Exhibit 1.1

PACCAR FINANCIAL CORP.

Medium-Term Notes, Series M

DISTRIBUTION AGREEMENT

November 20, 2009

To the several Agents

who are signatories hereto

Ladies and Gentlemen:

PACCAR Financial Corp., a Washington corporation (the “Company”), proposes to issue from time to time its Medium-Term Notes, Series M (the “Securities”) to be issued pursuant to the indenture, dated as of November 20, 2009 (the “Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). It is understood, however, that the Company may from time to time authorize the issuance of additional Securities and that such additional Securities may be sold pursuant to the terms of this Distribution Agreement (the “Agreement”), as though the issuance of such Securities were authorized as of the date hereof.

This Agreement provides both for the sale of Securities and any other securities that may be offered by post-effective amendment to the Registration Statement (as hereinafter defined) by the Company directly to purchasers through the Agents, in which case the Agents will act as agents of the Company in soliciting Security purchasers, and (as may from time to time be agreed to by the Company and the Agents) to the Agents as principals for resale to purchasers. Additional terms of any sale of Securities to the Agents as principals will be set out in a Terms Agreement (as hereinafter defined) relating to such sale, all as more fully provided herein.

Subject to the terms and conditions stated herein and subject to the reservation by the Company of the right to sell Securities directly to investors on its own behalf or to one or more underwriters for resale to the public, the Company hereby (i) appoints the Agents as agents of the Company for the purpose of soliciting purchases of the Securities from the Company by others, (ii) agrees that it will sell Securities only to or through the Agents or other agents appointed from time to time by the Company pursuant to agreements having terms not more favorable to such agents or the Company than the terms and conditions of this Agreement and (iii) agrees that whenever the Company determines to sell Securities directly to the Agents as principals for resale to others, it will enter into a Terms Agreement relating to such sale in accordance with the provisions of Section 2(b) hereof. The Company shall give the Agents prior notice of the appointment of any additional agents for the purpose of soliciting purchasers of the Securities. The Company will notify each Agent of the amount of Securities from time to time remaining unsold and of such other information as may be reasonably necessary to prevent inadvertent solicitations for sales in excess of the amount of Securities then remaining unsold.

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SECTION 1. Representations and Warranties .

(a) The Company represents and warrants as of the date hereof (unless otherwise set forth below), as of the time of each acceptance by the Company of any offer for the purchase of any Securities (whether to an Agent as principal or through an Agent as agent) (each such time being an “Applicable Time”), as of the date of each delivery of the Securities (the date of each such delivery to an Agent as principal or through an Agent as agent is referred to as a “Settlement Date”), and as of any time that the Registration Statement (as defined below) or the Prospectus (as defined below) shall be amended or supplemented, and as of the times referred to in Sections 6(a), 6(b) and 6(c) hereof (each of the times referenced above is referred to herein as a “Representation Date”), as follows:

(i) The Company has filed with the Securities and Exchange Commission (the “Commission”) an automatic shelf registration statement on Form S-3 (No. 333-[ — ]) which provides for the registration of the Securities, under the Securities Act of 1933, as amended (the “Act”), and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the Act (the “Rules and Regulations”), and the Company has filed such post-effective amendments thereto as may be required prior to any acceptance by the Company of an offer for the purchase of Securities. The Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).

(ii) Such registration statement (as so amended, if applicable) is referred to herein as the “Registration Statement”; and the final prospectus and all applicable amendments or supplements thereto (including the final prospectus supplement and pricing supplement relating to the offering of Securities), in the form furnished to the Agents for use in connection with the offering of the Securities, is herein called the “Prospectus;” provided, however, that all references to the “Registration Statement,” the “Prospectus” and the “preliminary prospectus” shall also be deemed to include all documents incorporated therein by reference pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). A “preliminary prospectus” shall be deemed to refer to any prospectus, any prospectus supplement and/or pricing supplement used before the acceptance by the Company of an offer for the purchase of Securities which omitted information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations. For purposes of this Agreement, all references to the Registration Statement, Prospectus or preliminary prospectus or to any amendment or supplement thereto shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

(iii) (A) At the time of filing the Registration Statement, (B) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), (C) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c) of the Rules and Regulations) made any offer relating to the Securities in reliance on the exemption of Rule 163 of the Rules and Regulations (“Rule 163”) and (D) at the date hereof, the Company was and is a “well-known seasoned issuer”, as defined in Rule 405 of the

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Rules and Regulations (“Rule 405”), and has not been and is not an “ineligible issuer” as defined in Rule 405; the Registration Statement is an “automatic shelf registration statement,” as defined in Rule 405, and the Securities, since their registration on the Registration Statement, have been and remain eligible for registration by the Company on a Rule 405 “automatic shelf registration statement”; and the Company has not received from the Commission any notice pursuant to Rule 401(g)(2) of the Rules and Regulations objecting to the use of the automatic shelf registration statement form.

