UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------
                                    Form 10-Q
                                   ----------

      [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2004

                                       OR

      [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                        Commission File Number: 001-31369

                                   ----------

                                 CIT Group Inc.
             (Exact name of Registrant as specified in its charter)

            Delaware                                            65-1051192
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                            Identification Number)

                   1 CIT Drive, Livingston, New Jersey, 07039
              (Address of Registrant's principal executive offices)

                          (973) 740-5000 (Registrant's
                                telephone number)

        (Former name, former address and former fiscal year, if changed
                               since last report)

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by  Section13  or 15(d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

      Indicate by check mark whether the registrant is an  accelerated  filer as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [X] No [ ]

      As of October 29, 2004, there were 210,181,847  shares of the Registrant's
common stock outstanding.

================================================================================



                         CIT GROUP INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                         Part I--Financial Information:

Item 1.  Consolidated Financial Statements .............................    1
         Consolidated Balance Sheets (Unaudited) .......................    1
         Consolidated Statements of Income (Unaudited) .................    2
         Consolidated Statements of Stockholders' Equity (Unaudited) ...    3
         Consolidated Statements of Cash Flows (Unaudited) .............    4
         Notes to Consolidated Financial Statements (Unaudited) ........   5-19

Item 2.  Management's Discussion and Analysis of Financial Condition
and       and Results of Operations and Quantitative and Qualitative
Item 3.  Disclosure about Market Risk ..................................   20-48
Item 4.  Controls and Procedures .......................................   49

                          Part II--Other Information:

Item 1.  Legal Proceedings .............................................   50
Item 2.  Unregistered Sales of Equity Securities 
           and Use of Proceeds .........................................   51
Item 6.  Exhibits and Reports on Form 8-K ..............................   51
Signatures .............................................................   53


                                       i


                          PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                         CIT GROUP INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (Unaudited)
                      ($ in millions -- except share data)

                                                      September 30, December 31,
                                                          2004          2003
                                                      ------------  -----------
                                     ASSETS

Financing and leasing assets:
   Finance receivables ..............................   $34,542.8    $31,300.2
   Reserve for credit losses ........................      (637.9)      (643.7)
                                                        ---------    ---------
   Net finance receivables ..........................    33,904.9     30,656.5
   Operating lease equipment, net ...................     7,932.9      7,615.5
   Finance receivables held for sale ................     1,757.3        918.3
Cash and cash equivalents ...........................     2,160.1      1,973.7
Retained interest in securitizations and
   other investments ................................     1,188.4      1,380.8
Goodwill and intangible assets ......................       594.4        487.7
Other assets ........................................     2,475.7      3,310.3
                                                        ---------    ---------
Total Assets ........................................   $50,013.7    $46,342.8
                                                        =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
   Commercial paper .................................   $ 4,496.5    $ 4,173.9
   Variable-rate senior notes .......................    11,507.7      9,408.4
   Fixed-rate senior notes ..........................    21,022.2     19,830.8
   Preferred capital securities .....................       254.2        255.5
                                                        ---------    ---------
Total debt ..........................................    37,280.6     33,668.6
Credit balances of factoring clients ................     3,929.9      3,894.6
Accrued liabilities and payables ....................     2,925.5      3,346.4
                                                        ---------    ---------
   Total Liabilities ................................    44,136.0     40,909.6
Commitments and Contingencies (Note 10)
Minority interest ...................................        40.7         39.0
Stockholders' Equity:
   Preferred stock: $0.01 par value, 100,000,000
     authorized, none issued ........................          --           --
   Common stock: $0.01 par value, 600,000,000
     authorized, 212,092,592 issued, 209,870,336
     outstanding ....................................         2.1          2.1
   Paid-in capital, net of deferred compensation
     of $44.8 and $30.6 .............................    10,672.2     10,677.0
   Accumulated deficit ..............................    (4,675.6)    (5,141.8)
   Accumulated other comprehensive loss .............       (81.1)      (141.6)
   Less: Treasury stock, 2,222,256 and 43,529 shares,
     at cost ........................................       (80.6)        (1.5)
                                                        ---------    ---------
   Total Stockholders' Equity .......................     5,837.0      5,394.2
                                                        ---------    ---------
   Total Liabilities and Stockholders' Equity .......   $50,013.7    $46,342.8
                                                        =========    =========

                 See Notes to Consolidated Financial Statements.


                                       1


                         CIT GROUP INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                    ($ in millions -- except per share data)



                                                                  Quarters Ended               Nine Months Ended
                                                                   September 30,                 September 30,
                                                             --------------------------------------------------------
                                                                2004           2003          2004            2003
                                                             -----------    -----------  -------------    -----------
                                                                                              
Finance income ...........................................   $     963.1    $     921.2    $   2,781.2    $   2,803.6
Interest expense .........................................         315.4          333.7          913.4        1,026.2
                                                             -----------    -----------    -----------    -----------
Net finance income .......................................         647.7          587.5        1,867.8        1,777.4
Depreciation on operating lease equipment ................         245.7          252.4          716.5          804.1
                                                             -----------    -----------    -----------    -----------
Net finance margin .......................................         402.0          335.1        1,151.3          973.3
Provision for credit losses ..............................          60.2           82.9          211.5          286.5
                                                             -----------    -----------    -----------    -----------
Net finance margin after provision for
   credit losses .........................................         341.8          252.2          939.8          686.8
Other revenue ............................................         212.5          232.0          676.4          701.6
Gain (loss) on venture capital investments ...............           4.2          (11.3)           7.9          (27.8)
                                                             -----------    -----------    -----------    -----------
Operating margin .........................................         558.5          472.9        1,624.1        1,360.6
Salaries and general operating expenses ..................         256.7          230.3          764.3          676.4
Gain on redemption of debt ...............................            --             --           41.8             --
                                                             -----------    -----------    -----------    -----------
Income before provision for income taxes .................         301.8          242.6          901.6          684.2
Provision for income taxes ...............................        (117.7)         (94.6)        (351.6)        (266.8)
Minority interest, after tax .............................          (0.2)          (0.2)          (0.2)          (0.3)
Dividends on preferred capital securities,
   after tax .............................................            --             --             --           (5.4)
                                                             -----------    -----------    -----------    -----------
Net income ...............................................   $     183.9    $     147.8    $     549.8    $     411.7
                                                             ===========    ===========    ===========    ===========
Earnings per share
Basic earnings per share .................................   $      0.87    $      0.70    $      2.60    $      1.95
                                                             ===========    ===========    ===========    ===========
Diluted earnings per share ...............................   $      0.86    $      0.69    $      2.56    $      1.94
                                                             ===========    ===========    ===========    ===========
Number of shares - basic (thousands) .....................       210,489        211,735        211,286        211,633
                                                             ===========    ===========    ===========    ===========
Number of shares - diluted (thousands) ...................       214,179        213,529        215,116        212,498
                                                             ===========    ===========    ===========    ===========
Dividends per common share ...............................   $      0.13    $      0.12    $      0.39    $      0.36
                                                             ===========    ===========    ===========    ===========


                See Notes to Consolidated Financial Statements.


                                       2


                         CIT GROUP INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
                                 ($ in millions)



                                                                                      Accumulated         Total          Total
                                              Common        Paid-in       Treasury     Earnings/      Comprehensive  Stockholders'
                                               Stock        Capital         Stock      (Deficit)      Income/(Loss)     Equity
                                            ---------   -------------    -----------   ------------   -------------- --------------
                                                                                               
Balance December 31, 2003 ..............     $  2.1     $  10,677.0      $   (1.5)     $ (5,141.8)     $ (141.6)       $  5,394.2
Net income .............................         --              --            --           549.8            --             549.8
Foreign currency translation
  adjustments ..........................         --              --            --              --          72.8              72.8
Change in fair values of
  derivatives qualifying as
  cash flow hedges .....................         --              --            --              --         (11.2)            (11.2)
Unrealized losses on equity
  and securitization
  investments, net .....................         --              --            --              --          (1.1)             (1.1)
                                                                                                                       ----------
Total comprehensive income .............         --              --            --              --            --             610.3
                                                                                                                       ----------
Cash dividends .........................         --              --            --           (83.6)           --             (83.6)
Restricted common stock grants .........         --            17.8            --              --            --              17.8
Treasury stock purchased,
  at cost ..............................         --              --        (137.9)             --            --            (137.9)
Exercise of stock option awards ........         --           (22.6)         58.8              --            --              36.2
                                             ------     -----------      --------      ----------      --------        ----------
Balance September 30, 2004 .............     $  2.1     $  10,672.2      $  (80.6)     $ (4,675.6)     $  (81.1)       $  5,837.0
                                             ======     ===========      ========      ==========      ========        ==========


                 See Notes to Consolidated Financial Statements.


                                       3


                         CIT GROUP INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                 ($ in millions)



                                                                                                  Nine Months Ended
                                                                                                    September 30,
                                                                                         ----------------------------------
                                                                                              2004                  2003
                                                                                         ----------------------------------
                                                                                                          
Cash Flows From Operations
Net income (loss) ....................................................................   $     549.8            $     411.7
Adjustments to reconcile net income to net cash flows from operations:
   Depreciation and amortization .....................................................         747.5                  831.4
   Provision for credit losses .......................................................         211.5                  286.5
   Provision for deferred federal income taxes .......................................         274.2                  229.6
   Gains on equipment, receivable and investment sales ...............................        (174.3)                (158.9)
   Gain on debt redemption ...........................................................         (41.8)                    --
   Decrease/(increase) in other assets ...............................................         133.5                 (161.6)
   (Decrease) increase in accrued liabilities and payables ...........................        (258.1)                 162.4
   Other .............................................................................         (74.7)                 (55.2)
                                                                                         -----------            -----------
Net cash flows provided by operations ................................................       1,367.6                1,545.9
                                                                                         -----------            -----------
Cash Flows From Investing Activities
Loans extended .......................................................................     (41,984.7)             (38,740.8)
Collections on loans .................................................................      35,665.6               32,794.5
Proceeds from asset and receivable sales .............................................       5,587.0                5,693.7
Purchase of finance receivable portfolios ............................................      (2,027.4)                (961.9)
Purchases of assets to be leased .....................................................        (874.3)              (1,672.1)
Acquisitions, net of cash acquired ...................................................        (724.8)                    --
Net decrease in short-term factoring receivables .....................................        (416.1)                (529.4)
Goodwill and intangibles acquired ....................................................        (114.1)                    --
Other ................................................................................          69.2                   23.0
                                                                                         -----------            -----------
Net cash flows (used for) investing activities .......................................      (4,819.6)              (3,393.0)
                                                                                         -----------            -----------
Cash Flows From Financing Activities
Proceeds from the issuance of variable and fixed-rate notes ..........................      10,071.7                8,608.9
Repayments of variable and fixed-rate notes ..........................................      (6,549.8)              (6,316.3)
Net increase (decrease) in commercial paper ..........................................         322.6                  (38.8)
Net repayments of non-recourse leveraged lease debt ..................................         (38.6)                 (96.8)
Cash dividends paid ..................................................................         (83.6)                 (76.3)
Other ................................................................................         (83.9)                  (1.2)
                                                                                         -----------            -----------
Net cash flows provided by financing activities ......................................       3,638.4                2,079.5
                                                                                         -----------            -----------
Net increase in cash and cash equivalents ............................................         186.4                  232.4
Cash and cash equivalents, beginning of period .......................................       1,973.7                2,036.6
                                                                                         -----------            -----------
Cash and cash equivalents, end of period .............................................   $   2,160.1            $   2,269.0
                                                                                         ===========            ===========
Supplementary Cash Flow Disclosure
Interest paid ........................................................................   $     911.7            $   1,110.3
Federal, foreign, state and local income
  taxes paid, net ....................................................................   $      74.4            $      53.1


                 See Notes to Consolidated Financial Statements.


                                       4


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 -- Summary of Significant Accounting Policies

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  is
a global  commercial and consumer  finance company that was founded in 1908. CIT
provides  financing  and leasing  capital  for  companies  in a wide  variety of
industries,  offering vendor, equipment,  commercial,  factoring,  consumer, and
structured  financing  products.  CIT operates primarily in North America,  with
locations in Europe, Latin America, Australia and the Asia-Pacific region.

      These  financial  statements,  which have been prepared in accordance with
the  instructions  to Form 10-Q, do not include all of the  information and note
disclosures  required by accounting  principles generally accepted in the United
States  ("GAAP") and should be read in  conjunction  with the  Company's  Annual
Report on Form 10-K for the year ended December 31, 2003.  Financial  statements
in this  Form  10-Q  have not been  audited  by  independent  registered  public
accountants in accordance  with the standards of the Public  Company  Accounting
Oversight  Board  (U.S.),   but  in  the  opinion  of  management   include  all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair statement of CIT's  financial  position and results of operations.  Certain
prior  period  amounts  have  been   reclassified  to  conform  to  the  current
presentation.

Stock Based Compensation

      CIT has elected to apply Accounting Principles Board Opinion 25 ("APB 25")
rather  than the  optional  provisions  of  Statement  of  Financial  Accounting
Standards No. 123,  "Accounting for Stock-Based  Compensation"  ("SFAS 123"), as
amended by SFAS No. 148, "Accounting for Stock-Based  Compensation -- Transition
and Disclosure" in accounting for its stock-based  compensation plans. Under APB
25, CIT does not  recognize  compensation  expense on the  issuance of its stock
options  because the option  terms are fixed and the  exercise  price equals the
market price of the  underlying  stock on the grant date.  The  following  table
presents the pro forma information  required by SFAS 123 as if CIT had accounted
for stock options granted under the fair value method of SFAS 123, as amended ($
in millions, except per share data):



                                                                               Quarters Ended         Nine Months Ended
                                                                                September 30,           September 30,
                                                                          -------------------------------------------------
                                                                             2004        2003          2004          2003
                                                                          ---------  ---------     ---------      ---------
                                                                                                      
Net income as reported .................................................  $   183.9  $   147.8     $   549.8      $   411.7
Stock-based compensation expense -- fair value method, after tax .......        5.1        6.8          15.6           18.5
                                                                          ---------  ---------     ---------      ---------
Pro forma net income ...................................................  $   178.8  $   141.0     $   534.2      $   393.2
                                                                          =========  =========     =========      =========
Basic earnings per share as reported ...................................  $    0.87  $    0.70     $    2.60      $    1.95
                                                                          =========  =========     =========      =========
Basic earnings per share pro forma .....................................  $    0.85  $    0.67     $    2.53      $    1.86
                                                                          =========  =========     =========      =========
Diluted earnings per share as reported .................................  $    0.86  $    0.69     $    2.56      $    1.94
                                                                          =========  =========     =========      =========
Diluted earnings per share pro forma ...................................  $    0.83  $    0.66     $    2.48      $    1.85
                                                                          =========  =========     =========      =========


      For the quarters ended  September 30, 2004 and 2003,  net income  includes
$3.4  million  and $2.1  million  of  after-tax  compensation  cost  related  to
restricted  stock  awards.  These costs for the nine months ended  September 30,
2004 and 2003 totaled $10.9 million and $3.3 million, after tax.

