
|
Dealer master notes |
7.0 |
6.5 |
8 |
21.0 |
19.4 |
8 |
||||||||||||||||||
|
Used truck sales and other revenues |
4.4 |
8.1 |
(46 |
) |
24.4 |
25.6 |
(5 |
) |
||||||||||||||||
|
235.9 |
228.4 |
3 |
714.2 |
648.6 |
10 |
|||||||||||||||||||
|
Income before income taxes |
$ |
49.1 |
$ |
37.8 |
30 |
$ |
149.8 |
$ |
115.9 |
29 |
||||||||||||||
New Business Volume
New business volume in the third quarter was $894.1 in 2025 and $991.6 in 2024, and in the first nine months, was $2,481.9 in 2025 and $2,712.0 in 2024. The decrease in both periods reflected lower retail sales of PACCAR trucks, partially offset by higher finance market share. Finance market share of new PACCAR truck sales increased to 23.1% and 21.0% in the third quarter and first nine months of 2025, respectively, from 21.9% and 20.6% in the third quarter and first nine months of 2024. New business volume from retail loans and finance leases in the third quarter of 2025 was $836.9 and $893.4 in the third quarter of 2024, and for the first nine months, new business volume from retail loans and leases was $2,306.3 in 2025 and $2,320.2 in 2024. Equipment on operating leases new business volume was $2.6 and $25.6 in the third quarter and first nine months of 2025 compared to $43.8 and $222.0 in the third quarter and first nine months of 2024, primarily due to higher demand from one large fleet customer in 2024. Dealer master notes new business volume of $54.6 in the third quarter of 2025 was comparable to $54.4 in the third quarter of 2024. In the first nine months, dealer master notes new business decreased to $150.1 in 2025 from $169.7 in 2024 due to decreased finance volume from dealers.
Revenues
The Company's revenues increased to $235.9 and $714.2 in the third quarter and first nine months of 2025, respectively, from $228.4 and $648.6 in the third quarter and first nine months of 2024, primarily driven by higher average wholesale and retail loan portfolio balances and higher portfolio yields, partially offset by a lower average operating lease portfolio.
- 21-
PACCAR FINANCIAL CORP.
Income Before Income Taxes
The Company's income before income taxes was $49.1 for the third quarter of 2025 compared to $37.8 for the third quarter of 2024. The increase in income before income taxes in 2025 was primarily the result of higher finance margin of $9.9 and higher operating lease margin of $4.5, partially offset by a higher provision for losses of $4.8.
The Company's income before income taxes was $149.8 for the first nine months of 2025 compared to $115.9 for the first nine months of 2024. The increase in income before income taxes in 2025 was primarily the result of higher finance margin of $30.1 and higher operating lease margin of $9.7, partially offset by a higher provision for losses of $9.8.
Included in Other assets on the Company's Balance Sheets are used trucks held for sale, net of impairments, of $76.3 at September 30, 2025 and $113.7 at December 31, 2024. These trucks are primarily units returned from matured operating leases in the ordinary course of business, and also include trucks acquired from repossessions or through acquisitions of used trucks in trades related to new truck sales.
In the third quarter, the Company recognized losses on used trucks, excluding repossessions, of $.2 in 2025 compared to $7.7 in 2024, including losses on multiple unit transactions of $.6 in 2025 compared to $5.1 in 2024. Used truck losses related to repossessions, which are recognized as credit losses, were $.6 in 2025 and $1.4 in 2024.
In the first nine months, the Company recognized losses on used trucks, excluding repossessions, of $5.5 in 2025 compared to $17.3 in 2024, including losses on multiple unit transactions of $4.5 in 2025 compared to $14.5 in 2024. Used truck losses related to repossessions, which are recognized as credit losses, were $2.4 in 2025 and $5.4 in 2024.