(iv) The Registration Statement became effective upon filing under Rule 462(e) of the Rules and Regulations (“Rule 462(e)”) on November 20, 2009, and any post-effective amendment thereto also became effective upon filing under Rule 462(e). No stop order suspending the effectiveness of the Registration Statement has been issued under the Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with.

(v) At the respective times that the Registration Statement and each amendment thereto (including the filing of the Company’s most recent Annual Report on Form 10-K with the Commission (the “Annual Report on Form 10-K”)) became effective, at each deemed effective date with respect to the Agents pursuant to Rule 430B(f)(2) of the Rules and Regulations and at each Representation Date, the Registration Statement and any amendments thereto complied and will comply in all material respects with the requirements of the Act and the Rules and Regulations and the Trust Indenture Act and the rules and regulations of the Commission under the Trust Indenture Act (the “Trust Indenture Act Regulations”) and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

(vi) The Prospectus and each preliminary prospectus and prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Act, when so filed, complied or will comply in all material respects with the Rules and Regulations; each preliminary prospectus and the Prospectus delivered to the Agents for use in connection with the offering of Securities are identical to any electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T; and at the date hereof, at the date of the Prospectus and at each Representation Date, neither the Prospectus nor any amendment or supplement thereto included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(vii) Any offer that is a written communication relating to the Securities made prior to the filing of the Registration Statement by the Company or any person acting on its behalf (within the meaning, for this paragraph only, of Rule 163(c) of the Rules and Regulations) has been filed with the Commission in accordance with the exemption provided by Rule 163 and such

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offer otherwise complied with the requirements of Rule 163, including, without limitation, the legending requirement, to qualify such offer for the exemption from Section 5(c) of the Act provided by Rule 163.

As of the Applicable Time, neither (x) the Issuer General Use Free Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time, the Statutory Prospectus (as defined below) made available by the Company for use by the applicable Agent(s) as of the Applicable Time and the applicable Final Term Sheet (as defined in Section 3(d) hereof), if any, relating to the offering of the Securities, all considered together (collectively, the “General Disclosure Package”), nor (y) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

As used in this subsection and elsewhere in this Agreement:

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Rules and Regulations (“Rule 433”), relating to the Securities that (i) is required to be filed with the Commission by the Company, (ii) is a “road show” that constitutes a written communication within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors.

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

“Statutory Prospectus” means (i) the prospectus relating to various securities of the Company, including the Securities, that is included in the Registration Statement and (ii) the prospectus supplement relating to the Securities and any preliminary pricing supplement relating to the Securities of a particular series.

Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Securities or until any earlier date that the Company notified or notifies the Agents as described in Section 3(l), did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified.

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The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement, the Prospectus, the General Disclosure Package or any Issuer Free Writing Prospectus made in reliance upon and in conformity with written information furnished to the Company by any Agent through the Agents expressly for use therein.

(viii) The Company is not in violation of its corporate charter or bylaws; the Company is not in default in the observance or performance of any obligation, agreement, indenture or instrument, the effect of which default would be material to the Company. The execution, delivery and performance of this Agreement and any applicable Terms Agreement, the Indenture and the Securities, and compliance by the Company with the provisions of the Securities and the Indenture, have been duly authorized by all necessary corporate action and will not conflict with, result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company pursuant to the terms of, or constitute a default in the observance or performance of, any agreement, indenture or instrument, or result in a violation of the corporate charter or bylaws of the Company or any order, rule or regulation of any court or governmental agency having jurisdiction over the Company or its properties, the effect of which conflict, lien, charge, encumbrance, default or violation would be material to the Company. Except as required by the Act, the Trust Indenture Act, the Exchange Act and applicable state securities laws, no consent, authorization or order of, or filing or registration with, any court or governmental agency is required for the execution, delivery and performance of this Agreement, any applicable Terms Agreement and the Indenture or in connection with the sale of Securities hereunder, the failure to obtain which consent, authorization or order or make which filing or registration would be material to the Company. The Company has no subsidiaries within the meaning of Rule 405 of the Rules and Regulations.