Recent Accounting Pronouncements

      In March 2004, the SEC issued Staff Accounting Bulletin 105,  "Application
of Accounting Principles to Loan Commitments" ("SAB 105"). SAB 105 requires that
certain mortgage loan  commitments  issued after March 31, 2004 be accounted for
as derivatives until the loan is made or they expire  unexercised.  The adoption
of SAB 105 did not have a material financial statement impact on the Company.


                                       5


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      In  January  2004,  the FASB  issued  FASB Staff  Position  No. FAS 106-1,
"Accounting  and Disclosure  Requirements  Related to the Medicare  Prescription
Drug  Improvement and  Modernization  Act of 2003" ("FSP 106-1").  For the third
quarter  of  2004,  the  Company  accounted  for  the  effects  of the  Medicare
Prescription Drug and Modernization Act of 2003 by recognizing the impact of the
Medicare  prescription drug subsidy prospectively from July 1, 2004. The subsidy
reduced the July 1, 2004 Accumulated Post Retirement Benefit Obligation and 2004
annual related expense by $3.5 million and $0.3 million, respectively.

      In December 2003, the American  Institute of Certified Public  Accountants
(AICPA) issued Statement of Position No. 03-3,  "Accounting for Certain Loans or
Debt  Securities  Acquired  in a  Transfer"  ("SOP  03-3").  SOP 03-3,  which is
effective for fiscal years beginning after December 15, 2003,  requires acquired
loans to be carried at fair value and prohibits the establishment of credit loss
valuation  reserves  at  acquisition  for  loans  that have  evidence  of credit
deterioration since origination.

      In December 2003, the FASB revised SFAS No. 132,  "Employers'  Disclosures
about  Pensions  and Other  Postretirement  Benefits."  This  revision  requires
interim  disclosures  regarding certain components of net periodic pension costs
and the employer's  contribution paid, or expected to be paid during the current
fiscal year, if significantly  different from amounts  previously  disclosed for
interim  periods  beginning  after December 15, 2003.  The  additional  required
disclosures are included in Note 9 -- Post Retirement and Other Benefit Plans.

      In December 2003, the SEC issued Staff Accounting  Bulletin 104,  "Revenue
Recognition"  ("SAB  104"),  which  revises  or  rescinds  portions  of  related
interpretive  guidance  in order to be  consistent  with  current  authoritative
accounting and auditing guidance and SEC rules and regulations.  The adoption of
SAB 104 as of January 1, 2004 did not have a material financial statement impact
on the Company.

      In May  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
pronouncement  establishes  standards  for  classifying  and  measuring  certain
financial  instruments as a liability (or an asset in some circumstances).  This
pronouncement   requires  CIT  to  display  the  Preferred  Capital   Securities
(previously  described as "Company obligated  mandatorily  redeemable  preferred
securities of subsidiary trust holding solely debentures of the Company") within
the debt  section on the face of the  Consolidated  Balance  Sheets and show the
related expense with interest expense on a pre-tax basis. There was no impact to
net  income  upon  adoption.  This  pronouncement  is  effective  for  financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. Prior period  restatement is not permitted.  On November 7, 2003,  certain
measurement  and  classification  provisions  of SFAS 150,  relating  to certain
mandatorily redeemable  non-controlling  interests,  were deferred indefinitely.
The adoption of these  delayed  provisions,  which relate  primarily to minority
interests  associated  with  finite-lived  entities,  is not  expected to have a
material financial statement impact on the Company.

Note 2 -- Earnings Per Share

      Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. The diluted
EPS computation includes the potential impact of dilutive securities,  including
stock options and restricted stock grants.  The dilutive effect of stock options
is computed  using the treasury  stock method,  which assumes the  repurchase of
common shares by CIT at the average market price for the period. Options that do
not have a  dilutive  effect  (because  the  exercise  price is above the market
price) are not  included in the  denominator  and  averaged  approximately  18.2
million shares and 17.6 million shares for the quarters ended September 30, 2004
and 2003,  and 18.1 million  shares and 18.0 million  shares for the nine months
ended September 30, 2004 and 2003, respectively.


                                       6


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented ($ in millions,  except per share amounts, which are
in whole dollars; weighted-average share balances in thousands):



                                                    Income        Shares     Per Share        Income        Shares     Per Share
                                                  (Numerator)  (Denominator)  Amount        (Numerator)  (Denominator)  Amount
                                                  -----------  -------------  --------     -----------  ------------- ----------
                                                    Quarter Ended September 30, 2004          Quarter Ended September 30, 2003
                                                  ------------------------------------     -------------------------------------
Basic EPS:
                                                                                                     
   Income available to common stockholders .....   $  183.9        210,489    $   0.87       $  147.8      211,735     $   0.70
Effect of Dilutive Securities:
   Restricted shares ...........................         --            649          --             --          284           --
   Stock options ...............................         --          3,041    $   0.01             --        1,510     $   0.01
                                                   --------        -------                   --------      -------
Diluted EPS ....................................   $  183.9        214,179    $   0.86       $  147.8      213,529     $   0.69
                                                   ========        =======                   ========      =======




                                                  Nine Months Ended September 30, 2004     Nine Months Ended September 30, 2003
                                                  ------------------------------------     -------------------------------------
                                                                                                     
Basic EPS:
   Income available to common
     stockholders ..............................   $  549.8        211,286    $   2.60       $  411.7      211,633     $   1.95
Effect of Dilutive Securities:
   Restricted shares ...........................       --              650       --              --            355        --
   Stock options ...............................       --            3,180    $   0.04           --            510     $   0.01
                                                   --------        -------                   --------      -------
Diluted EPS ....................................   $  549.8        215,116    $   2.56       $  411.7      212,498     $   1.94
                                                   ========        =======                   ========      =======



Note 3 -- Business Segment Information

      The selected financial  information by business segment presented below is
based upon a fixed  leverage  ratio across  business units and the allocation of
most corporate expenses. ($ in millions).



                                                                                                Total
                                              Specialty   Commercial   Equipment    Capital    Business    Corporate
                                               Finance     Finance      Finance     Finance    Segments    and Other  Consolidated
                                              ---------   ---------   ---------    --------    ---------    -------     ---------
                                                                                                   
Quarter Ended September 30, 2004
Operating margin .........................    $   238.7   $   173.4   $    54.6    $   71.1    $   537.8    $  20.7     $   558.5
Income taxes .............................         52.0        47.8        12.2        13.5        125.5       (7.8)        117.7
Net income (loss) ........................         84.1        78.3        19.1        25.8        207.3      (23.4)        183.9

Quarter Ended September 30, 2003
Operating margin .........................    $   218.7   $   142.0   $    35.8    $   63.0    $   459.5    $  13.4     $   472.9
Income taxes .............................         45.7        37.5         5.8        15.8        104.8      (10.2)         94.6
Net income (loss) ........................         71.6        58.8         9.0        24.4        163.8      (16.0)        147.8

At or for the Nine Months Ended
   September 30, 2004
Operating margin .........................    $   697.1   $   494.9   $   154.6    $  211.3    $ 1,557.9    $  66.2     $ 1,624.1
Income taxes .............................        139.6       132.6        33.7        44.4        350.3        1.3         351.6
Net income (loss) ........................        244.0       217.6        52.6        78.6        592.8      (43.0)        549.8
Total financing and leasing assets .......     15,716.8    12,463.6     6,844.6     9,394.2     44,419.2       --        44,419.2
Total managed assets .....................     20,787.0    12,463.6     9,769.3     9,394.2     52,414.1       --        52,414.1

At or for the Nine Months Ended
   September 30, 2003
Operating margin .........................    $   613.6   $   429.1   $   111.8    $  158.1    $ 1,312.6    $  48.0     $ 1,360.6
Income taxes .............................        119.3       115.8        17.7        35.4        288.2      (21.4)        266.8
Net income (loss) ........................        186.8       181.3        27.6        55.3        451.0      (39.3)        411.7
Total financing and leasing assets .......     12,126.9    11,192.1     6,732.6     9,108.1     39,159.7       --        39,159.7
Total managed assets .....................     18,763.4    11,192.1    10,237.1     9,108.1     49,300.7       --        49,300.7



                                       7


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)


Note 4 -- Concentrations

      The following  table  summarizes the geographic and industry  compositions
(by obligor) of financing and leasing portfolio assets ($ in millions):



                                                                 September 30, 2004           December 31, 2003
                                                                --------------------       ------------------------
Geographic
North America:
                                                                                                 
   Northeast ...............................................    $ 8,749.9      19.7%       $ 8,319.8         20.8%
   West ....................................................      8,386.0      18.9%         7,485.5         18.7%
   Midwest .................................................      6,749.3      15.2%         5,996.2         14.9%
   Southeast ...............................................      6,232.1      14.0%         5,558.6         13.9%
   Southwest ...............................................      4,976.3      11.2%         4,423.1         11.0%
   Canada ..................................................      2,189.3       4.9%         2,055.5          5.1%
                                                                ---------     -----        ---------        -----
Total North America ........................................     37,282.9      83.9%        33,838.7         84.4%
Other foreign ..............................................      7,136.3      16.1%         6,245.2         15.6%
                                                                ---------     -----        ---------        -----
   Total ...................................................    $44,419.2     100.0%       $40,083.9        100.0%
                                                                =========     =====        =========        =====

Industry
Manufacturing(1) ...........................................    $ 7,279.7      16.4%       $ 7,340.6         18.3%
Retail(2) ..................................................      6,363.4      14.3%         5,630.9         14.0%
Commercial airlines (including regional airlines) ..........      5,317.9      12.0%         5,039.3         12.6%
Consumer based lending -- home mortgage ....................      4,186.4       9.4%         2,679.6          6.7%
Service industries .........................................      3,116.1       7.0%         2,608.3          6.5%
Transportation(3) ..........................................      2,833.6       6.4%         2,934.9          7.3%
Consumer based lending -- non-real estate(4) ...............      2,206.1       5.0%         1,862.1          4.7%
Wholesaling ................................................      1,760.1       3.9%         1,374.7          3.4%
Construction equipment .....................................      1,587.8       3.6%         1,571.2          3.9%
Communications(5) ..........................................      1,312.1       2.9%         1,386.5          3.5%
Automotive Services ........................................      1,184.6       2.7%         1,152.3          2.9%
Other (no industry greater than 3.0%)(6) ...................      7,271.4      16.4%         6,503.5         16.2%
                                                                ---------     -----        ---------        -----
   Total ...................................................    $44,419.2     100.0%       $40,083.9        100.0%
                                                                =========     =====        =========        =====


----------
(1)   Includes  manufacturers  of apparel  (3.2%),  followed by food and kindred
      products,   textiles,   transportation  equipment,   chemical  and  allied
      products,  rubber and plastics,  industrial  machinery and equipment,  and
      other industries.

(2)   Includes retailers of apparel (6.6%) and general merchandise (4.1%).

(3)   Includes  rail,  bus,   over-the-road  trucking  industries  and  business
      aircraft.

(4)   Includes  receivables  from  consumers for products in various  industries
      such as manufactured housing,  recreational vehicles, marine and computers
      and related equipment.

(5)   Includes  $347.6 million and $556.3 million of equipment  financed for the
      telecommunications  industry at September  30, 2004 and December 31, 2003,
      respectively, but excludes telecommunications equipment financed for other
      industries.

(6)   Included in "Other" above are financing and leasing  assets in the energy,
      power and utilities sectors,  which totaled $1.0 billion, or 2.3% of total
      financing and leasing assets at September 30, 2004.  This amount  includes
      approximately  $659.3  million in project  financing and $258.5 million in
      rail cars on lease.


                                       8


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 5 -- Retained Interests in Securitizations and Other Investments

      The  following  table  details the  components  of retained  interests  in
securitizations and other investments ($ in millions):



                                                                                September 30,    December 31,
                                                                                    2004             2003
                                                                                -------------    ------------
                                                                                              
Retained interests in commercial loans:
   Retained subordinated securities..........................................      $ 405.7          $ 536.6
   Interest-only strips......................................................        301.4            366.8
   Cash reserve accounts.....................................................        293.7            226.3
                                                                                  --------         --------
   Total retained interests in commercial loans..............................      1,000.8          1,129.7
                                                                                  --------         --------
Retained interests in consumer loans:
   Retained subordinated securities..........................................         78.3             86.7
   Interest-only strips......................................................         29.6             58.9
   Cash reserve accounts.....................................................         16.2             34.0
                                                                                  --------         --------
   Total retained interests in consumer loans................................        124.1            179.6
                                                                                  --------         --------
Total retained interests in securitizations..................................      1,124.9          1,309.3
Aerospace equipment trust certificates.......................................         63.5             71.5
                                                                                  --------         --------
   Total.....................................................................     $1,188.4         $1,380.8
                                                                                  ========         ========



Note 6 -- Accumulated Other Comprehensive Loss

      The  following   table  details  the  components  of   accumulated   other
comprehensive loss, net of tax ($ in millions):



                                                                                September 30,    December 31,
                                                                                    2004             2003
                                                                                -------------    ------------
                                                                                              
Foreign currency translation adjustments.....................................     $(33.0)           $(105.8)
Changes in fair values of derivatives qualifying as cash flow hedges.........      (52.5)             (41.3)
Unrealized gain on equity and securitization investments.....................        5.2                6.3
Minimum pension liability adjustments........................................       (0.8)              (0.8)
                                                                                  --------         --------
   Total accumulated other comprehensive loss................................     $(81.1)           $(141.6)
                                                                                  ========         ========


Note 7 -- Derivative Financial Instruments

      As part of managing exposure to interest rate,  foreign currency,  and, in
limited  instances,  credit  risk,  CIT, as an  end-user,  enters  into  various
derivative transactions, all of which are transacted in over-the-counter markets
with  other   financial   institutions   acting  as  principal   counterparties.
Derivatives  are utilized for hedging  purposes only,  and our policy  prohibits
entering  into  derivative  financial  instruments  for  trading or  speculative
purposes.  To  ensure  both  appropriate  use as a hedge  and to  achieve  hedge
accounting treatment,  whenever possible,  substantially all derivatives entered
into are  designated  according  to a hedge  objective  against  a  specific  or
forecasted  liability or, in limited  instances,  assets.  The notional amounts,
rates,  indices,  and  maturities of our  derivatives  closely match the related
terms of the underlying hedged items.