Revenue and Expenses
The major factors for the changes in interest and fee income, interest and other borrowing costs and finance margin between the three months ended September 30, 2025 and 2024 are outlined in the table below:
|
Interest and |
||||||||||||
|
Interest and |
Other Borrowing |
Finance |
||||||||||
|
Fee Income |
Costs |
Margin |
||||||||||
|
Three Months Ended September 30, 2024 |
$ |
174.9 |
$ |
112.0 |
$ |
62.9 |
||||||
|
Increase (decrease) |
||||||||||||
|
Average finance receivables |
13.8 |
13.8 |
||||||||||
|
Average receivables from PACCAR and affiliates |
4.6 |
4.6 |
||||||||||
|
Average debt balances |
11.8 |
(11.8 |
) |
|||||||||
|
Yields |
5.2 |
5.2 |
||||||||||
|
Borrowing rates |
1.9 |
(1.9 |
) |
|||||||||
|
Total increase |
23.6 |
13.7 |
9.9 |
|||||||||
|
Three Months Ended September 30, 2025 |
$ |
198.5 |
$ |
125.7 |
$ |
72.8 |
||||||
•
Average finance receivables increased $881.9 in the third quarter of 2025 from the third quarter of 2024, primarily due to a larger retail loan and finance lease portfolio and higher dealer wholesale financing, which increased interest and fee income by $13.8.
•
Average receivables from PACCAR and affiliates increased $362.6 in the third quarter of 2025 as a result of new loans to affiliated companies exceeding collections, which increased interest and fee income by $4.6.
•
Average debt balances increased $1,031.2 in the third quarter of 2025, increasing interest and other borrowing costs by $11.8. The average debt balances reflect higher funding requirements for the portfolio growth in retail loans, finance leases and wholesale receivables, as well as funding for the affiliated companies.
•
Yields increased $5.2 due to higher yields on receivables from customers and PACCAR and affiliates. Yields on customer finance receivables were 6.1% and 5.9% in the third quarter of 2025 and 2024, respectively. Yields on receivables from PACCAR and affiliates were 5.0% in the third quarter of 2025 compared to 4.8% in the third quarter of 2024.
•
Average borrowing rates in the third quarter of 2025 were 4.5% compared to 4.4% in the third quarter of 2024 due to higher debt market interest rates, resulting in an increase of $1.9 in interest and other borrowing costs.
The major factors for the changes in interest and fee income, interest and other borrowing costs and finance margin between the nine months ended September 30, 2025 and 2024 are outlined in the table below:
- 22-
PACCAR FINANCIAL CORP.
|
Interest and |
||||||||||||
|
Interest and |
Other Borrowing |
Finance |
||||||||||
|
Fee Income |
Costs |
Margin |
||||||||||
|
Nine Months Ended September 30, 2024 |
$ |
482.9 |
$ |
299.5 |
$ |
183.4 |
||||||
|
Increase (decrease) |
||||||||||||
|
Average finance receivables |
63.2 |
63.2 |
||||||||||
|
Average receivables from PACCAR and affiliates |
14.3 |
14.3 |
||||||||||
|
Average debt balances |
51.0 |
(51.0 |
) |
|||||||||
|
Yields |
21.1 |
21.1 |
||||||||||
|
Borrowing rates |
17.5 |
(17.5 |
) |
|||||||||
|
Total increase |
98.6 |
68.5 |
30.1 |
|||||||||
|
Nine Months Ended September 30, 2025 |
$ |
581.5 |
$ |
368.0 |
$ |
213.5 |
||||||
•
Average finance receivables increased $1,401.5 in the first nine months of 2025, primarily due to higher dealer wholesale financing and a larger retail loan and finance lease portfolio, which increased interest and fee income by $63.2.
•
Average receivables from PACCAR and affiliates increased $389.0 in the first nine months of 2025 as a result of new loans to affiliated companies exceeding collections, which increased interest and fee income by $14.3.