(ix) From the dates as of which information is given in the Registration Statement, General Disclosure Package and the Prospectus, and except as described therein (a) there has not been any material adverse change in the business, properties, financial condition, results of operations, management or prospects of the Company, (b) there has been no material transaction entered into by the Company other than those in the ordinary course of business, (c) there has been no dividend or distribution of any kind declared, paid or made by the Company on its capital stock, except as disclosed in the financial statements incorporated by reference in the Registration Statement, the Prospectus and the General Disclosure Package, (d) there has been no amendment to the support agreement between the Company and PACCAR Inc (“PACCAR”) as amended and restated on June 19, 1989.

(x) Ernst & Young LLP, whose report appears in the Company’s Annual Report on Form 10-K which is incorporated by reference in the Registration Statement, the Prospectus and the General Disclosure Package, are an independent registered public accounting firm as required by the Act and the Rules and Regulations.

(xi) The Indenture has been validly authorized, duly executed and delivered by the Company, and constitutes the legally binding obligation of the Company enforceable in accordance with its terms (except as enforcement thereof may be limited by

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bankruptcy, insolvency, other laws relating to creditors’ rights generally or by general equity principles and except further as enforcement thereof may be limited by requirements that a claim with respect to any debt securities issued under the Indenture that are payable in a foreign currency (or a foreign currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States).

(xii) When the Securities are offered for sale pursuant hereto and to any applicable Terms Agreement, they will have been validly authorized for issuance and sale pursuant to this Agreement or such Terms Agreement and, upon delivery and payment therefor as provided in this Agreement, any applicable Terms Agreement and the Indenture will be validly issued and outstanding, and will constitute legally binding obligations of the Company enforceable in accordance with their terms (except as enforcement thereof may be limited by bankruptcy, insolvency, or other laws relating to creditors’ rights generally or by general equity principles and except further as enforcement thereof may be limited by requirements that a claim with respect to any Securities payable in a foreign currency (or a foreign currency judgment in respect of such claim) be converted into U.S. dollars at a rate or exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States); the Securities will be in a form previously certified to the Agents and contemplated by the Indenture and entitled to the benefits of the Indenture.

(xiii) The descriptions of the Securities and the Indenture contained in the Prospectus and the General Disclosure Package fairly present the information required with respect thereto in all material respects.

(xiv) PACCAR has been duly incorporated and is validly existing and in good standing under the laws of the State of Delaware; and the Company has been duly incorporated, is validly existing, and is active under the laws of the State of Washington, is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the failure to so qualify and be in good standing would materially adversely affect its business or financial condition, and has the power and authority necessary to own or hold its properties and to conduct the business in which it is presently engaged.

(xv) Except as described in the General Disclosure Package and the Prospectus, there is no material litigation or governmental proceeding pending or, to the knowledge of the Company, threatened against the Company which might result in any material adverse change in the financial condition, results of operations, business, property or prospects of the Company or which is required to be disclosed in the Registration Statement and the aggregate of all pending legal or governmental proceedings to which the Company is a party or of which any of their respective assets, properties or operations is the subject which are not described in the Registration Statement, the General Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, may not reasonably be expected to result in a material adverse change.

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(xvi) The financial statements filed as part of or incorporated by reference in the Registration Statement, the General Disclosure Package or the Prospectus present, and will present as of each applicable Representation Date, fairly, the financial condition and results of operations of the Company, at the dates and for the periods indicated therein, and have been, and will be as of each applicable Representation Date, prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved; and the supporting schedules included or incorporated by reference in the Registration Statement present fairly the information required to be stated therein.

(xvii) The documents incorporated by reference in the Registration Statement and the Prospectus have been, and will be as of each applicable Representation Date, prepared by the Company in conformity in all material respects with the applicable requirements of the Act and the Rules and Regulations and the Exchange Act and the rules and regulations of the Commission thereunder; and such documents have been, or will be as of each applicable Representation Date, timely filed as required thereby.