      CIT  utilizes  interest  rate  swaps to  exchange  variable-rate  interest
underlying forecasted issuances of commercial paper, specific variable-rate debt
instruments,  and, in limited  instances,  variable-rate  assets for  fixed-rate
amounts.  These  interest  rate  swaps are  designated  as cash flow  hedges and
changes in fair value of these  swaps,  to the extent  they are  effective  as a
hedge,  are  recorded in other  comprehensive  income.  Ineffective  amounts are
recorded in interest  expense.  Interest rate swaps are also utilized to convert
fixed-rate interest on specific debt instruments to variable-rate amounts. These
interest  rate swaps are  designated  as fair value  hedges and  changes in fair
value of the swaps are  effectively  recorded as an  adjustment  to the carrying
value of the hedged item, as the  offsetting  changes in fair value of the swaps
and the hedged items are recorded in earnings.


                                       9


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      The following  table presents the notional  principal  amounts of interest
rate swaps by class and the corresponding hedge designation ($ in millions):



                                                Notional Amount
                                     --------------------------------------
                                         September 30,     December 31,
                                             2004              2003
                                     --------------------------------------
                                                                    
                                                                             Effectively   converts   the  interest
                                                                             rate  on  an   equivalent   amount  of
Floating to fixed-rate swaps --                                              commercial paper, variable-rate notes
  cash flow hedges...................       $ 5,637.5          $2,615.0      and selected assets to a fixed rate.

                                                                             Effectively   converts   the  interest
                                                                             rate on an equivalent amount of
Fixed to floating-rate swaps --                                              fixed-rate notes and selected assets
  fair value hedges..................         8,363.1           6,758.2      to a variable rate.
                                            ---------          --------
Total interest rate swaps............       $14,000.6          $9,373.2
                                            =========          ========


      In  addition  to the  swaps  in  the  table  above,  in  conjunction  with
securitizations,  CIT has $2.3 billion in notional amount of interest rate swaps
outstanding  with the related trusts to protect the trusts against interest rate
risk. CIT entered into offsetting swap  transactions with third parties totaling
$2.3 billion in notional  amount at  September  30, 2004 to insulate the related
interest rate risk.

      CIT utilizes foreign currency exchange forward contracts to hedge currency
risk underlying  foreign  currency loans to subsidiaries and the net investments
in foreign  operations.  These contracts are designated as foreign currency cash
flow  hedges  or net  investment  hedges  and  changes  in fair  value  of these
contracts are recorded in other comprehensive  income along with the translation
gains and losses on the  underlying  hedged items.  CIT utilizes  cross currency
swaps to hedge  currency  risk  underlying  foreign  currency  debt and selected
foreign  currency  assets.  These swaps are designated as foreign  currency cash
flow hedges or foreign  currency  fair value hedges and changes in fair value of
these  contracts  are  recorded  in other  comprehensive  income  (for cash flow
hedges),  or  effectively  as a basis  adjustment  (including  the impact of the
offsetting  adjustment to the carrying value of the adjusted item) to the hedged
item (for fair value hedges) along with the translation  gains and losses on the
underlying  hedged items.  CIT also utilizes  Treasury locks (bond  forwards) to
hedge  interest  rate  risk  associated  with  planned  debt  issuances.   These
derivatives are designated as cash flow hedges of a forecasted transaction, with
changes in fair value of these contracts recorded in other comprehensive income.
Gains and losses  recorded in other  comprehensive  income are  reclassified  to
earnings in the same period that the forecasted debt issuance impacts earnings.

      The components of the adjustment to Accumulated Other  Comprehensive  Loss
for  derivatives  qualifying  as cash flow hedges are presented in the following
table ($ in millions):



                                                                            Fair Value                     Total
                                                                            Adjustments   Income Tax    Unrealized
                                                                          of Derivatives    Effects        Loss
                                                                         ---------------- -----------   -----------
                                                                                                  
Balance at December 31, 2003 -- unrealized loss.....................           $64.6        $(23.3)         $41.3
Changes in values of derivatives qualifying as cash flow hedges....             18.4          (7.2)          11.2
                                                                               -----        ------          -----
Balance at September 30, 2004 -- unrealized loss....................           $83.0        $(30.5)         $52.5
                                                                               =====        ======          =====


      The unrealized  loss as of September 30, 2004,  presented in the preceding
table,   primarily   reflects  our  use  of  interest   rate  swaps  to  convert
variable-rate debt to fixed-rate debt,  followed by lower market interest rates.
For the quarter ended September 30, 2004, the ineffective  portion of changes in
the  fair  value of cash  flow  hedges  amounted  to $0.2  million  and has been
recorded  as an increase  to  interest  expense  and for the nine  months  ended
September 30, 2004,  the  ineffective  portion  amounted to $0.5 million and has
been recorded as a decrease to interest expense.  Assuming no change in interest
rates,   approximately   $12.8  million,   net  of  tax,  of  Accumulated


                                       10


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Other  Comprehensive  Loss is expected to be  reclassified  to earnings over the
next twelve months as contractual cash payments are made. The Accumulated  Other
Comprehensive  Loss  (along  with  the  corresponding  swap  liability)  will be
adjusted as market interest rates change over the remaining life of the swaps.

      During  2004,  CIT entered  into  credit  default  swaps,  with a combined
notional  value of $98.0  million and terms of 5 years,  to  economically  hedge
certain CIT credit exposures. These swaps do not meet the requirements for hedge
accounting  treatment  and  therefore  are  recorded  at fair  value,  with both
realized  and  unrealized  gains or  losses  recorded  in other  revenue  in the
consolidated  statement of income.  The cumulative  fair value  adjustment as of
September 30, 2004 amounted to a $2.4 million pretax loss.

Note 8 -- Certain Relationships and Related Transactions

      CIT is a partner with Dell Inc.  ("Dell") in Dell Financial  Services L.P.
("DFS"),  a joint venture that offers financing to Dell's  customers.  The joint
venture  provides  Dell  with  financing  and  leasing   capabilities  that  are
complementary to its product  offerings and provides CIT with a steady source of
new financings.  On September 8, 2004, CIT and Dell agreed to extend the current
agreement  beyond  October 2005 and to modify certain  contractual  terms of the
relationship.  The new  agreements  provide  CIT with the  right to  purchase  a
minimum  percentage of DFS's finance  receivables  on a declining  scale through
January 2010.  Dell also has the option to purchase CIT's 30% interest in DFS in
February  2008 based on a formula tied to DFS  profitability,  within a range of
$100 million to $345 million.

      CIT  regularly  purchases  finance  receivables  from  DFS  at a  premium,
portions of which are typically securitized within 90 days of purchase from DFS.
CIT has limited recourse to DFS on defaulted  contracts.  In accordance with the
joint venture  agreement,  net income and losses  generated by DFS as determined
under GAAP are  allocated 70% to Dell and 30% to CIT. The DFS board of directors
voting  representation  is equally weighted  between  designees of CIT and Dell,
with one  independent  director.  DFS is not  consolidated  in  CIT's  financial
statements and is accounted for under the equity  method.  At September 30, 2004
and December 31, 2003,  financing and leasing  assets related to the DFS program
(included  in the CIT  Consolidated  Balance  Sheet) were $2.4  billion and $1.4
billion, and securitized assets included in managed assets were $2.0 billion and
$2.5 billion. In addition to the owned and securitized assets acquired from DFS,
CIT's  investment  in and loans to the joint  venture  were  approximately  $192
million and $205 million at September 30, 2004 and December 31, 2003.

      CIT  also  has a  joint  venture  arrangement  with  Snap-on  Incorporated
("Snap-on") that has a similar business purpose and model to the DFS arrangement
described  above,  including  credit  recourse  on  defaulted  receivables.  The
agreement  with Snap-on  extends until  January  2006.  CIT and Snap-on have 50%
ownership interests,  50% board of directors'  representation,  and share income
and losses equally.  The Snap-on joint venture is accounted for under the equity
method and is not consolidated in CIT's financial  statements.  At September 30,
2004 and  December  31,  2003,  the related  financing  and  leasing  assets and
securitized assets were $1.1 billion and $0.1 billion, respectively. In addition
to the owned and  securitized  assets  purchased from the Snap-on joint venture,
CIT's  investment  in and  loans to the joint  venture  were  approximately  $17
million at both  September 30, 2004 and December 31, 2003.  Both the Snap-on and
the Dell joint venture arrangements were acquired in a 1999 acquisition.

      Since December  2000,  CIT has been a joint venture  partner with Canadian
Imperial Bank of Commerce  ("CIBC") in an entity that is engaged in  asset-based
lending in Canada.  Both CIT and CIBC have a 50% ownership interest in the joint
venture, and share income and losses equally. This entity is not consolidated in
CIT's financial  statements and is accounted for under the equity method.  As of
September 30, 2004 and December 31, 2003,  CIT's  investment in and loans to the
joint venture were $175 million and $119 million.

      CIT  invests  in  various  trusts,  partnerships,  and  limited  liability
corporations  established in conjunction with structured financing  transactions
of equipment,  power and infrastructure  projects. CIT's interests in certain of
these  entities  were  acquired  by  CIT  in  November  1999,  and  others  were
subsequently  entered into in the normal  course of business.  At September  30,
2004 and December 31, 2003, other assets included $18 million and $21 million of
investments in non-consolidated  entities relating to such transactions that are
accounted for under the equity or cost methods.


                                       11


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      Certain shareholders of CIT provide investment  management services in the
normal course of business in conjunction with CIT's employee benefit plans.

Note 9 -- Post retirement and Other Benefit Plans

      The following table discloses various  components of pension expense ($ in
millions):



                                                                  For the Quarters          For the Nine Months
                                                                 Ended September 30,        Ended September 30,
                                                                 -------------------        --------------------
Retirement Plans                                                   2004       2003           2004        2003
                                                                 -------     ------         -------     -------
                                                                                            
 Service cost..............................................       $ 4.4      $ 3.9          $ 13.3      $ 11.7
 Interest cost.............................................         3.9        3.6            11.7        10.8
 Expected return on plan assets............................        (4.0)      (2.4)          (12.1)       (7.0)
 Amortization of net loss..................................         0.7        0.9             2.1         2.6
                                                                  -----      -----           -----       -----
 Net periodic benefit cost.................................       $ 5.0      $ 6.0          $ 15.0      $ 18.1
                                                                  =====      =====           =====       =====
 Postretirement Plans
 Service cost..............................................       $ 0.5      $ 0.3           $ 1.4       $ 1.1
 Interest cost.............................................         0.8        0.8             2.5         2.3
 Amortization of net loss..................................          --         --             0.5         0.1
                                                                  -----      -----           -----       -----
 Net periodic benefit cost.................................       $ 1.3      $ 1.1           $ 4.4       $ 3.5
                                                                  =====      =====           =====       =====


Note 10 -- Commitments and Contingencies

      In the normal course of meeting the financing needs of its customers,  CIT
enters into various credit-related commitments, including commitments to provide
financing and leasing capital, letters of credit and guarantees. Standby letters
of credit  obligate  CIT to pay the  beneficiary  of the letter of credit in the
event that a CIT  client to which the letter of credit was issued  does not meet
its related obligation to the beneficiary.  These financial instruments generate
fees and involve,  to varying degrees,  elements of credit risk in excess of the
amounts  recognized in the consolidated  balance sheets.  To minimize  potential
credit risk, CIT generally requires  collateral and other  credit-related  terms
and conditions  from the customer.  At the time  credit-related  commitments are
granted,  the fair value of the underlying  collateral and guarantees  typically
approximates or exceeds the contractual amount of the commitment. In the event a
customer defaults on the underlying transaction, the maximum potential loss will
generally be limited to the contractual amount outstanding less the value of all
underlying collateral and guarantees.

      Guarantees  are issued  primarily  in  conjunction  with  CIT's  factoring
product,  whereby CIT provides the client with credit  protection  for its trade
receivables  without actually  purchasing the  receivables.  The trade terms are
generally  sixty days or less.  In the event that the  customer is unable to pay
according to the contractual terms, then the receivables would be purchased.  As
of September 30, 2004, there were no outstanding  liabilities  relating to these
credit-related  commitments or guarantees,  as amounts are generally  billed and
collected on a monthly basis.

      The   accompanying   table   summarizes   the   contractual   amounts   of
credit-related commitments ($ in millions):



                                                                                                    December 31,
                                                                      September 30, 2004                2003
                                                             ------------------------------------   ------------
                                                                 Due to Expire
                                                             --------------------
                                                              Within        After        Total          Total
                                                             One Year     One Year    Outstanding    Outstanding
                                                             --------     --------    -----------    -----------
                                                                                          
Financing and leasing assets............................     $1,010.4     $6,403.6     $7,414.0       $5,934.3
Letters of credit and acceptances:
  Standby letters of credit.............................        422.7        189.4        612.1          508.7
  Other letters of credit...............................        614.4         46.7        661.1          694.0
  Acceptances...........................................         25.0           --         25.0            9.3
Guarantees..............................................        112.9         12.3        125.2          133.2
Venture capital fund commitments........................          3.4         93.6         97.0          124.2



                                       12


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      Commitments to purchase commercial aircraft from both Airbus Industrie and
The Boeing Company are detailed below ($ in millions):



                                                              September 30, 2004         December 31, 2003
                                                             --------------------       -------------------
Calendar Year                                                 Amount        Units       Amount        Units
-------------                                                 ------        -----       ------        -----
                                                                                            
2004 (Remaining)........................................      $ 279.0          7         $ 634.0        15
2005....................................................        906.0         18           952.0        20
2006....................................................      1,002.0         20         1,088.0        21
2007....................................................        260.0          5           260.0         5
                                                             --------         --        --------        --
Total...................................................     $2,447.0         50        $2,934.0        61
                                                             ========         ==        ========        ==


      The commitment amounts above are based on appraised values. Actual amounts
will vary based upon market factors at the time of delivery.