•
Average debt balances increased $1,514.5 in the first nine months of 2025, reflecting higher funding requirements for the portfolio and affiliated companies, increasing interest and other borrowing costs by $51.0. The average debt balances reflect higher funding requirements for the portfolio growth in retail loans, finance leases and wholesale receivables, as well as funding for the affiliated companies.
•
Yields increased $21.1 due to higher yields on receivables from customers and PACCAR and affiliates. Yields on customer finance receivables were 6.0% and 5.8% in the first nine months of 2025 and 2024, respectively. Yields on receivables from PACCAR and affiliates were 4.9% in the first nine months of 2025 compared to 4.4% in the same period of 2024.
•
Average borrowing rates in the first nine months of 2025 were 4.5% compared to 4.3% in the first nine months of 2024 due to higher debt market interest rates, resulting in an increase of $17.5 in interest and other borrowing costs.
The major factors for the changes in operating lease and rental revenues, depreciation and other rental expenses and operating lease margin between the three months ended September 30, 2025 and 2024 are outlined in the table below:
|
Operating Lease |
Depreciation |
|||||||||||
|
and Rental |
and Other |
Operating |
||||||||||
|
Revenues |
Rental Expenses |
Lease Margin |
||||||||||
|
Three Months Ended September 30, 2024 |
$ |
45.4 |
$ |
43.2 |
$ |
2.2 |
||||||
|
(Decrease) increase |
||||||||||||
|
Operating lease impairments |
(5.9 |
) |
5.9 |
|||||||||
|
Results on returned lease assets |
(2.1 |
) |
2.1 |
|||||||||
|
Average operating lease assets |
(13.3 |
) |
(10.5 |
) |
(2.8 |
) |
||||||
|
Revenue and cost per asset |
.9 |
1.6 |
(.7 |
) |
||||||||
|
Total (decrease) increase |
(12.4 |
) |
(16.9 |
) |
4.5 |
|||||||
|
Three Months Ended September 30, 2025 |
$ |
33.0 |
$ |
26.3 |
$ |
6.7 |
||||||
•
Operating lease impairments decreased depreciation and rental expenses by $5.9 due to improved used truck market prices in 2025.
•
Results on returned lease assets decreased depreciation and other rental expenses by $2.1, primarily due to lower losses on sales of returned lease units in 2025 as compared to 2024.
•
Average operating lease assets decreased in 2025 due to the volume of expiring leases exceeding new business volume for leased vehicles.
•
Revenue per asset increased $.9 primarily due to higher lease rates from higher average truck value financed and higher rental utilization. Cost per asset increased $1.6 primarily due to higher vehicle related expenses.
- 23-
PACCAR FINANCIAL CORP.
The major factors for the changes in operating lease and rental revenues, depreciation and other rental expenses and operating lease margin between the nine months ended September 30, 2025 and 2024 are outlined in the table below:
|
Operating Lease |
Depreciation |
|||||||||||
|
and Rental |
and Other |
Operating |
||||||||||
|
Revenues |
Rental Expenses |
Lease Margin |
||||||||||
|
Nine Months Ended September 30, 2024 |
$ |
140.1 |
$ |
132.3 |
$ |
7.8 |
||||||
|
(Decrease) increase |
||||||||||||
|
Operating lease impairments |
(9.4 |
) |
9.4 |
|||||||||
|
Results on returned lease assets |
(2.2 |
) |
2.2 |
|||||||||
|
Average operating lease assets |
(38.4 |
) |
(29.8 |
) |
(8.6 |
) |
||||||
|
Revenue and cost per asset |
6.6 |
(.1 |
) |
6.7 |
||||||||
|
Total (decrease) increase |
(31.8 |
) |
(41.5 |
) |
9.7 |
|||||||
|
Nine Months Ended September 30, 2025 |
$ |
108.3 |
$ |
90.8 |
$ |
17.5 |
||||||
•
Operating lease impairments decreased depreciation and rental expenses by $9.4, reflecting improved used truck market prices in 2025.