(xviii) There are no contracts or other documents which are required to be filed as exhibits to the Registration Statement by the Act or by the Rules and Regulations, or which were required to be filed as exhibits to any document incorporated by reference in any prospectus by the Exchange Act or the rules and regulations of the Commission thereunder, which have not been filed as exhibits to the Registration Statement or to such document incorporated therein by reference as permitted by the Rules and Regulations or the rules and regulations of the Commission under the Exchange Act, as the case may be.

(xix) All the authorized, issued and outstanding capital stock of the Company has been duly authorized, is validly issued, fully paid and nonassessable and is owned, of record and beneficially, by PACCAR Financial Services Corporation (“PFSC”), a direct subsidiary of PACCAR, free and clear of any mortgage, pledge, lien, claim or encumbrance, except as described in the General Disclosure Package and the Prospectus.

(xx) The Company has all licenses for the conduct of its business which the failure to have would have a material adverse effect on the business of the Company and all licenses are valid and in full force and effect; and the Company has not received any notice of proceedings relating to the revocation or modification of such licenses which, singly or in the aggregate, if subject to an unfavorable decision, would result in an adverse effect.

(xxi) The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements and the money laundering statutes and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

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(xxii) Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company is currently subject to any sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(xxiii) Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA; and the Company and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

(xxiv) The Medium-Term Note program under which the Securities are issued (the “Program”), as well as the Securities, are rated A1 by Moody’s Investors Service and AA- by Standard & Poor’s, or such other rating as to which the Company has most recently notified the Agents pursuant to Section 3(e) hereof.

(xxv) The Registration Statement is not the subject of a pending proceeding or examination under Section 8(d) or 8(e) of the Act, and the Company is not the subject of a pending proceeding under Section 8A of the Act in connection with the offering of the Securities.

(xxiii) The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting. Since the date of the latest audited financial statements included or incorporated by reference in the Registration Statement, the General Disclosure Package

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or the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective.

(b) Any certificate signed by any officer of the Company and delivered to an Agent or to its counsel in connection with an offering of Securities or the sale of Securities to an Agent as principal shall be deemed a representation and warranty by the Company to such Agent as to the matters covered thereby.

SECTION 2. Agents .

(a) Solicitations as Agent . On the basis of the representations and warranties contained herein, but subject to the terms and conditions herein set forth, each Agent agrees, as agent of the Company, to use reasonable efforts to solicit offers to purchase the Securities upon the terms and conditions set forth in the Prospectus. The Agents shall not appoint sub-agents. The Agents are authorized to engage the services of any other broker or dealer in connection with the offer or sale of the Securities purchased by the Agents as principal for resale to others, and the Agents may allow any portion of the discount they have received in connection with such purchases from the Company to such brokers or dealers.

The Agents shall offer the Securities at such times, in such amounts and maturities and at such rates of interest as the Company shall authorize, but the Company shall not approve the solicitation of purchases of Securities in excess of the amount which shall be authorized by the Company from time to time or in excess of the principal amount of Securities registered pursuant to the Registration Statement. The Agent will have no responsibility for maintaining records with respect to the aggregate principal amount of Securities sold, or of otherwise monitoring the availability of Securities for sale under the Registration Statement. The Agents shall furnish a copy of the Prospectus to each offeree to the extent required by the Act. The Agents shall not offer to sell to or solicit offers to buy from any person in any state or jurisdiction otherwise than in conformity with the Blue Sky Memorandum referred to in Section 4.

The Company reserves the right, in its sole discretion, to suspend solicitation of purchases of the Securities, commencing at any time, for a period of time or permanently. Promptly after receipt of telephonic, or written notice from the Company, the Agents will suspend solicitation of purchases of the Securities from the Company until such time as the Company has advised them that such solicitation may be resumed. Following any such notice, until such time as the Company shall notify the Agents, telephonically or in writing, to recommence solicitation of purchases of the Securities, the Company shall not be required to comply with the requirements of Sections 6(b), 6(c) and 6(d) hereof. Promptly after providing telephonic or written notice to the Agents to recommence such solicitation, the Company shall provide to the Agents such certificates, opinions and letters as generally described in Sections 6(b), 6(c) and 6(d) as the Agents may reasonably request or as may be specified in any applicable Terms Agreement.