      Outstanding  commitments  to purchase  equipment,  other than the aircraft
detailed above,  totaled $280.9 million at September 30, 2004 and $197.2 million
at December 31, 2003. CIT is party to a railcar sale-leaseback transaction under
which it is obligated to pay a remaining total of $457.8  million,  comprised of
approximately  $28.5  million per year  through  2010 and  declining  thereafter
through  2024,  which is more  than  offset by  scheduled  payments  from  CIT's
re-lease of the assets,  contingent on our ability to maintain railcar usage. In
conjunction  with  this  sale-leaseback  transaction,  CIT  has  guaranteed  all
obligations of the related consolidated lessee entity.

      CIT has guaranteed  the public and private debt  securities of a number of
its wholly owned, consolidated  subsidiaries,  including those disclosed in Note
14 -- Summarized Financial Information of Subsidiaries.  In the normal course of
business,  various  consolidated CIT subsidiaries have entered into other credit
agreements and certain derivative  transactions with financial institutions that
are  guaranteed  by  CIT.  These   transactions  are  generally  used  by  CIT's
subsidiaries  outside of the U.S. to allow the local  subsidiary to borrow funds
in local  currencies.  In  addition,  CIT has  guaranteed,  on behalf of certain
non-consolidated  subsidiaries,  $11.9 million of third party debt, which is not
reflected in the consolidated balance sheet at September 30, 2004.

Note 11 -- Legal Proceedings

      On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities  Act of 1933,  was filed in the United States  District Court for
the  Southern  District of New York  against  CIT,  its former  Chief  Executive
Officer and its Chief Financial Officer. The lawsuit contained  allegations that
the registration  statement and prospectus prepared and filed in connection with
CIT's 2002 initial public offering ("IPO") were materially false and misleading,
principally  with  respect to the  adequacy of CIT's  telecommunications-related
loan loss  reserves at the time.  The lawsuit  purported to have been brought on
behalf of all those who  purchased  CIT common stock in or traceable to the IPO,
and sought,  among other relief,  unspecified  damages or  rescission  for those
alleged class members who still hold CIT stock and unspecified damages for other
alleged class members.  On June 25, 2003, by order of the United States District
Court, the lawsuit was consolidated with five other substantially similar suits,
all of which  had been  filed  after  April 10,  2003 and one of which  named as
defendants some of the  underwriters in the IPO and certain former  directors of
CIT.  Glickenhaus & Co., a privately held  investment  firm, has been named lead
plaintiff in the consolidated action.

      On September  16, 2003, an amended and  consolidated  complaint was filed.
That  complaint  contains  substantially  the same  allegations  as the original
complaints.  In addition to the  foregoing,  two similar  suits were  brought by
certain  shareholders  on behalf of CIT  against CIT and some of its present and
former directors under Delaware corporate law.

      On  September  9,  2004,  Exquisite  Caterers  v.  Popular  Leasing et al.
("Exquisite Caterers"),  a putative class action, was filed against 13 financial
institutions,  including CIT, who had acquired  equipment  leases  ("NorVergence
Leases") from NorVergence,  Inc., a reseller of telecommunications  and Internet
services to


                                       13


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

businesses. The Exquisite Caterers lawsuit is pending in the U.S. District Court
for the  District of New  Jersey.  Exquisite  Caterers  based its  complaint  on
allegations  that NorVergence  misrepresented  the capabilities of the equipment
leased to its customers and overcharged for the equipment. The complaint asserts
that the NorVergence  Leases are unenforceable  and seeks  rescission,  punitive
damages, treble damages and attorneys' fees. In addition,  putative class action
suits in Florida and Texas and several individual suits, all based upon the same
core  allegations  and seeking the same relief,  have been filed by  NorVergence
customers against CIT and the other financial institutions.

      On July 14, 2004,  the U.S.  Bankruptcy  Court ordered the  liquidation of
NorVergence  under Chapter 7 of the Bankruptcy  Code.  Since then, the Attorneys
General  of  Florida,  New  Jersey,  New  York,  Illinois  and  Texas  commenced
investigations of NorVergence and the financial institutions, including CIT, who
purchased  NorVergence Leases. CIT has cooperated with the Attorneys General and
agreed to refrain from collection  activities  related to the NorVergence Leases
in each of these States pending the outcome of the investigations.

      In addition,  there are various proceedings against CIT, which have arisen
in the ordinary  course of business.  While the outcomes of the above  mentioned
and  ordinary  course  legal  proceedings  and the  related  activities  are not
certain,  based on present  assessments,  management  does not believe that they
will have a material adverse effect on the financial condition of CIT.

Note 12 -- Severance and Facility Restructuring Reserves

      The following table summarizes previously  established purchase accounting
liabilities  (pre-tax) related to severance of employees and closing facilities,
as well as 2004 restructuring activities during 2004 ($ in millions):



                                                              Severance           Facilities
                                                       --------------------  ---------------------
                                                       Number of              Number of                 Total
                                                       Employees    Reserve  Facilities    Reserve    Reserves
                                                       ---------    -------  ----------    -------    --------
                                                                                        
Balance December 31, 2003.........................         43        $ 2.3        12        $ 7.2       $ 9.5
Additions.........................................        217         14.7         4          4.5        19.2
Utilization.......................................        (82)        (4.2)       (2)        (5.1)       (9.3)
                                                          ---        -----        --        -----       -----
Balance at September 30, 2004.....................        178        $12.8        14        $ 6.6       $19.4
                                                          ===        =====        ==        =====       =====


      The beginning reserves relate largely to the restructuring of the European
operations and include  amounts  payable within the next year to individuals who
chose to receive  payments on a periodic  basis.  The facility  reserves  relate
primarily to shortfalls in sublease  transactions  and will be utilized over the
remaining  lease  terms,  generally  6 years.  The  additions  to  restructuring
reserves in 2004 relate to two initiatives:  (1) the second quarter  combination
of the former  Structured  Finance with Capital  Finance and the transfer of the
communications  and media portfolio to Commercial Finance ($3.6 million) and (2)
the third quarter  acquisition of a Western  European vendor finance and leasing
business ($15.6 million).  Costs related to the Capital Finance combination were
included in current period earnings, while restructuring  liabilities related to
the vendor  finance and leasing  acquisition  were  established  under  purchase
accounting in conjunction  with fair value  adjustments to purchased  assets and
liabilities.

Note 13 -- Goodwill and Intangible Assets

      Goodwill and  intangible  assets totaled $594.4 million and $487.7 million
at  September  30,  2004  and  December  31,  2003,  respectively.  The  Company
periodically  reviews and evaluates its goodwill and other intangible assets for
potential  impairment.  Effective  October 1, 2001, the Company adopted SFAS No.
142,  "Goodwill and Other Intangible  Assets" ("SFAS 142"), under which goodwill
is no longer amortized but instead is assessed for impairment at least annually.
As part of the adoption,  the Company allocated its existing goodwill to each of
its reporting  units as of October 1, 2001.  Under the transition  provisions of
SFAS 142, there was no goodwill impairment as of October 1, 2001.


                                       14


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      The most recent  goodwill  impairment  analysis was  performed  during the
fourth quarter of 2003,  which  indicated that the fair value of goodwill was in
excess of the  carrying  value.  During the  September  2004  quarter,  goodwill
increased in Specialty  Finance due to the Western  European  vendor finance and
leasing  business  acquisition.  The  following  table  summarizes  the goodwill
balance by segment ($ in millions):

                                              Specialty    Commercial
                                               Finance       Finance     Total
                                               -------       -------     -----
Balance at December 31, 2003...............     $12.7        $370.4      $383.1
Additions..................................      49.2            --        49.2
                                                -----        ------      ------
Balance at September 30, 2004..............     $61.9        $370.4      $432.3
                                                =====        ======      ======

      The Western  European  vendor  finance and leasing  acquisition  increased
goodwill and  intangibles  by  approximately  $80 million.  Management is in the
process of finalizing additional integration plans relating to this acquisition.
Accordingly,  additional  purchase  accounting  refinements  may  result  in  an
adjustment to goodwill and acquired intangibles.

      Other intangible assets, net, are comprised primarily of acquired customer
relationships  (Specialty Finance and Commercial  Finance balances),  as well as
proprietary  computer  software and related  transaction  processes  (Commercial
Finance).  The following table summarizes the intangible  asset, net balances by
segment ($ in millions):

                                              Specialty    Commercial
                                               Finance       Finance     Total
                                               -------       -------     -----
Balance at December 31, 2003...............      $ --        $104.6      $104.6
Additions..................................      64.9           0.4        65.3
Amortization...............................      (1.0)         (6.8)       (7.8)
                                                -----        ------      ------
Balance at September 30, 2004..............     $63.9         $98.2      $162.1
                                                =====        ======      ======

      The  increase  was  primarily  related to two  acquisitions,  the  Western
European vendor finance and leasing  business in the third quarter of 2004 and a
technology  business in the second quarter of 2004. Other intangible  assets are
being amortized over their  corresponding  respective lives ranging from five to
twenty  years in relation  to the related  revenue  streams,  where  applicable.
Amortization  expense  totaled $3.3 million and $7.8 million for the quarter and
nine months  ended  September  30, 2004 versus $1.1 million and $3.3 million for
the  respective  prior year  periods.  Accumulated  amortization  totaled  $18.2
million and $10.4  million at September  30, 2004 and  December  31,  2003.  The
projected  amortization  for the years ended December 31, 2004 through  December
31, 2008 is: $12.2 million for 2004;  $17.2 million for 2005;  $16.1 million for
2006; and $12.8 million for 2007 and 2008.


                                       15


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14 -- Summarized Financial Information of Subsidiaries

      The following presents condensed  consolidating  financial information for
CIT Holdings LLC and Capita Corporation (formerly AT&T Capital Corporation). CIT
has guaranteed on a full and  unconditional  basis the existing debt  securities
that  were  registered  under  the  Securities  Act of 1933  and  certain  other
indebtedness  of these  subsidiaries.  CIT has not presented  related  financial
statements or other information for these  subsidiaries on a stand-alone  basis.
($ in millions)



                                                                              CIT
                CONSOLIDATING                     CIT          Capita       Holdings        Other
                BALANCE SHEETS                 Group Inc.    Corporation      LLC        Subsidiaries     Eliminations    Total
                --------------                -----------    -----------   ----------    ------------     ------------  -----------
September 30, 2004
ASSETS
                                                                                                     
Net finance receivables ...................   $   1,118.5    $  3,268.6   $  1,439.9     $  28,077.9     $       --    $  33,904.9
Operating lease equipment, net ............            --         512.3        127.4         7,293.2             --        7,932.9
Finance receivables held for sale .........            --          85.2         77.7         1,594.4             --        1,757.3
Cash and cash equivalents .................       1,465.3         550.9        252.6          (108.7)            --        2,160.1
Other assets ..............................       7,930.9        (298.7)       448.6         2,014.7       (5,837.0)       4,258.5
                                              -----------    ----------   ----------     -----------     ----------    -----------
   Total Assets ...........................   $  10,514.7    $  4,118.3   $  2,346.2     $  38,871.5     $ (5,837.0)   $  50,013.7
                                              ===========    ==========   ==========     ===========     ==========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ......................................   $  34,771.6    $    476.9   $  1,364.1     $     668.0     $       --    $  37,280.6
Credit balances of
   factoring clients ......................            --            --           --         3,929.9             --        3,929.9
Accrued liabilities and payables ..........     (30,093.9)      3,135.7       (311.3)       30,195.0             --        2,925.5
                                              -----------    ----------   ----------     -----------     ----------    -----------
   Total Liabilities ......................       4,677.7       3,612.6      1,052.8        34,792.9             --       44,136.0
Minority interest .........................            --            --           --            40.7             --           40.7
Total Stockholders' Equity ................       5,837.0         505.7      1,293.4         4,037.9       (5,837.0)       5,837.0
                                              -----------    ----------   ----------     -----------     ----------    -----------
   Total Liabilities and
   Stockholders' Equity ...................   $  10,514.7    $  4,118.3   $  2,346.2     $  38,871.5     $ (5,837.0)   $  50,013.7
                                              ===========    ==========   ==========     ===========     ==========    ===========

December 31, 2003
ASSETS
Net finance receivables ...................   $   1,581.3    $  3,755.4   $  1,208.8     $  24,111.0     $       --    $  30,656.5
Operating lease equipment, net ............            --         580.3        146.4         6,888.8             --        7,615.5
Finance receivables held for sale .........            --          80.0        163.8           674.5             --          918.3
Cash and cash equivalents .................       1,479.9         410.6        227.5          (144.3)            --        1,973.7
Other assets ..............................       8,308.2         198.1        174.1         1,892.6       (5,394.2)       5,178.8
                                              -----------    ----------   ----------     -----------     ----------    -----------
   Total Assets ...........................   $  11,369.4    $  5,024.4   $  1,920.6     $  33,422.6     $ (5,394.2)   $  46,342.8
                                              ===========    ==========   ==========     ===========     ==========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ......................................   $  30,656.7    $  1,003.5   $  1,407.7     $     600.7     $       --    $  33,668.6
Credit balances of
   factoring clients ......................            --            --           --         3,894.6             --        3,894.6
Accrued liabilities and payables ..........     (24,681.5)      3,412.0       (701.2)       25,317.1             --        3,346.4
                                              -----------    ----------   ----------     -----------     ----------    -----------
Total Liabilities .........................       5,975.2       4,415.5        706.5        29,812.4             --       40,909.6
Minority interest .........................            --            --           --            39.0             --           39.0
Total Stockholders' Equity ................       5,394.2         608.9      1,214.1         3,571.2       (5,394.2)       5,394.2
                                              -----------    ----------   ----------     -----------     ----------    -----------
   Total Liabilities and
   Stockholders' Equity ...................   $  11,369.4    $  5,024.4   $  1,920.6     $  33,422.6     $ (5,394.2)   $  46,342.8
                                              ===========    ==========   ==========     ===========     ==========    ===========




