PACCAR 2010 Annual Report Download - page 38

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The change in finance and lease margin is outlined in more detail in the tables below:
Interest and
Interest other borrowing Finance
and fees expenses margin
2008 $ 683.4 $ 394.1 $ 289.3
Increase/(decrease)
Average finance receivables (113.4) (113.4)
Yields (53.4) (53.4)
Average debt balances (67.6) 67.6
Borrowing rates (26.8) 26.8
Currency translation (14.8) (7.9) (6.9)
Total decrease (181.6) (102.3) (79.3)
2009 $ 501.8 $ 291.8 $ 210.0
The lower average finance receivables reflect portfolio runoff from decreased retail loan and finance lease new
business volume resulting from fewer retail sales of trucks, as well as lower dealer wholesale financing from dealer
inventory reductions in Europe. Average debt balances declined reflecting a lower level of funding needed to fund
the smaller financial services portfolio. Yields and borrowing rates declined due to lower market interest rates.
Currency translation effects resulted primarily from a lower euro vs. the U.S. dollar. Overall, 2009 finance margin
decreased to $210 million primarily due to lower average finance receivables and lower market interest rates.
Operating lease,
rental and Depreciation Lease
other income and other margin
2008 $ 579.5 $ 441.5 $ 138.0
Increase/(decrease)
Operating lease impairments 29.5 (29.5)
(Gains) losses on returned lease assets (9.1) 20.1 (29.2)
Used trucks taken on trade package 12.7 16.3 (3.6)
Average operating lease assets (3.7) (3.1) (.6)
Revenue and cost per asset (36.0) (17.4) (18.6)
Currency translation (14.5) (12.6) (1.9)
Insurance and other (20.9) (18.2) (2.7)
Total (decrease)/increase (71.5) 14.6 (86.1)
2009 $ 508.0 $ 456.1 $ 51.9
Operating lease impairments increased $29.5 million in 2009 due to declining used truck prices ($19.6 million) and
higher losses on repossessed operating lease equipment ($9.9 million). There were lower gains on sales of trucks
returned from leases ($9.1 million) and higher losses on sales of trucks returned from leases of $20.1 million due to
lower used truck prices as a result of the global economic recession. In 2009, the Financial Services segment began
taking used trucks on trade packages resulting in higher revenues of $12.7 million from the sale of these trucks. The
loss of $3.6 million is due to declining used truck prices and higher than anticipated costs to sell. Revenue and
depreciation from operating leases decreased from lower average assets in the operating lease portfolio. Lower
market demand resulted in a decrease in revenues and cost per asset of $36.0 million and $17.4 million, respectively.
The decrease in revenue consisted of lower asset utilization (the proportion of available operating lease units that
are being leased) of $10.2 million, lower lease rates of $13.2 million and lower fuel and service revenue of $12.6
million. The decrease in costs per asset are due to lower vehicle operating expenses (including lower fuel costs of
$8.3 million) reflecting lower asset utilization levels. Currency translation effects resulted primarily from a lower
euro vs. the U.S. dollar. Insurance and other revenues and costs decreased primarily due to a reduction in the
insurance portfolio. Overall, lease margin declined $86.1 million to $51.9 million from $138.0 million in 2008.
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