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Promptly upon the closing of the sale of any Securities, the Company agrees to pay the appropriate Agent a commission (or allow such Agent a discount) in the currency in which such Securities are denominated equal to a percentage of the principal amount of each of the Securities sold by the Company as a result of a solicitation made by such Agent during the term of this Agreement as set forth in Schedule A hereto, or such other amount as shall be agreed between the Company and such Agent and set forth in the pricing supplement relating to such Securities.

The Agents are authorized to solicit orders for the Securities in such denominations (in U.S. dollars or in another currency), upon such terms and at such prices as the Company shall authorize and shall be set forth in a pricing supplement to the Prospectus to be prepared following each acceptance by the Company of an offer for the purchase of Securities. Unless otherwise specifically authorized, the Agents shall solicit orders only for the purchase of Securities (i) at 100 percent of their principal amount and (ii) denominated in U.S. dollars in the amount of $1,000 or any integral multiple of $1,000. Each Agent shall communicate to the Company, orally or in writing, each reasonable offer to purchase Securities received by it as Agent. The Company shall have the sole right to accept offers to purchase the Securities and may in its absolute discretion reject any such offer in whole or in part. The Company shall have no liability to any Agent for any commission for its rejection of any offer or its failure to consummate any sale. Each Agent shall have the right, in its discretion reasonably exercised, to reject any offer to purchase the Securities received by it in whole or in part, and any such rejection shall not be deemed a breach of its agreement contained herein.

(b) Purchases as Principal . Each sale of Securities to an Agent as principal shall be made in accordance with the terms contained herein and (unless the Company and the Agent shall otherwise agree) in a separate agreement which will provide for the sale of such Securities to, and the purchase and reoffering thereof by, the Agent. Each such separate agreement (which may be an oral agreement) between an Agent and the Company is herein referred to as a “Terms Agreement.” Unless the context otherwise requires, each reference contained herein to “this Agreement” shall be deemed to include any applicable Terms Agreement between the Company and an Agent. Each such Terms Agreement, whether oral or in writing, shall be with respect to such information (as applicable) as is specified in Exhibit A hereto. An Agent’s commitment to purchase Securities as principal pursuant to any Terms Agreement or otherwise shall be deemed to have been made on the basis of the representations and warranties of the Company herein contained and shall be subject to the terms and conditions herein set forth. Each Terms Agreement shall specify (i) the principal amount of Securities to be purchased by such Agent pursuant thereto, (ii) the price to be paid to the Company for such Securities (which shall be at a discount, if any, as specified in a Terms Agreement), (iii) the time and place of delivery of and payment for such Securities, (iv) any provisions relating to the rights of and any default by any broker or dealer acting together with such Agent in the reoffering of the Securities, and (v) such other provisions (including further terms of the Securities) as may be mutually agreed upon. The Agents may utilize a selling or dealer group in connection with the resale of the Securities purchased and may reallow to any broker or dealer any portion of the discount or commission payable pursuant hereto. Such Terms Agreement shall also specify the requirements for the stand-off agreement, officer’s certificate, opinions of counsel and comfort letter pursuant to Sections 3(m), 5(b), 5(c), 5(e) and 5(f) hereof.

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Securities to be purchased by an Agent as principal are herein called the “Purchased Securities.” Purchased Securities will be represented by a global certificate (the “Book-Entry Securities”) registered in the name of the depositary (the “Depositary”) specified in the Prospectus or by certificates issued in definitive form (the “Certificated Securities”). Delivery of Certificated Securities shall be made to the Agent and delivery of Book-Entry Securities shall be made to the Trustee as agent for the Depositary for the account of the Agent, in either case, against payment by the Agent of the purchase price to or upon the order of the Company in the funds specified in the applicable Terms Agreement. Certificated Securities shall be registered in such names and in such denominations as the Agent may request not less than two full business days prior to the applicable Closing Date (as defined below). The Company will have Certificated Securities available for inspection, checking and packaging by the Agent in the city in which delivery and payment is to occur, not later than 2 p.m., on the business day prior to the applicable Closing Date.

If the Company and two or more Agents enter into an agreement pursuant to which such Agents agree to purchase Securities from the Company as principal and one or more of such Agents shall fail on the Closing Date to purchase the Securities which it or they are obligated to purchase (the “Defaulted Securities”), then the nondefaulting Agents shall have the right, within 24 hours thereafter, to make arrangements for one of them or one or more other Agents or underwriters to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; provided, however, that if such arrangements shall not have been completed within such 24-hour period, then:

No action taken pursuant to this paragraph shall relieve any defaulting Agent from liability in respect of its default. In the event of any such default which does not result in a termination of such agreement, either the nondefaulting Agents or the Company shall have the right to postpone the Closing Date for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements.