                                       16


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)




                                                                              CIT
                CONSOLIDATING                     CIT          Capita       Holdings        Other
            STATEMENTS OF INCOME               Group Inc.    Corporation      LLC        Subsidiaries     Eliminations    Total
            --------------------              -----------    -----------   ----------    ------------     ------------  -----------
                                                                                                     
Nine Months Ended September 30, 2004
Finance income ............................   $      24.5    $    534.6   $    143.8     $   2,078.3     $       --    $   2,781.2
Interest expense ..........................         (62.5)        157.1         10.9           807.9             --          913.4
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net finance income ........................          87.0         377.5        132.9         1,270.4             --        1,867.8
Depreciation on operating
   lease equipment ........................            --         236.3         32.5           447.7             --          716.5
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net finance margin ........................          87.0         141.2        100.4           822.7             --        1,151.3
Provision for credit losses ...............          13.9          36.2          8.5           152.9             --          211.5
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net finance margin, after provision
   for credit losses ......................          73.1         105.0         91.9           669.8             --          939.8
Equity in net income of
   subsidiaries ...........................         533.5            --           --              --         (533.5)            --
Other revenue .............................          (3.0)        109.6         70.3           499.5             --          676.4
Gain on venture capital
   investments ............................            --            --           --             7.9             --            7.9
                                              -----------    ----------   ----------     -----------     ----------    -----------
Operating margin ..........................         603.6         214.6        162.2         1,177.2         (533.5)       1,624.1
Operating expenses ........................          94.5         109.9         69.7           490.2             --          764.3
Gain on redemption of debt ................          41.8            --           --              --             --           41.8
                                              -----------    ----------   ----------     -----------     ----------    -----------
Income (loss) before provision for
   income taxes ...........................         550.9         104.7         92.5           687.0         (533.5)         901.6
Provision for income taxes ................          (1.1)        (40.8)       (36.1)         (273.6)            --         (351.6)
Minority interest, after tax ..............            --            --           --            (0.2)            --           (0.2)
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net income ................................   $     549.8    $     63.9   $     56.4     $     413.2     $   (533.5)   $     549.8
                                              ===========    ==========   ==========     ===========     ==========    ===========
Nine Months Ended September 30, 2003
Finance income ............................   $      73.4    $    592.1   $    142.0     $   1,996.1     $       --    $   2,803.6
Interest expense ..........................         (37.2)        244.5         12.2           806.7             --        1,026.2
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net finance income ........................         110.6         347.6        129.8         1,189.4             --        1,777.4
Depreciation on operating
   lease equipment ........................            --         287.2         53.6           463.3             --          804.1
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net finance margin ........................         110.6          60.4         76.2           726.1             --          973.3
Provision for credit losses ...............          30.6          33.9         12.2           209.8             --          286.5
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net finance margin, after provision
   for credit losses ......................          80.0          26.5         64.0           516.3             --          686.8
Equity in net income of
   subsidiaries ...........................         363.0            --           --              --         (363.0)            --
Other revenue .............................           4.2          86.8         74.2           536.4             --          701.6
Gain on venture capital
   investments ............................            --            --           --           (27.8)            --          (27.8)
                                              -----------    ----------   ----------     -----------     ----------    -----------
Operating margin ..........................         447.2         113.3        138.2         1,024.9         (363.0)       1,360.6
Operating expenses ........................          30.0         134.4         73.3           438.7             --          676.4
Gain on redemption of debt ................            --            --           --              --             --             --
                                              -----------    ----------   ----------     -----------     ----------    -----------
Income (loss) before provision for
   income taxes ...........................         417.2         (21.1)        64.9           586.2         (363.0)         684.2
Provision for income taxes ................          (5.5)          8.2        (25.3)         (244.2)            --         (266.8)
Minority interest, after tax ..............            --            --           --            (0.3)            --           (0.3)
Dividends on preferred capital
   securities, after tax ..................            --            --           --            (5.4)            --           (5.4)
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net income ................................   $     411.7    $    (12.9)  $     39.6     $     336.3     $   (363.0)   $     411.7
                                              ===========    ==========   ==========     ===========     ==========    ===========




                                       17


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                                                              CIT
           CONSOLIDATING STATEMENT                CIT          Capita       Holdings        Other
                OF CASH FLOWS                  Group Inc.    Corporation      LLC        Subsidiaries     Eliminations     Total
           -----------------------            -----------    -----------   ----------    ------------     ------------  ----------
                                                                                                     
Nine Months Ended September 30, 2004
Cash Flows From Operating Activities:
Net cash flows provided
   by (used for) operations ...............   $    (177.8)   $    975.7   $    (91.9)    $     661.6     $       --    $   1,367.6
                                              -----------    ----------   ----------     -----------     ----------    -----------
Cash Flows From
   Investing Activities:
Net (increase) decrease in financing
   and leasing assets .....................         490.9         333.0       (147.0)       (5,565.7)            --       (4,888.8)
Decrease in inter-company loans
   and investments ........................      (4,359.0)           --           --              --        4,359.0             --
Other .....................................            --            --           --            69.2             --           69.2
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net cash flows (used for) provided
   by investing activities ................      (3,868.1)        333.0       (147.0)       (5,496.5)       4,359.0       (4,819.6)
                                              -----------    ----------   ----------     -----------     ----------    -----------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt ...........       4,114.9        (526.6)       (43.6)          261.2             --        3,805.9
Inter-company financing ...................            --        (641.8)       307.6         4,693.2       (4,359.0)            --
Cash dividends paid .......................         (83.6)           --           --              --             --          (83.6)
Other .....................................            --            --           --           (83.9)            --          (83.9)
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net cash flows provided by
   (used for) financing activities ........       4,031.3      (1,168.4)       264.0         4,870.5       (4,359.0)       3,638.4
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net increase (decrease) in cash and
   cash equivalents .......................         (14.6)        140.3         25.1            35.6             --          186.4
Cash and cash equivalents,
   beginning of period ....................       1,479.9         410.6        227.5          (144.3)            --        1,973.7
                                              -----------    ----------   ----------     -----------     ----------    -----------
Cash and cash equivalents,
   end of period ..........................   $   1,465.3    $    550.9   $    252.6     $    (108.7)    $       --    $   2,160.1
                                              ===========    ==========   ==========     ===========     ==========    ===========



                                       18


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                                                              CIT
           CONSOLIDATING STATEMENT                CIT          Capita       Holdings        Other
                OF CASH FLOWS                  Group Inc.    Corporation      LLC        Subsidiaries     Eliminations     Total
           -----------------------            -----------    -----------   ----------    ------------     ------------  ----------
                                                                                                     
Nine Months Ended September 30, 2003
Cash Flows From Operating Activities:
Net cash flows provided
   by (used for) operations ...............   $    (949.9)   $    648.9   $    186.4     $   1,660.5     $       --    $   1,545.9
                                              -----------    ----------   ----------     -----------     ----------    -----------
Cash Flows From
   Investing Activities:
Net increase in financing and
   leasing assets .........................        (904.6)       (174.7)      (254.8)       (2,081.9)            --       (3,416.0)
Increase in inter-company loans
   and investments ........................        (235.8)           --           --              --          235.8             --
Other .....................................            --            --           --            23.0             --           23.0
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net cash flows (used for) provided
   by investing activities ................      (1,140.4)       (174.7)      (254.8)       (2,058.9)         235.8       (3,393.0)
                                              -----------    ----------   ----------     -----------     ----------    -----------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt ...........       2,540.0         (63.3)      (573.1)          253.4             --        2,157.0
Inter-company financing ...................            --        (242.7)       533.2           (54.7)        (235.8)            --
Cash dividends paid .......................         (76.3)           --           --              --             --          (76.3)
Other .....................................            --            --           --            (1.2)            --           (1.2)
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net cash flows provided by
   (used for) financing activities ........       2,463.7        (306.0)       (39.9)          197.5         (235.8)       2,079.5
                                              -----------    ----------   ----------     -----------     ----------    -----------
Net increase (decrease) in cash and
   cash equivalents .......................         373.4         168.2       (108.3)         (200.9)            --          232.4
Cash and cash equivalents,
   beginning of period ....................       1,310.9         231.1        293.7           200.9             --        2,036.6
                                              -----------    ----------   ----------     -----------     ----------    -----------
Cash and cash equivalents,
   end of period ..........................   $   1,684.3    $    399.3   $    185.4     $        --     $       --    $   2,269.0
                                              ===========    ==========   ==========     ===========     ==========    ===========



                                       19


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations and Quantitative  and Qualitative  Disclosure about Market
        Risk

      The  following  discussion  uses  financial  terms  that we  believe to be
relevant to our business. A glossary of other key terms used in our business can
be found following the "Introduction" section.

Introduction

      CIT is a global  commercial and consumer  finance company that was founded
in 1908.  We provide  financing  and  leasing  capital for  companies  in a wide
variety  of  industries,  offering  vendor,  equipment,  commercial,  factoring,
consumer, and structured financing products.

      Our primary  sources of revenue are interest and rental income  related to
collateralized  lending and equipment  leasing.  Finance  receivables (loans and
capital  leases) and operating lease  equipment  (operating  leases) are the two
major asset types that generate this revenue. In the case of finance receivables
(which are financial assets), the substantive risks and rewards of equipment and
other  collateralized  asset  ownership  belong  to the  customer  and we retain
predominantly  the borrower  credit risk.  With operating  lease  equipment,  we
retain the substantive risks and rewards of equipment  ownership,  including the
right to take  depreciation and the risk of damage or obsolescence.  We fund our
leasing and lending  activity via the global capital  markets,  using commercial
paper,  unsecured term debt, and securitizations.  We refer to the excess of our
interest and rental  income over our interest  expense as "net finance  margin."
This revenue is  supplemented by other  "non-spread"  sources of revenue such as
syndication fees, gains from dispositions of equipment,  factoring  commissions,
servicing of loans and other fees.

      We measure our overall level of profitability with the following metrics:

      o     Net income as a percentage of average earning assets (AEA);

      o     Net income per common share (EPS);

      o     Net income as a percentage of average tangible equity (ROTE); and

      o     Net income as a percentage of average equity (ROE).

      We believe that the keys to enhancing profitability in our business are as
follows:

Net Interest  Margin -- Our ability to lend money at rates in excess of our cost
of borrowing. We measure this with the following ratios:

      o     Finance income as a percentage of AEA; and

      o     Net finance income as a percentage of AEA.

Funding and Market Rate Risk Management -- Our ability to access funding sources
at competitive rates,  which depends on maintaining high quality assets,  strong
capital  ratios  and  high  credit  ratings.  This  profitability  key is also a
function of interest rate and currency rate risk  management,  where the goal is
to  substantially  insulate our interest  margins and profits from  movements in
market interest rates and foreign currency  exchange rates. We gauge our funding
and  interest  rate  risk  management   activities  with  various  measurements,
including the following:

      o     Interest expense as a percentage of AEA;

      o     Net finance margin as a percentage of AEA; and

      o     Various  interest  sensitivity and liquidity  measurements  that are
            discussed in Risk Management.

Credit Risk  Management -- Our ability to evaluate the  creditworthiness  of our
customers,  both during the credit granting process and  periodically  after the
advancement of funds, and to maintain high quality assets.  We assess our credit
risk management activities with the following measurements:

      o     Delinquent assets as a percentage of finance receivables;

      o     Non-performing assets as a percentage of finance receivables; and

      o     Net charge-offs as a percentage of average finance receivables.


                                       20


Expense Management -- Our ability to maintain efficient  operating platforms and
infrastructure in order to run our business at competitive cost levels. We track
our efficiency with the following measurements:

      o     Efficiency  ratio,  which  is the  ratio  of  salaries  and  general
            operating  expenses to operating  margin excluding the provision for
            credit losses; and

      o     Operating expenses as a percentage of average managed assets (AMA).

Equipment  and Residual Risk  Management  -- Our ability to evaluate  collateral
risk in leasing and lending  transactions  and to  remarket  equipment  at lease
termination. We measure these activities with the following:

      o     Operating lease margin as a percentage of average leased equipment;

      o     Gains and losses on equipment sales; and

      o     Equipment utilization/value of equipment off lease.

Asset  Generation  and Growth -- Our ability to originate new business and build
our earning assets in a focused and prudent  manner.  We measure our performance
in these areas with the following:

      o     Origination volumes;

      o     Levels  of  financing  and  leasing   assets,   and  managed  assets
            (including  securitized  finance  receivables  that we  continue  to
            manage); and

      o     Levels of non-spread and other revenue.

Capital Management -- Our ability to maintain a strong capital base and adequate
credit loss reserve  levels.  We measure our performance in these areas with the
following:

      o     Tangible equity to managed assets ratio;

      o     Reserve for credit losses as a percentage of finance receivables, of
            delinquent assets, and of non-performing assets; and

      o     Debt to tangible equity ratio.

Glossary of Key Terms



Term                                           Description
-----                                          ----------
                                             
Average Earning Assets (AEA)................   "AEA"  is  the  average  during  the  reporting  period  of  finance
                                               receivables,  operating lease  equipment,  finance  receivables held
                                               for  sale  and  certain   investments,   less  credit   balances  of
                                               factoring   clients.   The   average   is  used  for   certain   key
                                               profitability  ratios,  including  return  on AEA and  margins  as a
                                               percentage of AEA.

Average Finance Receivables (AFR)...........   "AFR"  is  the  average  during  the  reporting  period  of  finance
                                               receivables  and  includes  loans and  finance  leases.  It excludes
                                               operating lease  equipment.  The average is used to measure the rate
                                               of charge-offs for the period.

Average Managed Assets (AMA)................   "AMA" is the  average  earning  assets  plus the  average of finance
                                               receivables  previously  securitized  and still  managed  by us. The
                                               average  is used to  measure  the rate of  charge-offs  on a managed
                                               basis for the period to monitor overall credit  performance,  and to
                                               monitor expense control.

Derivative Contracts........................   Derivatives  are  entered  into to reduce  interest  rate or foreign
                                               currency  risks and more  recently to hedge credit risk.  Derivative
                                               contracts  used by CIT include  interest rate swaps,  cross currency
                                               swaps, foreign exchange forward contracts and credit default swaps.