•
Results on returned lease assets decreased depreciation and other rental expenses by $2.2, primarily due to lower losses on sales of returned lease units in 2025 as compared to 2024.
•
Average operating lease assets decreased in 2025 due to the volume of expiring leases exceeding new business volume for leased vehicles.
•
Revenue per asset increased $6.6 primarily due to higher lease rates from higher average truck value financed and higher rental utilization. Cost per asset decreased $.1 primarily due to lower depreciation expense.
Used truck sales and other revenues and cost of used truck sales and other expenses are summarized below for the third quarter and first nine months of 2025 compared to the third quarter and first nine months of 2024:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
September 30 |
September 30 |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Used truck sales |
$ |
1.2 |
$ |
4.8 |
$ |
14.8 |
$ |
16.2 |
||||||||
|
Insurance, franchise and other revenues |
3.2 |
3.3 |
9.6 |
9.4 |
||||||||||||
|
Used truck sales and other revenues |
4.4 |
8.1 |
24.4 |
25.6 |
||||||||||||
|
Cost of used truck sales |
1.3 |
5.3 |
15.7 |
19.0 |
||||||||||||
|
Insurance, franchise and other expenses |
1.3 |
2.1 |
5.1 |
5.5 |
||||||||||||
|
Cost of used truck sales and other expenses |
2.6 |
7.4 |
20.8 |
24.5 |
||||||||||||
|
Results from used trucks and other |
$ |
1.8 |
$ |
.7 |
$ |
3.6 |
$ |
1.1 |
||||||||
Results from used trucks and other in the third quarter and first nine months of 2025 increased by $1.1 and $2.5 from the third quarter and first nine months of 2024, respectively, primarily reflecting improved results from the sale of used trucks received on trade and higher flooring insurance margin.
SG&A
The Company's selling, general and administrative expenses (SG&A) decreased in the third quarter to $17.5 in 2025 from $18.1 in 2024, and decreased for the first nine months to $51.9 in 2025 from $53.3 in 2024. The decrease in both periods was primarily due to lower professional fees and travel expenses. As an annualized percentage of average earning assets, the Company's SG&A decreased to .6% in the third quarter and the first nine months of 2025 from .7% in the third quarter and first nine months of 2024.
- 24-
PACCAR FINANCIAL CORP.
Allowance for Credit Losses
The following table summarizes information on the Company's allowance for credit losses on receivables and asset portfolio and presents related ratios:
|
Nine Months Ended |
Year Ended |
Nine Months Ended |
||||||||||
|
September 30 |
December 31 |
September 30 |
||||||||||
|
2025 |
2024 |
2024 |
||||||||||
|
Balance at beginning of period |
$ |
74.4 |
$ |
61.0 |
$ |
61.0 |
||||||
|
Provision for losses |
32.9 |
37.5 |
23.1 |
|||||||||
|
Charge-offs |
(31.9 |
) |
(24.4 |
) |
(15.1 |
) |
||||||
|
Recoveries |
.5 |
.3 |
.2 |
|||||||||
|
Balance at end of period |
$ |
75.9 |
$ |
74.4 |
$ |
69.2 |
||||||
|
Ratios: |
||||||||||||
|
Charge-offs, net of recoveries ($31.4 in 2025) to |
||||||||||||
|
average total portfolio ($11,119.9 in 2025) |
||||||||||||
|
annualized at September 30, 2025 |
.38 |
% |
.24 |
% |
.20 |
% |
||||||
|
Allowance for credit losses ($75.9 in 2025) to period-end |
||||||||||||
|
total portfolio ($11,280.5 in 2025) |
.67 |
% |
.67 |
% |
.65 |
% |
||||||
|
Period-end retail loan and lease receivables past |
||||||||||||
|
due over 30 days ($157.8 in 2025) to period-end |
||||||||||||
|
retail loan and lease receivables ($7,911.6 in 2025) |
1.99 |
% |
1.31 |
% |
1.06 |
% |
||||||
The provision for losses on receivables was $32.9 for the first nine months of 2025 compared to $23.1 for the first nine months of 2024, reflecting portfolio growth and higher expected credit losses in 2025.