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(c) Administrative Procedures . Administrative procedures respecting the sale of Securities shall be agreed upon from time to time by the Agents and the Company (the “Procedures”). The several Agents and the Company agree to perform the respective duties and obligations specifically provided to be performed by each of them herein and in the Procedures.

(d) Closing Date . The documents required to be delivered by Section 5 hereof shall be delivered at the offices of Sidley Austin LLP , 787 Seventh Avenue, New York, New York 10019, on the date hereof or, with respect to any particular Agent, such other date and time as such Agent and the Company may agree upon in writing (the “Closing Date”).

(e) Other Debt Securities . Nothing contained herein, other than Section 3(m) hereof, shall limit the right of the Company to authorize and issue debt securities, including medium-term notes other than the Securities, under the Indenture or otherwise.

(f) Reliance . The Company and the Agents agree that any Securities the placement of which the Agents arrange shall be placed by the Agents, and any Securities purchased by an Agent shall be purchased, in reliance on the representations, warranties, covenants and agreements of the Company contained herein and on the terms and conditions and in the manner provided herein.

SECTION 3. Covenants of the Company .

The Company covenants and agrees:

(a) To furnish promptly to each Agent upon request a signed copy of the Registration Statement as filed with the Commission and each amendment or supplement thereto, and a copy of the General Disclosure Package and each Prospectus with respect to the Securities filed with the Commission, including all supplements thereto and all documents incorporated therein by reference, and all consents and exhibits filed therewith. The Registration Statement and each amendment thereto and the Prospectus and each amendment and supplement thereto so furnished to the Agents will be identical to any electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(b) To deliver promptly to each Agent such number of the following documents as each Agent may reasonably request: (i) conformed copies of the Registration Statement and any new registration statement (excluding exhibits other than the computation of the ratios of earnings to fixed charges, the Indenture and this Agreement), (ii) the General Disclosure Package and Prospectus with respect to the Securities, and (iii) any documents incorporated by reference in any Prospectus with respect to the Securities (excluding exhibits).

(c) To file with the Commission, during any period in which any Prospectus is required by law to be delivered in connection with sales of the Securities, any amendment or supplement to the Registration Statement, any new registration statement or any Prospectus that is required by the Act or the Rules and Regulations, and all documents, and any amendments to previously filed documents, required to be filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act.

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(d) Prior to filing with the Commission during any period in which the Prospectus is required by law to be delivered in connection with sales of Securities (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Act) (i) any amendment or supplement to the Registration Statement and any new registration statement, (ii) any Prospectus or any amendment or supplement thereto, or (iii) any document incorporated by reference in any of the foregoing or any amendment of or supplement to any such incorporated document, to furnish a copy thereof to the counsel for the Agents and to allow the Agents and counsel for the Agents a reasonable opportunity to comment thereon and, between the date of delivery of any Terms Agreement and the Settlement Date with respect to such Terms Agreement, not to file any such document to which the applicable agent reasonably objects. Unless otherwise notified by the Agents, the Company will prepare a final term sheet (the “Final Term Sheet”) reflecting the final terms of an offering of Securities, in form and substance satisfactory to the Agents, and shall file such Final Term Sheet as an “issuer free writing prospectus” pursuant to Rule 433 prior to the close of business within two days following the date such final terms are established.

(e) To advise each Agent promptly (i) when any post-effective amendment to the Registration Statement or any new registration statement relating to or covering the Securities becomes effective, (ii) the receipt of any comments from the Commission, (iii) of any request by the Commission for an amendment or supplement to the Registration Statement or the filing of any new registration statement or any Prospectus, to any document incorporated by reference in any of the foregoing or for any additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or such new registration statement or any order directed to any Prospectus or any document incorporated therein by reference or the initiation or threat of any stop order proceeding or of any challenge by the Commission to the accuracy or adequacy of any document incorporated by reference in any Prospectus or of any examination pursuant to Section 8(e) of the Act concerning the Registration Statement, (v) of receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose, (vi) of the occurrence of any event which causes the Registration Statement or such new registration statement or the General Disclosure Package or any Prospectus to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading, and (vii) any change in the rating assigned by any nationally recognized statistical rating organization (“NRSRO”) to the Program or any debt securities (including the Securities) of the Company, or the public announcement by any NRSRO that it has under surveillance or review, with possible negative implications, its rating of the Program or any such debt securities, or the withdrawal by an NRSRO of its rating of the Program or any such debt securities. The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus (including, without limitation, any pricing supplement) transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus (including, without limitation, any pricing supplement). The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment.