                                       21




Term                                           Description
-----                                          ----------
                                             
Efficiency Ratio............................   The  efficiency  ratio measures the level of expenses in relation to
                                               revenue  earned,  and is  calculated  as the  percentage of salaries
                                               and general operating  expenses to operating  margin,  excluding the
                                               provision for credit losses.

Finance Income..............................   Finance   income   includes   both   interest   income  on   finance
                                               receivables and rental income on operating leases.

Financing and Leasing Assets................   Financing  and leasing  assets  include  loans,  capital and finance
                                               leases,  leveraged leases,  operating  leases,  assets held for sale
                                               and certain investments.

Leases -- capital and finance...............   Lease   designation    describing   financing   structures   whereby
                                               substantially  all of the  economic  benefits and risks of ownership
                                               are passed to the lessee.

Leases -- leveraged.........................   Similar to capital leases except a third party,  long-term  creditor
                                               is  involved  and  provides  debt  financing.  CIT is party to these
                                               lease types as creditor or as lessor, depending on the transaction.

Leases -- tax-optimized leveraged...........   Leveraged  leases  where we are the lessor and have  increased  risk
                                               in comparison to other leveraged lease  structures,  as the creditor
                                               in these structures has a priority recourse to the leased equipment.

Leases -- operating.........................   Lease  designation  where  CIT  maintains  ownership  of the  asset,
                                               collects  rental  payments,  recognizes  depreciation  on the asset,
                                               and assumes the risks of ownership, including obsolescence.

Managed Assets..............................   Managed  assets  are  comprised  of finance  receivables,  operating
                                               lease  equipment,   finance   receivables  held  for  sale,  certain
                                               investments,  and  receivables  securitized and still managed by us.
                                               The change in managed  assets  during a  reporting  period is one of
                                               our measurements of asset growth.

Non-GAAP Financial Measures.................   Non-GAAP  financial  measures are balances that do not readily agree
                                               to  balances   disclosed  in  financial   statements   presented  in
                                               accordance  with  accounting  principles  generally  accepted in the
                                               U.S.   These   measures   are   disclosed   to  provide   additional
                                               information  and insight  relative to historical  operating  results
                                               and financial position of the business.

Non-performing Assets.......................   Non-performing  assets include loans placed on  non-accrual  status,
                                               due to  doubt of  collectibility  of  principal  and  interest,  and
                                               repossessed assets.

Non-spread Revenue..........................   Non-spread   revenues   include   syndication   fees,   gains   from
                                               dispositions  of equipment,  factoring  commissions,  loan servicing
                                               and other fees and are reported in Other Revenue.

Operating Margin............................   The total of   net  finance   margin  after   provision  for  credit
                                               losses (risk adjusted margin) and other revenue.

Retained Interest...........................   The  portion  of the  interest  in assets  sold in a  securitization
                                               transaction that is retained by CIT.

Residual Values.............................   Residual  values  represent the estimated  value of equipment at the
                                               end of the lease  term.  For  operating  leases,  it is the value to
                                               which the asset is  depreciated  at the end of its  useful  economic
                                               life (i.e., "salvage" or "scrap value").



                                       22




Term                                           Description
-----                                          ----------
                                             
Return on Equity or Tangible Equity.........   Net income  expressed as a percentage  of average  equity or average
                                               tangible equity. These are key measurements of profitability.

Risk Adjusted Margin........................   Net finance margin after provision for credit losses.

Special Purpose Entity (SPE)................   Distinct legal entities  created for a specific  purpose in order to
                                               isolate  the risks and  rewards of owning  its assets and  incurring
                                               its   liabilities.   SPEs  are  typically  used  in   securitization
                                               transactions,  joint venture  relationships  and certain  structured
                                               leasing transactions.

Tangible Equity.............................   Tangible   stockholders'   equity   excludes   goodwill   and  other
                                               intangible  assets,  and certain  other  comprehensive  income items
                                               and  includes  preferred  capital  securities.  Tangible  equity  is
                                               utilized in leverage ratios and return ratios.

Yield-related Fees..........................   In  certain   transactions,   in  addition   to   interest   income,
                                               yield-related   fees   are   collected   for   the   assumption   of
                                               underwriting  risk.  Yield-related  fees  are  reported  in  Finance
                                               Income and are recognized over the life of the lending transaction.


Profitability and Key Business Trends

      Net income for the nine  months  ended  September  30, 2004  increased  to
$549.8  million from $411.7  million for the same 2003 period.  The current year
results included a $25.5 million  after-tax gain recognized in the first quarter
on the early  redemption of debt. Our improved  profitability  reflected  higher
asset levels,  lower charge-offs and lower borrowing costs, which were partially
offset by higher operating expenses.

      Our profitability measurements for the respective periods are presented in
the table below:

                                                 Quarters Ended September 30,
                                                 ----------------------------
                                                    2004             2003
                                                    -----            -----
Net income per diluted share.................       $0.86            $0.69
Net income as a percentage of AEA............        1.88%            1.64%
Return on average tangible equity............        14.1%            12.2%
Return on equity.............................        12.8%            11.3%

                                                Nine Months Ended September 30,
                                                ------------------------------
                                                    2004             2003
                                                    -----            -----
Net income per diluted share.................       $2.56            $1.94
Net income as a percentage of AEA............        1.92%            1.54%
Return on average tangible equity............        14.3%            11.7%
Return on equity.............................        13.0%            10.7%

--------------------------------------------------------------------------------
For the nine months ended September 30, 2004, net income per diluted share,  net
income as a percentage of AEA,  return on average  tangible equity and return on
average equity excluding gain on redemption of debt were $2.44, 1.83%, 13.6% and
12.4%, respectively.

      Total  financing  and leasing  portfolio  assets grew to $44.4  billion at
September 30, 2004 from $40.1 billion and $39.2 billion at December 31, 2003 and
September  30, 2003.  Managed  assets were $52.4  billion at September 30, 2004,
versus $49.7  billion and $49.3  billion at December 31, 2003 and  September 30,
2003.  New business  volumes for the quarter and the nine months,  increased 10%
and 11% from 2003,  with strength  across most business  lines.  Increased asset
levels  included  seasonal  factoring and home equity  portfolio  growth for the
quarter.  We also acquired a European vendor leasing business with approximately
$700 million in financing and leasing assets during the quarter.


                                       23


      This  "Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations" and "Quantitative and Qualitative Disclosure about Market
Risk" contain  certain  non-GAAP  financial  measures.  See "Non-GAAP  Financial
Measurements" for additional  information.  The sections that follow analyze our
results  by  financial   statement  caption  and  are  referenced  back  to  the
profitability keys that are discussed in "Introduction."

Net Finance Margin

      An analysis of net finance margin is set forth below ($ in millions):



                                                  Quarters Ended September 30,     Nine Months Ended September 30,
                                                  ----------------------------     -------------------------------
                                                      2004           2003                2004             2003
                                                    ---------      ---------          ---------        ---------
                                                                                           
Finance income..................................    $   963.1      $   921.2          $ 2,781.2        $ 2,803.6
Interest expense................................        315.4          333.7              913.4          1,026.2
                                                    ---------      ---------          ---------        ---------
  Net finance income............................        647.7          587.5            1,867.8          1,777.4
Depreciation on operating lease equipment.......        245.7          252.4              716.5            804.1
                                                    ---------      ---------          ---------        ---------
  Net finance margin............................    $   402.0      $   335.1          $ 1,151.3        $   973.3
                                                    =========      =========          =========        =========
Average Earnings Asset ("AEA")..................    $39,195.6      $36,072.4          $38,119.0        $35,559.0
                                                    =========      =========          =========        =========

As a % of AEA:
Finance income..................................         9.83%         10.22%              9.73%           10.51%
Interest expense................................         3.22%          3.70%              3.20%            3.84%
                                                         ----          -----               ----            -----
  Net finance income............................         6.61%          6.52%              6.53%            6.67%
Depreciation on operating lease equipment.......         2.51%          2.80%              2.50%            3.02%
                                                         ----          -----               ----            -----
  Net finance margin............................         4.10%          3.72%              4.03%            3.65%
                                                         ====          =====               ====            =====


      For the quarter ended  September 30, 2004, net finance margin  improved by
$66.9 million or 38 basis points (as a percentage  of AEA) from 2003,  while the
improvement  for the nine months ended September 30, 2004 totaled $178.0 million
or 38 basis points over the prior year period due primarily to reduced borrowing
costs. Year over year growth in financing and leasing assets was offset by lower
finance income, as the portfolio continued to reprice in the relatively low rate
environment.  Lower operating lease rentals reduced nine-month finance income by
$72.7  million or 25 basis  points from the prior year  period.  See  "Operating
Leases" for additional information regarding operating lease margin.

      The trend in net finance  margin as a  percentage  of AEA,  excluding  the
impact of  operating  lease  rentals,  reflects a greater  decline  in  interest
expense  than  in  finance   income  yield,   primarily  due  to  the  narrowing
(improvement) of our credit spreads and the refinancing of higher-cost debt. The
increase in AEA reflects growth in the latter part of 2003 and in 2004.


                                       24


      Additional  information  regarding  our  borrowing  costs  is shown in the
following  table.  Debt  balances  represent  the  average  outstanding  for the
applicable period. ($ in millions):



                                                                   Before Swaps                 After Swaps
                                                              ---------------------     ------------------------
                                                                                              
Quarter Ended September 30, 2004
 Commercial paper, variable-rate senior
   notes and bank credit facilities........................   $15,855.5       1.78%      $17,661.7        2.54%
 Fixed-rate senior and subordinated notes..................   $19,357.5       5.76%       17,551.3        4.96%
                                                              ---------                  ---------
 Composite.................................................   $35,213.0       3.97%      $35,213.0        3.75%
                                                              =========                  =========
Quarter Ended September 30, 2003
 Commercial paper, variable-rate senior
   notes and bank credit facilities........................   $11,728.3       1.77%      $15,917.6        2.58%
 Fixed-rate senior and subordinated notes..................    20,297.9       6.04%       16,108.6        5.78%
                                                              ---------                  ---------
 Composite.................................................   $32,026.2       4.48%      $32,026.2        4.19%
                                                              =========                  =========
Nine Months Ended September 30, 2004
 Commercial paper, variable-rate senior
   notes and bank credit facilities........................   $14,742.5       1.69%      $17,842.5        2.43%
 Fixed-rate senior and subordinated notes..................    19,206.0       5.72%       16,106.0        5.16%
                                                              ---------                  ---------
 Composite.................................................   $33,948.5       3.97%      $33,948.5        3.72%
                                                              =========                  =========
Nine Months Ended September 30, 2003
 Commercial paper, variable-rate senior
   notes and bank credit facilities........................   $12,154.3       1.87%      $15,412.0        2.69%
 Fixed-rate senior and subordinated notes..................    20,092.9       6.17%       16,835.2        5.94%
                                                              ---------                  ---------
 Composite.................................................   $32,247.2       4.55%      $32,247.2        4.39%
                                                              =========                  =========


Operating Leases

      The table below summarizes operating lease margin, both in amount and as a
percentage of average operating lease equipment ($ in millions):



                                                    Quarters Ended September 30,     Nine Months Ended September 30,
                                                    ----------------------------     -------------------------------
                                                        2004            2003               2004            2003
                                                     ----------      ----------         ----------      ----------
                                                                                            
Rental income...................................     $  366.6        $  364.3           $1,051.0        $1,123.7
Depreciation expense............................        245.7           252.4              716.5           804.1
                                                     --------        --------           --------        --------
  Operating lease margin........................     $  120.9        $  111.9           $  334.5        $  319.6
                                                     ========        ========           ========        ========
Average operating lease equipment...............     $7,873.2        $7,458.9           $7,720.1        $7,151.1
                                                     ========        ========           ========        ========
As a % of Average Operating
  Lease Equipment:
Rental income...................................        18.62%          19.54%             18.15%          20.95%
Depreciation expense............................        12.48%          13.54%             12.37%          14.99%
                                                     --------        --------           --------        --------
Operating lease margin..........................         6.14%           6.00%              5.78%           5.96%
                                                     ========        ========           ========        ========


      Depreciation expense for the nine months ended September 30, 2004 included
a $14.8 million impairment charge to reduce the carrying value of certain older,
out of production aircraft to estimated fair value. The additional  depreciation
expense  primarily  relates to aircraft with a single lessee with upcoming lease
terminations  and for which market rental rates have  declined.  Therefore,  the
projected  cash flows no longer  supported  the  corresponding  carrying  value,
resulting in the additional depreciation charge.

      The decline in operating lease margin and its components from 2003 for the
nine  months  also  reflects  lower  rentals on the  Capital  Finance  aerospace
portfolio  due to the  commercial  airline  industry  downturn and the change in
equipment  mix to a greater  proportion  of  aircraft  and rail  assets  with an
average  depreciable  life  of  25  and  40  years,  respectively,  compared  to
smaller-ticket  assets with lives generally of 3 years in the Specialty  Finance
and Equipment Finance  portfolios.  This trend was partially reversed during the
current quarter by last quarter's small-ticket technology portfolio acquisition.
Aerospace rentals trended downward  following the terrorist attacks on September
11, 2001, but have recently shown some improvement.


                                       25


      The following  table  summarizes the total  operating  lease  portfolio by
segment ($ in millions):



                                                                      September 30,   June 30,    December 31,   September 30,
                                                                          2004          2004          2003            2003
                                                                      -------------   --------    ------------   -------------
                                                                                                         
Capital Finance -- Aerospace.......................................     $4,247.3      $4,161.7       $4,141.1        $3,905.1
Capital Finance -- Rail and Other..................................      2,227.6       2,212.5        2,095.3         2,075.1
Specialty Finance..................................................      1,057.0       1,084.0          959.5         1,043.4
Equipment Finance..................................................        401.0         380.6          419.6           461.7
                                                                        --------      --------       --------        --------
  Total............................................................     $7,932.9      $7,838.8       $7,615.5        $7,485.3
                                                                        ========      ========       ========        ========


      o     The increase in the Capital  Finance  aerospace  portfolio  reflects
            deliveries of new commercial aircraft.

      o     The  Specialty   Finance  and  Equipment   Finance  operating  lease
            portfolios  reflect the continued trend toward  financing  equipment
            through  finance  leases and loans,  rather than  operating  leases,
            although   the   Specialty   Finance   runoff   was  offset  by  the
            above-mentioned    second   quarter   2004   technology    portfolio
            acquisition.

