April 27, 2011
PACCAR Financial (PFC) is celebrating its 50th anniversary this year. “We’re celebrating a milestone,” said Todd Hubbard, president of PACCAR Financial. “The growth of PACCAR’s captive finance company has been dramatic. In 1970, PFC had total assets of $87 million in its portfolio compared to $3.6 billion in 2010. The finance group saw a 30 percent jump in business between 2009 and 2010, and it’s looking to grow significantly again in 2011.”
Recent customer surveys reinforce PFC’s commitment to customer service which Hubbard said helped propel PFC’s growth. “On a scale of 1 to 10, our customers gave us, on average, a 9-plus in all the key metrics of customer service and loan programs,” he said. “You can’t get much better than that.”
According to Hubbard, PFC has grown to be a primary lender to customers through Peterbilt’s and Kenworth’s network of dealerships. “Our mission is to support our dealers with innovative and attractive lease and finance packages for their customers,” said Hubbard. “And, since we have a vested interest in the transportation industry, we can be more creative and responsive to our dealerships’ customers than other finance sources.”
Hubbard said that mission was very evident during the recent downturn in the economy from which the trucking industry is emerging.
“We had a perfect storm of events, which impacted many customers ability to obtain financing due to the tightening of credit,” he said. “Because of PACCAR Inc’s superior A+ corporate credit rating, we had good access to funding at reasonable costs and were well positioned to work with our customers and address the issues.”
PFC also stepped in to help customers through the introduction of a used truck trade package program.
“In some cases, our customers wanted to purchase new trucks, but trading in their existing used trucks was a problem due to depressed resale values in the used truck market,” said Hubbard. “PFC bridged that gap by taking a portion of the trades and limiting a dealer’s risk of absorbing an entire trade package. The end result was that it helped facilitate new truck purchases, which was good for our customers, good for our dealers, and good for PACCAR.”
PFC’s vested interest in the transportation industry has been a fundamental building block for many PACCAR dealers. So has the finance company’s longevity and track record with customers.
“The amount of time PFC has been in business plays a big factor in my ability to effectively sell to my customers – that they’ll be there to service the loan, and be there the next time our customer wants to replace a truck,” said Clay Madden, director of finance for Performance Kenworth in Houston. “So many times, finance companies come and go. As a finance manager you can’t always promise that the loan you’re placing will be serviced until the end of the loan. We’ve just seen so many finance companies go out of business. As our captive finance company, our customer can feel confident with PFC that they’re going to be there even when the industry goes into a downturn.”
According to Gary Carlson, president and founder of Select 1 Transport, how a financial group responds in times of uncertainty is a barometer for future success.
“During the middle of last year, we had some growth we were concerned about and how we were going to fund that growth,” recalled Carlson, whose company specializes in automotive transport, event marketing, and managed global logistics. “We picked up the phone, gave PFC a call and said, ‘here’s what we are thinking of doing. We’d like to change our truck financing a little bit.’ Without hesitation, they worked with us. Obviously we showed them a good, well-thought-out proposal and it allowed them to work with us on a refinancing package. That will go a long way for us over the years to come.”
Hubbard said a finance source shows its true colors when the industry goes through its cyclical up and downs. “Banks and independent finance companies come and go,” he added. “They tend to emerge during the booms in the industry, but disappear or tighten their belts during the down times. The one thing constant about PFC, is we’re constant. We’re always there and a part of the proposition of buying a Kenworth or Peterbilt truck.”
A valued partner is how Jon Vinje, president of Halvor Lines in Superior, Wis.,. views his relationship with PFC.
“We have some relationships with local banks, which are necessary for our business,” said Vinje. “But for our tractors, we pride ourselves on our equipment, and we need a good financial partner for equipment acquisition. PACCAR Financial provides the financial resources to make us successful. And, I feel very comfortable with PFC — they continue to support our business. More importantly, I value their partnership with us even more after going through the economic downturn. They understood the different business cycles that we go through with the economy and trucking industry – something local banks just don’t understand.”
Through its history, PFC has been known for offering comprehensive finance and lease packages to better serve its customers. These include special promotions such as bundling “no-cost” extended warranty offers in the finance package. “That’s something banks can’t offer,” said Hubbard.
“PFC certainly does have innovative programs,” echoed Bob Gentry, president of Peterbilt of New Hampshire. “In addition to standard finance and more creative lease packages, they do extended terms, skip payments for our construction customers, and on the medium-duty side, they’ve been very aggressive with creative financing. The special Medium Duty Combo program they offer blends a 4.99 percent interest rate with an extended warranty and is extremely helpful. The majority of my business over the past several months was due to that program.”
With the documented industry-leading high resale values of both Kenworth and Peterbilt trucks, Hubbard said PFC can confidently offer lease finance products that include a guaranteed residual value. “With a high residual value, it makes the monthly lease payment for a Kenworth or Peterbilt very competitive and often on par with lower cost vehicles. It gives our customers more truck, more comfort, and more quality for the dollar, plus a way to utilize off-balance sheet financing. It’s why we’ve seen a dramatic increase in lease business in our portfolio over the past couple years.”
While providing truck finance packages has been PFC’s mainstay, it has also broadened its scope over the years to include trailer and body upfitting financing.
“The ability to lease and have our trailers financed has been an important financing piece for us,” said Doug Lokemoen, president of Tri-Hi Transportation, which operates 75 Peterbilts and 93 trailers out of Merrill, Wis. “We do both retail financing as well as FMV (fair market value) leases,” he said. “And they’ve financed our trailers the past seven or eight years, and that’s helped a lot.
“We use the FMV to help keep our payments down and grow our company. But whether it’s a lease or finance package, the folks at PFC have been very helpful in working with us to develop the best option for our company.”
PFC also helps PACCAR dealers grow and flourish by lending money for flooring plans, as well as dealership expansion.
“As a captive finance group, they provide wholesale floor plans for us on new and used trucks,” said Cooper Sykes, president of Cooper Kenworth, which has 10 locations in North Carolina. “Along with providing retail financing for our customers, they’ve been absolutely vital to our organization. They have a vested interest in their dealer body in wholesale and retail financing. When I had only been in business a year, I was working with another finance company. But, in 1973 and ’74, when the economy went into a trough, that other lender said they were going to cut my floor plan off. I went to Kenworth and they in turn went to PFC and picked up my floor plan to allow me to continue. I was very small at that time. Even though that was 37 years ago, I never forgot that.
“Then in 1995, my Durham store burned to the ground, and during the 12 months I was trying to build back, PACCAR Financial and Kenworth worked with me to get my dealership back on track. They helped me when I had trouble, so over the years I’ve been as loyal to them as they have been to me.”
According to Hubbard, PACCAR Financial has come full circle over the past 50 years. “We originally began as a finance source to help customers purchase Kenworth and Peterbilt trucks,” he said. “But as we’ve grown and matured, we’ve come to play an integral role with dealers in their flooring and expansion, plus we’ve continued to support their customers with innovative finance plans and creative approaches to customer needs during the up as well as down cycles of our industry.
“Who knows what the next 50 years hold, but our customers can be assured that Kenworth and Peterbilt products will continue to be industry-leading, be backed by a world-class dealer network, and supported by a finance group dedicated to their mutual success.”