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(f) The Company shall pay the required Commission filing fees relating to the Securities within the time required by Rule 456(b)(1) (i) of the Rules and Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) of the Rules and Regulations (including, if applicable, by updating the “Calculation of Registration Fee” table in accordance with Rule 456(b)(1)(ii) either in a post-effective amendment to the Registration Statement or on the cover page of a prospectus filed pursuant to Rule 424(b)).

(g) If, during any period in which the Prospectus is required by law to be delivered in connection with sales of the Securities (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Act), the Commission shall issue a stop order suspending the effectiveness of the Registration Statement, to make every reasonable effort to obtain the lifting of that order at the earliest possible time.

(h) To make generally available to its security holders, as soon as practicable but in no event later than 90 days after each twelve-month period identified below, an earnings statement (in form complying with the provisions of Section 11(a) of the Act, which need not be certified by independent certified public accountants unless required by the Act or the Rules and Regulations) covering the twelve-month period beginning not later than the first day of the fiscal quarter next following each date which (i) under Section 11(a) of the Act and the Rules and Regulations is an effective date of the Registration Statement for purposes of said Section 11(a), and (ii) is not later than the last sale hereunder; provided that such delivery requirement shall be deemed met by the Company’s compliance with its reporting requirements pursuant to the Exchange Act and the rules and regulations promulgated by the Commission thereunder.

(i) So long as any of the Securities are outstanding, to furnish to each Agent not later than the time the Company makes the same generally available to others, copies of all reports and financial statements furnished by the Company to any securities exchange on which the Securities are listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder to the extent that such reports and financial statements are not publicly available on EDGAR.

(j) To endeavor, in cooperation with the Agents, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as we may agree upon and to maintain such qualifications in effect for as long as may be required for the distribution of the Securities; provided that in no event shall the Company be obligated to qualify to do business as a foreign corporation in any jurisdiction where it is not already so qualified, to file any general consent to service of process, or to subject itself to taxation in any jurisdiction where it is not already subject to taxation. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Securities have been qualified as above provided.

(k) The Company will prepare, with respect to any Securities to be sold through or to the Agents pursuant to this Agreement, a pricing supplement with respect to such Securities in a form previously approved by the Agents and will file the Prospectus, including such pricing supplement pursuant to Rule 424(b)(3) (or any rule succeeding or replacing such rule) under the Act not later than the close of business of the Commission on the fifth business day after the date on which such pricing supplement is first used.

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(l) If at any time during the term of this Agreement any event shall occur or any condition shall exist as a result of which it is necessary, in the reasonable opinion of counsel for the Agents or counsel for the Company, to further amend or supplement the Prospectus or the General Disclosure Package in order that the Prospectus or the General Disclosure Package will not include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time the Prospectus or the General Disclosure Package is delivered to a purchaser, or if it shall be necessary, in the reasonable opinion of either of such counsel, to amend or supplement the Registration Statement or the Prospectus or the General Disclosure Package or to file a new registration statement in order to comply with the requirements of the Act or the Rules and Regulations, immediate notice shall be given, and confirmed in writing, to the Agents to cease the solicitation of offers to purchase the Securities in the Agents’ capacity as agent and to cease sales of any Securities the Agents may then own as principal pursuant to a Terms Agreement, and the Company will promptly prepare and file with the Commission such amendment or supplement or a new registration statement, whether by filing documents pursuant to the Exchange Act, the Act or otherwise, as may be necessary to correct such untrue statement or omission or to make the Registration Statement, any new registration statement and Prospectus or the General Disclosure Package comply with such requirements. The Company shall not be required to comply with the provisions of this subsection during any period from the time (i) the Agents shall have suspended solicitation of purchases of the Securities in their capacity as agents pursuant to a request from the Company and (ii) the Agents shall not then hold any Securities as principal purchased pursuant to a Terms Agreement, to the time the Company shall determine that solicitation of purchases of the Securities should be resumed or shall subsequently enter into a new Terms Agreement with the Agents. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement relating to the Securities or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company will promptly notify the Agents and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

(m) If provided in a Terms Agreement, between the date of such Terms Agreement and the Settlement Date with respect to such Terms Agreement, the Company will not offer or sell, or enter into any agreement to sell, any debt securities of the Company (other than the Securities that are to be sold pursuant to such Terms Agreement and commercial paper for other short-term debt with an original maturity of 270 days or less in the ordinary course of business) without such Agent’s prior consent.