      Maximizing equipment  utilization levels is a prime component of operating
lease portfolio profitability. Equipment not subject to lease agreements totaled
$172.8 million and $265.9 million,  at September 30, 2004 and December 31, 2003,
respectively.  The  reduction  was due to fewer  commercial  aerospace  and rail
assets off lease as well as the sale of a test equipment  rental business in the
second  quarter of 2004.  Weakness  in the  commercial  airline  industry  could
adversely impact prospective rental and utilization rates.

Net Finance Margin after Provision for Credit Losses (Risk-adjusted Margin)

      The following table summarizes risk-adjusted margin, both in amount and as
a percentage of AEA ($ in millions):



                                                                   Quarters Ended September 30,  Nine Months Ended September 30,
                                                                   ----------------------------  -------------------------------
                                                                          2004           2003          2004            2003
                                                                         ------         ------        -------          ------
                                                                                                           
Net finance margin ................................................      $402.0         $335.1       $1,151.3          $973.3
Provision for credit losses .......................................        60.2           82.9          211.5           286.5
                                                                         ------         ------        -------          ------
  Risk-adjusted margin ............................................      $341.8         $252.2        $ 939.8          $686.8
                                                                         ======         ======        =======          ======
As a Percentage of AEA:
Net finance margin ................................................        4.10%          3.72%          4.03%           3.65%
Provision for credit losses .......................................        0.61%          0.92%          0.74%           1.07%
                                                                         ------         ------        -------          ------
  Risk-adjusted margin ............................................        3.49%          2.80%          3.29%           2.58%
                                                                         ======         ======        =======          ======


      The  improvement  for both  periods  of 2004  compared  to 2003  primarily
reflects the previously discussed  improvement in net finance margin, as well as
incremental  benefit  from  lower  charge-offs,  which is  discussed  further in
"Credit Metrics".

Other Revenue

      The components of other revenue are set forth in the following table ($ in
millions):



                                                                            Quarters Ended              Nine Months Ended
                                                                             September 30,                September 30,
                                                                         ---------------------       ------------------------
                                                                          2004           2003          2004            2003
                                                                         ------         ------        -------          ------
                                                                                                           
Fees and other income .............................................       $119.6        $151.5        $ 387.3          $430.8
Factoring commissions .............................................         59.5          47.6          168.0           139.3
Gains on sales of leasing equipment ...............................         23.5          14.6           77.9            48.7
Gains on securitizations ..........................................          9.9          18.3           43.2            82.8
                                                                          ------        ------        -------          ------
  Total other revenue .............................................       $212.5        $232.0        $ 676.4          $701.6
                                                                          ======        ======        =======          ======
Other revenue as a percentage of AEA ..............................         2.17%         2.57%          2.36%           2.63%
                                                                          ======        ======        =======          ======



                                       26


      We continue to emphasize growth and  diversification  of other revenues to
improve our overall profitability, though in relation to 2003, our reduced level
of securitization has shifted certain securitization-related revenues from other
revenue back to interest margin.

      o     Fees and other income  include  syndication  fees,  gains from asset
            sales,  miscellaneous  fees,  accretion  on retained  securitization
            interests and servicing  fees related to  securitized  assets.  Both
            securitization  accretion  and  servicing  fees  declined  in  2004,
            corresponding to the reduction of  approximately  20% in securitized
            assets  during  the  period.  Structuring  and  syndication  fees in
            Capital  Finance  and  Commercial  Finance  declined  due  to  fewer
            transactions.  Miscellaneous fees were down in all segments compared
            to prior periods.

      o     Higher  factoring  commissions  reflect strong volumes and year over
            year  portfolio  growth,  benefiting  from  two  large  acquisitions
            completed during the latter part of 2003.

      o     Gains  on  sales  of  leasing  equipment  increased  in 2004  due to
            stronger  equipment   collateral  values,   including   construction
            equipment in Equipment Finance and computer related equipment in the
            International unit of Specialty Finance.

      o     Third quarter  securitization  gains were down considerably in 2004,
            due   primarily  to  a  decline  in  commercial   (vendor   finance)
            securitization  volume  in  Specialty  Finance.   Additionally,   we
            continue to fund home equity loan growth entirely  on-balance sheet,
            which effectively transfers  securitization  accretion and servicing
            fees  from fees and  other  income in 2003 to margin in 2004.  Prior
            year volume  included  $0.5  billion of home equity  loans that were
            securitized during the nine month period in 2003.

      The following table presents information regarding securitization activity
($ in millions):



                                                           Quarters Ended            At or for the Nine Months
                                                            September 30,               Ended September 30,
                                                      -------------------------     --------------------------
                                                        2004            2003           2004            2003
                                                      ---------       ---------      ---------       ---------
                                                                                         
Volume securitized .................................   $783.8         $1,317.5       $2,867.4        $ 4,207.4
Gains ..............................................   $  9.9         $   18.3       $   43.2        $    82.8
Gains as a percentage of volume securitized ........     1.26%            1.39%          1.51%            1.97%
Gains as a percentage of pre-tax income ............     3.28%            7.54%          4.79%           12.10%
Securitized assets .................................                                 $7,994.9        $10,141.0
Retained interest in securitized assets ............                                 $1,124.9        $ 1,297.3


Venture Capital Investments

      On January 15,  2004,  we  announced  the  signing of a purchase  and sale
agreement for the  disposition of the direct  investment  portfolio at an amount
approximating  the carrying  value at December 31, 2003.  During 2004, we closed
the sale of approximately $68 million of this portfolio under the existing sales
contract.  We are working toward satisfying the outstanding  closing  conditions
for remaining assets of $32 million at September 30, 2004.

      Our remaining  portfolio of direct and private fund venture capital equity
investments is summarized in the following table ($ in millions):

                                                September 30,     December 31,
                                                    2004              2003
                                                -------------     ------------
Direct investments..........................       $ 31.9            $101.1
Number of companies.........................           10                47
Private equity funds........................       $154.3            $148.8
Number of funds.............................           52                52
Remaining commitments.......................       $ 97.0            $124.2
Total investment balance....................       $186.2            $249.9

      The  remaining  commitments  at  September  30, 2004 relate to the private
equity funds.


                                       27


Reserve for Credit Losses

      Our provision for credit losses and reserve for credit losses is presented
in the following table ($ in millions):



                                                                                          At or for the
                                                           Quarters Ended               Nine Months Ended
                                                            September 30,                  September 30,
                                                       -----------------------       -------------------------
                                                        2004            2003           2004            2003
                                                      --------        --------       --------        --------
                                                                                           
Balance beginning of period ........................   $621.0          $754.9        $ 643.7           $760.8
                                                       ------          ------        -------           ------
Provision for credit losses -- Finance receivables..     60.2            82.9          224.0            286.5
                            -- Argentine reserve ...       --              --          (12.5)              --
                                                       ------          ------        -------           ------
Total provision for credit losses ..................     60.2            82.9          211.5            286.5
Reserves relating to acquisitions and other ........     29.0             5.3           37.9             18.5
                                                       ------          ------        -------           ------
  Additions to reserve for credit losses, net ......     89.2            88.2          249.4            305.0
                                                       ------          ------        -------           ------
Net credit losses:
  Specialty Finance ................................     42.5            38.6          114.6            122.5
  Commercial Finance ...............................     21.6            28.9           76.2             83.9
  Equipment Finance ................................      7.8            23.1           49.6             99.8
  Capital Finance ..................................      0.4              --           14.8              7.1
                                                       ------          ------        -------           ------
  Total net credit losses ..........................     72.3            90.6          255.2            313.3
                                                       ------          ------        -------           ------
Balance end of period ..............................   $637.9          $752.5        $ 637.9           $752.5
                                                       ======          ======        =======           ======
Reserve for credit losses as a percentage of
     finance receivables ...........................                                    1.85%            2.48%
Reserve for credit losses as a percentage of
     past due receivables (60 days or more)(1) .....                                   111.3%            87.2%
Reserve for credit losses as a percentage of
     non-performing assets(2) ......................                                   120.7%            86.8%


----------
(1)   The reserve for credit losses as a percentage of past due  receivables (60
      days or more),  excluding  telecommunication  and  Argentine  reserves and
      corresponding  delinquencies,  was 100.7% and 62.0% at September  30, 2004
      and 2003, respectively.

(2)   The reserve for credit  losses as a percentage of  non-performing  assets,
      excluding  telecommunication  and  Argentine  reserves  and  corresponding
      non-performing  assets,  was 113.5% and 64.4% at  September  30,  2004 and
      2003, respectively.

      The  decreased  provision  for 2004 in  relation  to 2003  reflects  lower
charge-offs and improving credit metrics.  The increase in reserves  relating to
acquisitions  during  2004  is due  primarily  to the  European  vendor  leasing
business  and home  equity bulk  purchases.  See  "Credit  Metrics"  for further
discussion.

      The  following  table  presents the  components  of the reserve for credit
losses, both in amount and as a percentage of corresponding  finance receivables
($ in millions):

                                        September 30, 2004    December 31, 2003
                                        ------------------    -----------------
Finance receivables.................    $572.2     1.67%      $524.6     1.71%
Telecommunications(1)...............      65.7    18.90%       106.6    19.16%
Argentina(2)........................        --       --         12.5    55.07%
                                        ------                ------
Total...............................    $637.9     1.85%      $643.7     2.06%
                                        ======                ======

----------
(1)   Percentage of finance  receivables in  telecommunications  portfolio.

(2)   Percentage of finance receivables in Argentina.

      The decline in the reserve for credit  losses at  September  30, 2004 from
2003, in both amount and percentage,  was due to  telecommunication  charge-offs
taken  against the  previously  established  specific  reserve and the improving
credit metrics.  The decline in the specific  Argentine reserve resulted largely
from the fourth quarter 2003 charge-off of $101.0 million,  and the sale of that
business during the second quarter of 2004.

Reserve for Credit Losses -- Finance Receivables

      The reserve for credit losses is determined based on three key components:
(1) specific  reserves for collateral  dependent  loans which are impaired under
SFAS 114, (2) reserves for estimated losses inherent in the portfolio based upon
historical  and projected  credit  trends and (3) reserves for general  economic
environment and other factors.


                                       28


      The  reserve  includes   specific  reserves  relating  to  impaired  loans
(excluding  telecommunication  and  Argentine) of $27.1 million at September 30,
2004, compared to $66.4 million at December 31, 2003. The portion of the reserve
related to inherent estimated loss and estimation risk reflect our evaluation of
trends in our key credit  metrics,  as well as our assessment of risk in certain
industry sectors, including commercial aerospace.

      The  consolidated  reserve  for credit  losses is  intended to provide for
losses  inherent in the portfolio,  which requires the  application of estimates
and significant  judgment as to the ultimate  outcome of collection  efforts and
realization  of collateral  values,  among other things.  Therefore,  changes in
economic  conditions or credit  metrics,  including past due and  non-performing
accounts,  or  other  events  affecting  specific  obligors  or  industries  may
necessitate  additions  or  reductions  to the  consolidated  reserve for credit
losses.  Management continues to believe that the credit risk characteristics of
the  portfolio  are  well  diversified  by  geography,  industry,  borrower  and
equipment  type.  Refer  to  "Concentrations"  for  more  information.  Based on
currently available information,  management believes that our total reserve for
credit losses is adequate.

Reserve for Credit Losses -- Telecommunications

      The telecommunications reserve was $65.7 million at September 30, 2004. We
have recorded net  write-offs of $134.3  million  against this specific  reserve
since  $200.0  million  was added to the reserve  for credit  losses  during the
quarter  ended June 30,  2002 (in light of the  continued  deterioration  in the
telecommunications  sector  at  that  time,  particularly  with  respect  to our
competitive local exchange carrier ("CLEC") portfolio).

      Our  telecommunications  portfolio is included in  "Communications" in the
industry  composition  table  included  in  Note  4  --  Concentrations  to  the
Consolidated  Financial Statements.  This portfolio includes lending and leasing
transactions  to  the   telecommunications   sector.   Lending  and  leasing  of
telecommunication  equipment  to  non-telecom  companies  is  conducted  in  our
Specialty  Finance  business  and is  categorized  according  to the  customer's
("obligor's")  industry in the industry  composition table.  Certain statistical
data is presented in the following table ($ in millions):

                                                 September 30,    December 31,
                                                     2004             2003
                                                 -------------    ------------
CLEC accounts..................................      $117.4          $197.8
Other telecommunication accounts...............       230.2           381.2
                                                     ------          ------
Total telecommunication portfolio..............      $347.6          $579.0
                                                     ======          ======
Portfolio as a % of total financing
  and leasing assets...........................        0.79%            1.5%
Number of accounts.............................          29              44
Top 10 accounts................................      $206.4          $253.4
Largest account exposure.......................      $ 29.3          $ 31.0
Non-performing accounts........................      $ 24.5          $ 57.2
Number of non-performing accounts..............           5               6
Non-performing accounts as a
  percentage of portfolio......................         7.0%            9.9%

Reserve for Credit Losses -- Argentina

      During the second quarter of 2004, we completed the  previously  announced
sale of our Argentine  portfolio to an Argentine bank at a modest gain. With the
completion of this transaction, we transferred the remaining specific reserve of
$12.5 million to the Reserve for Credit Losses -- Finance Receivables.

      In the  first  half of 2002,  we  established  a $135.0  million  specific
reserve for Argentine exposure to reflect the geopolitical risks associated with
collecting our peso-based  assets and  repatriating  them into U.S. dollars that
resulted from the Argentine  government  instituting  certain economic  reforms.
When established,  the reserve was about two-thirds of our combined currency and
credit  exposure.  During the fourth quarter of 2003,  based on the  substantial
progress  with  collection  and work out efforts,  we recorded a $101.0  million
charge-off  against this specific  reserve and transferred  $21.5 million to the
Reserve for Credit Losses -- Finance Receivables.