Charge-offs, net of recoveries, increased to $31.4 in the first nine months of 2025 from $14.9 in the first nine months of 2024. The increase in charge-offs reflected a soft truckload market and included losses on four large fleet customers which were provisioned for previously. The higher charge-offs also reflect higher average loss severity due to normalized used truck market values when compared to previous periods.
Retail loan and lease receivables past due over 30 days at September 30, 2025 was 1.99%, compared to 1.31% at December 31, 2024 and 1.06% at September 30, 2024. The increase in past dues from December 31, 2024 primarily reflects the effect of two large fleet customers becoming past due. The Company continues to focus on maintaining low past due balances.
The estimation methods and factors considered for determining the allowance during the periods included in this filing have been consistently applied. See "Note B - Finance and Other Receivables" for additional discussion regarding the Allowance for Credit Losses.
Modifications
The Company modifies loans and finance leases in the normal course of its operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant delays are modifications extending terms up to three months for customers experiencing some short-term financial stress, but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company's modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms.
- 25-
PACCAR FINANCIAL CORP.
The post-modification balances of accounts modified during the nine months ended September 30, 2025 and 2024 are summarized below:
|
Nine Months Ended |
Nine Months Ended |
|||||||||||||||
|
September 30, 2025 |
September 30, 2024 |
|||||||||||||||
|
Amortized |
% of Total |
Amortized |
% of Total |
|||||||||||||
|
Cost Basis |
Portfolio* |
Cost Basis |
Portfolio* |
|||||||||||||
|
Commercial |
$ |
176.6 |
2.1 |
% |
$ |
295.1 |
3.7 |
% |
||||||||
|
Insignificant delay |
133.1 |
1.6 |
% |
93.0 |
1.2 |
% |
||||||||||
|
Credit |
49.9 |
.6 |
% |
103.3 |
1.3 |
% |
||||||||||
|
$ |
359.6 |
4.3 |
% |
$ |
491.4 |
6.2 |
% |
|||||||||
* Amortized cost basis immediately after modification as a percentage of period-end portfolio, on an annualized basis.
Modification activity decreased to $359.6 in the first nine months of 2025 from $491.4 in the first nine months of 2024. The decrease in Commercial modifications primarily reflects lower volumes of end-of-term refinancing. The increase in Insignificant Delay modifications reflects an increase in customers requesting payment relief for up to three months. Of the $133.1 Insignificant Delay modifications, $127.5 or 96% were payment relief for customers that were current at the time of modification. The decrease in Credit modifications is primarily due to granting a six-month term extension to one large fleet customer in financial difficulty in 2024.
When the Company modifies a 30+ days past due account, the customer is then generally considered current under the revised contractual terms. The Company modified $37.4 of accounts during the third quarter of 2025, $21.3 of accounts during the fourth quarter of 2024 and $1.7 of accounts in the third quarter of 2024 that were 30+ days past due and became current at the time of modification. Had the accounts not been modified and had they continued to not make payments, the pro forma percentage of retail loan and lease accounts 30+ days past due would have been as follows:
|
September 30 |
December 31 |
September 30 |
||||||||||
|
2025 |
2024 |
2024 |
||||||||||
|
Pro forma percentage of retail loan and lease accounts 30+ days past due |
2.47 |
% |
1.57 |
% |
1.08 |
% |
||||||
The Company typically requires customers to pay current before granting modifications. The higher pro forma percentage of retail loan and lease accounts 30+ days past due at September 30, 2025 was primarily due to a modification with five months extension granted to one large fleet customer in financial difficulty.