(n) The Company will use the net proceeds received by it from the issuance and sale of the Securities in the manner specified in the General Disclosure Package and the Prospectus.

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(o) The Company represents and agrees that, unless it obtains the prior consent of the Agents, and each Agent represents and agrees that, unless it obtains the prior consent of the Company, it has not made and will not make any offer relating to the Securities that would constitute an “issuer free writing prospectus,” as defined in Rule 433, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405, required to be filed with the Commission; provided, however, that prior to the preparation of the Final Term Sheet in accordance with Section 3(d), the Agents are authorized to use the information with respect to the final terms of the applicable Securities in communications conveying information relating to the applicable offering of Securities to investors. Any such free writing prospectus consented to by the Company and the Agent(s) is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping; provided, however, that any such treatment shall not convert a Permitted Free Writing Prospectus that would not otherwise constitute an Issuer Free Writing Prospectus into an Issuer Free Writing Prospectus solely due to such treatment. Any Permitted Free Writing Prospectus shall be considered to be an Issuer General Use Free Writing Prospectus unless otherwise agreed to by the Company and the Agents.

SECTION 4. Payment of Expenses .

The Company will pay (i) the costs incident to its authorization, issuance, sale and delivery of the Securities and any taxes payable in that connection, (ii) the costs incident to the preparation, printing and filing under the Act of the Registration Statement, any new registration statement and any amendments and exhibits thereto, (iii) the costs incident to the preparation, printing and filing of any document and any amendments and exhibits thereto required to be filed by the Company under the Exchange Act, (iv) the costs of furnishing to the Agents copies of the Registration Statement filed and each amendment and post-effective amendment thereof (including exhibits), any preliminary prospectus, Permitted Free Writing Prospectus or Prospectus, any supplement to the Prospectus and any documents incorporated by reference in any of the foregoing documents, (v) the fees and disbursements of the Trustee and its counsel, (vi) the cost of any filings with the Financial Industry Regulatory Authority, Inc., in respect of the Securities, (vii) the fees and disbursements of counsel to the Company, (viii) any fees payable to rating agencies in connection with the rating of the Securities, (ix) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in this Agreement and of preparing and printing a Blue Sky Memorandum and a memorandum concerning the legality of the Securities as an investment (including reasonable fees and expenses of counsel for the Agents in connection therewith), and (x) all other costs and expenses incident to the Company’s performance of its obligations under this Agreement.

In addition, the Company agrees to pay the reasonable fees and disbursements of Sidley Austin LLP , counsel for the Agents in connection with the sale of the Securities.

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SECTION 5. Conditions of Obligations .

The obligations of an Agent to solicit offers to purchase the Securities will be subject to the continued accuracy of the representations and warranties of the Company contained herein, to the accuracy of the statements of the Company’s officers made in any certificate furnished pursuant to the provisions hereof, to the performance and observance by the Company of all covenants and agreements contained herein and to the following additional conditions:

(a) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no order shall have been issued by the Commission suspending or preventing the use of the General Disclosure Package or any prospectus, and no proceedings for such purpose shall be pending before or threatened by the Commission and any request by the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Agents.

(b) At the Closing Date, the Agents shall have been received the opinion, dated as of the delivery date thereof, of Bruce N. Holliday, Assistant General Counsel of PACCAR and counsel for the Company, in form and substance reasonably satisfactory to the Agents and their counsel, to the effect that:

(i) PACCAR has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, PFSC has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and the Company has been duly incorporated, is validly existing as a corporation, and is active under the laws of the State of Washington.

(ii) The Company has corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus.

(iii) The Company is duly qualified and in good standing as a foreign corporation to transact business in each jurisdiction in which the failure to so qualify and be in good standing would materially adversely affect its business or financial condition.