A contract modification that improves the past due status reduces the probability of default. The effect of modifications is included in the Company's historical loss information used to determine the allowance for credit losses. Modification of accounts in prior quarters that were 30+ days past due at the time of modification are included in past dues if they were not performing under the modified terms at September 30, 2025, December 31, 2024 and September 30, 2024. For certain modifications to customers experiencing financial difficulties that are at-risk at September 30, 2025, December 31, 2024 and September 30, 2024, the allowance for credit losses is based on the value of the underlying collateral or a discounted cash flow analysis.
Portfolio
The Company's portfolio is concentrated with customers in the heavy- and medium-duty truck transportation industry. The portfolio is comprised of retail loans and leases, dealer wholesale financing and dealer master notes as follows:
|
September 30 |
December 31 |
September 30 |
||||||||||||||||||||||
|
2025 |
2024 |
2024 |
||||||||||||||||||||||
|
Retail loans |
$ |
6,074.7 |
54 |
% |
$ |
5,675.3 |
51 |
% |
$ |
5,592.8 |
53 |
% |
||||||||||||
|
Retail leases |
1,836.9 |
16 |
% |
1,846.3 |
16 |
% |
1,793.5 |
17 |
% |
|||||||||||||||
|
Dealer wholesale financing |
2,792.8 |
25 |
% |
3,070.1 |
27 |
% |
2,707.5 |
25 |
% |
|||||||||||||||
|
Dealer master notes |
523.5 |
4 |
% |
518.1 |
5 |
% |
467.2 |
4 |
% |
|||||||||||||||
|
Operating lease receivables and other |
52.6 |
1 |
% |
55.9 |
1 |
% |
55.0 |
1 |
% |
|||||||||||||||
|
Total portfolio |
$ |
11,280.5 |
100 |
% |
$ |
11,165.7 |
100 |
% |
$ |
10,616.0 |
100 |
% |
||||||||||||
- 26-
PACCAR FINANCIAL CORP.
Retail loans increased to $6,074.7 at September 30, 2025 from $5,675.3 at December 31, 2024, reflecting new business volume exceeding collections.
Retail leases were $1,836.9 at September 30, 2025, comparable to $1,846.3 at December 31, 2024.
Dealer wholesale financing balances decreased to $2,792.8 at September 30, 2025 from $3,070.1 at December 31, 2024 due to lower dealer new truck inventory.
Dealer master notes were $523.5 at September 30, 2025 compared to $518.1 at December 31, 2024. Dealers may pay the loans early or make additional draws up to specified balances of the contracts and/or vehicles pledged to the Company. As of September 30, 2025, the underlying pledged contracts and/or vehicles were $697.0 of which the dealers have $161.2 as potential additional borrowing capacity.
Income Taxes
The Company's effective income tax rate for the third quarter and first nine months of 2025 was 24.6% and 24.0%, respectively, compared to 24.6% and 24.3% for the same periods of 2024, reflecting changes in the state tax expense during 2025 as compared to 2024.
The Company is included in the consolidated federal income tax return of PACCAR. Federal income taxes for the Company are determined on a separate return basis. State income taxes, where the Company files combined tax returns with PACCAR, are determined on a blended statutory rate, which is substantially the same as the rate computed on a separate return basis.
The Company's deferred income tax benefit for the first nine months of 2025 was $.4 compared to $17.9 for the first nine months of 2024. The Company's net deferred tax liability decreased to $465.7 at September 30, 2025 from $467.7 at December 31, 2024, primarily due to lower benefits from accelerated depreciation. Deferred taxes are impacted by new business volume and the accelerated depreciation deduction rate under U.S. federal and state tax law. The difference in the timing of depreciation for financial statement and income tax purposes does not impact operating results.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The most significant impact to the Company of the OBBBA is the permanent reinstatement of bonus depreciation for qualifying properties. The Company expects the impact will defer the payment of a portion of current federal income taxes and will have an immaterial impact to the Company's Statements of Comprehensive Income.
Company Outlook
Truck Industry Class 8 retail sales in the U.S. in 2025 are expected to be 205,000-220,000 units compared to 240,200 in 2024. Average earning assets in 2025 are expected to increase 8-10%. If current freight transportation conditions decline due to a weaker economy, including the effect of ongoing tariff uncertainty, then past due accounts, truck repossessions and credit losses would likely increase from the current levels and new business volume and average earning assets would likely decline. See the Forward-Looking Statements section of Management's Discussion and Analysis for factors that may affect this outlook.
Funding and Liquidity
The Company's debt ratings at September 30, 2025 are as follows:
|
Standard |
||||
|
and Poor's |
Moody's |
|||
|
Commercial paper |
A-1 |
P-1 |
||
|
Senior unsecured debt |
A+ |
A1 |
A decrease in these credit ratings could negatively impact the Company's ability to access capital markets at competitive interest rates and the Company's ability to maintain liquidity and financial stability.
The Company periodically registers debt securities under the Securities Act of 1933 for offering to the public. In November 2024, the Company filed a shelf registration statement to issue medium-term notes. The shelf registration statement expires in November 2027 and does not limit the principal amount of debt securities that may be issued during the period.
- 27-
PACCAR FINANCIAL CORP.
The Company participates with PACCAR and certain other PACCAR affiliates in committed bank facilities of $4,000.0 at September 30, 2025. Of this amount, $1,500.0 expires in June 2026, $1,250.0 expires in June 2028 and $1,250.0 expires in June 2030. PACCAR and the Company intend to extend or replace these credit facilities on or before expiration to maintain facilities of similar amounts and duration.
Of the $4,000.0 credit facilities, $3,088.0 is available for use by the Company and/or PACCAR and certain non-U.S. PACCAR financial subsidiaries. The remaining $912.0 is allocated to PACCAR and certain non-U.S. PACCAR financial subsidiaries. These credit facilities are maintained primarily to provide backup liquidity for the Company's commercial paper and maturing medium-term notes. The Company is liable only for its own borrowings under these credit facilities. There were no borrowings under these credit facilities for the three months ended September 30, 2025.
The Company issues commercial paper and medium-term notes to fund its financing and leasing operations. The total principal amounts of commercial paper and medium-term notes outstanding for the Company as of September 30, 2025 were $3,322.9 and $7,600.0, respectively.
The Company believes its current investment grade credit ratings of A+/A1, committed bank facilities, collections on existing loans and leases and its ability to borrow from PACCAR, if necessary, will continue to provide it with sufficient resources and access to capital markets at competitive interest rates to maintain its liquidity and financial stability. In the event of a decrease in the Company's credit ratings or a disruption in the financial markets, the Company may not be able to refinance its maturing debt in the financial markets. In such circumstances, the Company would be exposed to liquidity risk to the degree that the timing of debt maturities differs from the timing of receivable collections from customers. The Company believes its various sources of liquidity, including committed bank facilities, would continue to provide it with sufficient funding resources to service its maturing debt obligations.
Other information on liquidity, sources of capital, and contractual cash commitments as presented in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report") continues to be relevant.
Forward-Looking Statements
This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future results of operations or financial position and any other statement that does not relate to any historical or current fact. Such statements are based on currently available operating, financial and other information and are subject to risks and uncertainties that may affect actual results. Risks and uncertainties include, but are not limited to: national and local economic, political and industry conditions; changes in the levels of new business volume due to unit fluctuations in new PACCAR truck sales or reduced market share; changes in competitive factors; changes affecting the profitability of truck owners and operators; price changes impacting equipment costs and residual values; changes in interest rates and other operating costs; insufficient liquidity in the capital markets and availability of other funding sources; cybersecurity risks to the Company's information technology systems; pandemics; climate-related risks; global conflicts; litigation involving the Company or affiliated entities; and legislation and governmental regulation, including the potential impact of tariffs on PACCAR truck sales and the Company's equipment costs.
- 28-
PACCAR FINANCIAL CORP.
PACCAR Financial Corp. published this content on October 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 30, 2025 at 20:11 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]