                                       29


Credit Metrics

Net Charge-offs

      Net  charge-offs,  both in amount and as a percentage  of average  finance
receivables, are shown in the following tables ($ in millions):



                                                                              Before
                                                                          Liquidating and              Liquidating and
                                                     Total               Telecommunications           Telecommunications
                                              -----------------          ------------------           ------------------
                                                                                                  
Quarter Ended September 30, 2004
Specialty Finance -- commercial ...........   $ 28.1      1.49%          $ 28.1        1.49%           $  --           --
Commercial Finance ........................     21.6      0.72%            10.5        0.36%            11.1        11.63%
Equipment Finance .........................      7.8      0.49%             8.0        0.52%            (0.2)       (0.96)%
Capital Finance ...........................      0.4      0.05%             0.4        0.05%              --           --
                                              ------                     ------                        -----
   Total Commercial Segments ..............     57.9      0.81%            47.0        0.67%            10.9         9.03%
Specialty Finance -- consumer .............     14.4      1.30%            10.6        1.12%             3.8         2.41%
                                              ------                     ------                        -----
   Total ..................................   $ 72.3      0.88%          $ 57.6        0.72%           $14.7         5.25%
                                              ======                     ======                        =====

Quarter Ended September 30, 2003
Specialty Finance -- commercial ...........   $ 25.6      1.47%          $ 25.2        1.45%           $ 0.4           --
Commercial Finance ........................     28.9      1.08%            17.7        0.75%            11.2         7.39%
Equipment Finance .........................     23.1      1.52%            18.1        1.26%             5.0         6.53%
Capital Finance ...........................       --        --               --          --               --          --
                                              ------                     ------                        -----
   Total Commercial Segments ..............     77.6      1.17%            61.0        0.95%            16.6         7.13%
Specialty Finance -- consumer .............     13.0      1.80%             6.6        1.26%             6.4         3.22%
                                              ------                     ------                        -----
   Total ..................................   $ 90.6      1.23%          $ 67.6        0.98%           $23.0         5.33%
                                              ======                     ======                        =====

Nine Months Ended September 30, 2004
Specialty Finance -- commercial ...........   $ 63.3      1.15%          $ 63.2        1.15%           $ 0.1           --
Commercial Finance ........................     76.2      0.86%            34.5        0.41%            41.7        13.36%
Equipment Finance .........................     49.6      1.05%            42.9        0.93%             6.7         6.49%
Capital Finance ...........................     14.8      0.73%            14.8        0.73%              --           --
                                              ------                     ------                        -----
   Total Commercial Segments ..............    203.9      0.97%           155.4        0.75%            48.5        11.09%
Specialty Finance -- consumer .............     51.3      1.67%            30.9        1.22%            20.4         3.87%
                                              ------                     ------                        -----
   Total ..................................   $255.2      1.06%          $186.3        0.80%           $68.9         7.15%
                                              ======                     ======                        =====

Nine Months Ended September 30, 2003
Specialty Finance -- commercial ...........   $ 80.5      1.51%          $ 79.7        1.49%           $ 0.8        15.92%
Commercial Finance ........................     83.9      1.10%            52.9        0.73%            31.0         6.54%
Equipment Finance .........................     99.8      2.14%            73.9        1.70%            25.9         8.34%
Capital Finance ...........................      7.1      0.33%             1.8        0.08%             5.3           --
                                              ------                     ------                        -----
   Total Commercial Segments ..............    271.3      1.37%           208.3        1.10%            63.0         7.81%
Specialty Finance -- consumer .............     42.0      2.23%            23.1        1.81%            18.9         3.10%
                                              ------                     ------                        -----
   Total ..................................   $313.3      1.45%          $231.4        1.14%           $81.9         5.79%
                                              ======                     ======                        =====


      Total   charge-offs   continued  to  decline   during   2004,   reflecting
improvements across most segments:

      o     Specialty Finance -- commercial charge-offs increased largely due to
            charge-offs   taken  with   respect  to  leases  to   customers   of
            NorVergence, Inc., a bankrupt vendor currently subject to regulatory
            investigations.  At September  30,  2004,  after taking into account
            charge-offs  and  loan  loss  reserves,  the  remaining  outstanding
            receivables to NorVergence customers were approximately $6 million.


                                       30


      o     Commercial  Finance  charge-offs  fell well  below the prior year in
            both the asset-based lending and factoring business,  reflecting the
            stronger  economy,  retail in particular.  In  conjunction  with the
            combination of the former  Structured  Finance into Capital Finance,
            the  communications  and  media  portfolio  was  transferred  to the
            Commercial  Finance segment.  As a result,  charge-offs  against the
            specific  telecommunications  reserve are reflected in this segment.
            See "Results by Business Segment" for further discussion.

      o     Equipment  Finance  improvement was  considerable in relation to the
            prior year due to broad-based reductions across all product lines in
            both the U.S. and Canada, reflecting lower non-performing assets and
            strengthening collateral values.

      o     Specialty  Finance --  consumer  charge-offs,  while up in  absolute
            amounts,  were down as a percentage of average  finance  receivables
            from the  prior  year  reflecting  the  return to  on-balance  sheet
            funding of the home equity portion of this portfolio.

Past Due and Non-performing Assets

      The following table sets forth certain information concerning our past due
(sixty days or more) and  non-performing  assets and the related  percentages of
finance receivables ($ in millions):



                                                                        September 30, 2004    December 31, 2003
                                                                         -----------------    ----------------
                                                                                             
Past Dues:
Specialty Finance -- commercial....................................        $212.3   2.60%       $226.4   3.17%
Commercial Finance.................................................         106.0   0.85%        131.9   1.14%
Equipment Finance..................................................          66.6   1.05%        137.9   2.18%
Capital Finance....................................................          28.4   1.04%         30.5   1.11%
                                                                           ------               ------
   Total Commercial Segments.......................................         413.3   1.39%        526.7   1.90%
Specialty Finance -- consumer......................................         159.9   3.31%        149.6   4.26%
                                                                           ------               ------
   Total ..........................................................        $573.2   1.66%       $676.3   2.16%
                                                                           ======               ======
Non-performing assets:
Specialty Finance -- commercial....................................         $87.8   1.08%       $119.8   1.68%
Commercial Finance.................................................          96.9   0.78%        132.5   1.15%
Equipment Finance..................................................         164.9   2.60%        218.3   3.46%
Capital Finance....................................................          11.5   0.42%         49.7   1.81%
                                                                           ------               ------
   Total Commercial Segments.......................................         361.1   1.22%        520.3   1.87%
Specialty Finance -- consumer......................................         167.6   3.47%        156.2   4.45%
                                                                           ------               ------
   Total ..........................................................        $528.7   1.53%       $676.5   2.16%
                                                                           ======               ======
Non accrual loans..................................................        $427.9               $566.5
Repossessed assets.................................................         100.8                110.0
                                                                           ------               ------
 Total non-performing assets.......................................        $528.7               $676.5
                                                                           ======               ======


      The  September  30,  2004  delinquency  rate of 1.66%  marked  the  eighth
consecutive quarter of improvement.

      o     Specialty  Finance -- commercial  delinquency  improvement from both
            prior year  periods  was driven by  declines  in the Small  Business
            Lending portfolio and the international portfolios,  most notably in
            our European  operations,  where  servicing was  centralized  during
            2003.

      o     Commercial  Finance past due levels were down considerably from 2003
            due to  improvements  in the  Commercial  Services  (factoring)  and
            Business  Credit  (asset-based  lending)  units  as  well  as in the
            telecommunications portfolio.

      o     Equipment Finance delinquency  improved across virtually all product
            lines in relation to 2003.

      o     Capital Finance  improvement from 2003 included lower delinquency in
            the project  finance  portfolio,  though  delinquency  was up in the
            regional aerospace portfolio from last quarter.

      o     Specialty  Finance -- consumer  delinquency  was up in dollar amount
            but  down  as  a  percentage  of  finance   receivables  from  2003,
            reflecting a return to  on-balance  sheet funding of the home equity
            portfolio.   Consumer  delinquency  on  a  managed  basis  has  been
            relatively stable in percentage terms over the periods presented.


                                       31


      Likewise,  non-performing  assets also declined for the eighth consecutive
quarter,   reflecting   the  same   trends   discussed   above.   Non-performing
telecommunications  accounts (in Commercial  Finance)  totaled $24.5 million and
$57.2 million September 30, 2004 and December 31, 2003, respectively.

      Managed  past due loans in dollar  amount and as a  percentage  of managed
financial assets are shown in the table below ($ in millions):

                                        September 30, 2004    December 31, 2003
                                        ------------------    -----------------
Past Dues:
Specialty Finance -- commercial.....      $294.8   2.29%      $  321.2   2.77%
Commercial Finance..................       106.0   0.85%         131.9   1.14%
Equipment Finance...................       116.2   1.24%         243.6   2.49%
Capital Finance.....................        28.4   1.04%          30.5   1.11%
                                          ------              --------
   Total Commercial Segments........       545.4   1.46%         727.2   2.04%
Specialty Finance -- consumer.......       304.9   4.44%         294.8   4.78%
                                          ------              --------
   Total ...........................      $850.3   1.92%      $1,022.0   2.44%
                                          ======              ========

      Managed past due loans decreased both in dollar amount and as a percentage
of managed financial  assets,  reflecting the same factors that are discussed in
the owned delinquency analysis.

Salaries and General Operating Expenses

      The  efficiency  ratio and the ratio of  salaries  and  general  operating
expenses to average managed assets ("AMA") are summarized in the following table
($ in millions):



                                                  Quarters Ended September 30,  Nine Months Ended September 30,
                                                  ----------------------------  -------------------------------
                                                      2004           2003             2004             2003
                                                    ---------      ---------        ---------        ---------
                                                                                            
Efficiency ratio (1)............................         41.5%          41.4%            41.6%            41.1%
Salaries and general operating expenses as a
  percentage of AMA (2).........................         2.18%          2.00%            2.18%            1.98%
Salaries and general operating expenses ........    $   256.7      $   230.3        $   764.3        $   676.4
Average Managed Assets..........................    $47,166.8      $46,052.0        $46,737.1        $45,648.4


--------------------------------------------------------------------------------
(1)   Efficiency  ratio is the ratio of salaries and general  operating  margin,
      excluding the provision for credit losses.

(2)   "AMA" means average managed  assets,  which is average earning assets plus
      the  average  of  finance  receivables  previously  securitized  and still
      managed by us.

      Salaries  and general  operating  expenses for the quarter and nine months
ended September 30, 2004 increased from the prior year periods  primarily due to
higher   incentive-based   compensation,   including  restricted  stock  awards,
acquisition  activities  and  higher  corporate  expenses  reflecting  increased
advertising,  governance and  compliance-related  costs.  Personnel decreased to
approximately 5,700 at September 30, 2004, from 5,780 at September 30, 2003.

      Expenses are monitored closely by business unit and corporate  management,
and are reviewed monthly. An approval and review procedure is in place for major
capital  expenditures,  such  as  computer  equipment  and  software,  including
post-implementation  evaluations.  We continue to target an improved  efficiency
ratio in the mid 30% area and an AMA  ratio  of  under  2.00%,  as:  (1) we have
existing capacity to grow assets without commensurate expense increases;  (2) we
expect payback on our restructuring activities; (3) we have additional plans for
platform   consolidation    technology    investment;    and   (4)   we   expect
compliance-related expenses to decline from the current level.

Gain on Redemption of Debt

      In January 2004 and December  2003, we called at par $1.25 billion of term
debt  securities.  These notes were listed on the New York Stock  Exchange under
the ticker symbols CIC and CIP and are commonly  known as PINEs ("Public  Income
Notes").  The  securities  carried  coupon  rates of 8.25% and 8.125%,  but were
marked  down to a  market  interest  rate  yield  of  approximately  7.5% in our
financial  statements through purchase  accounting.  In light of the high coupon
rates, we called the securities for redemption pursuant to the terms outlined in
the  prospectuses.


                                       32


The call of $512 million on January 15, 2004  resulted in a pretax gain of $41.8
million  ($25.5  million after tax) in the first  quarter of 2004.  The December
call of $735 million  resulted in a pretax gain of $50.4 million  ($30.8 million
after tax) during the fourth quarter of 2003.

Income Taxes

      The following table sets forth certain  information  concerning our income
taxes ($ in millions):



                                                                  Quarters Ended           Nine Months Ended
                                                                   September 30,             September 30,
                                                             ------------------------   -----------------------
                                                               2004           2003        2004          2003
                                                             ---------      ---------   ---------     ---------
                                                                                            
Provision for income taxes................................    $117.7          $94.6       $351.6        $266.8
Effective tax rate........................................      39.0%          39.0%        39.0%         39.0%


      The effective tax rate exceeds the U.S.  Federal tax rate of 35% primarily
due to state and local, and foreign income taxes.

      At  September  30,  2004,  CIT had U.S.  federal net  operating  losses of
approximately $1.9 billion,  which expire in various years beginning in 2011. In
addition, CIT has various state net operating losses that will expire in various
years beginning in 2004.  Federal and state  operating  losses may be subject to
annual use limitations  under section 382 of the Internal  Revenue Code of 1986,
as amended, and other limitations under certain state laws.  Management believes
that CIT will have  sufficient  taxable  income  in  future  years and can avail
itself  of tax  planning  strategies  in order to fully  utilize  these  losses.
Accordingly, we do not believe a valuation allowance is required with respect to
these net operating losses.

      CIT has open tax years in the U.S.,  Canada and other  jurisdictions  that
are currently  under  examination  by the  applicable  taxing  authorities,  and
certain  later tax years that may in the future be subject to  examination.  CIT
periodically  evaluates  the adequacy of our related tax  reserves,  taking into
account  our  open  tax  return  positions,  tax law  changes  and  third  party
indemnifications.  We believe that our tax reserves are  appropriate.  The final
determination  of tax audits and any  related  litigation  could  affect our tax
reserves.

Results by Business Segment

      The  tables  that  follow  summarize  selected  financial  information  by
business  segment,  based upon a fixed leverage ratio across business units, and
the allocation of most corporate expenses ($ in millions):



                                                                 Quarters Ended            Nine Months Ended
                                                                  September 30,              September 30,
                                                          --------------------------    ----------------------
                                                               2004          2003         2004         2003
                                                             ---------     ---------    ---------    ---------
                                                                                            
Net Income (Loss)
Specialty Finance.........................................    $ 84.1         $ 71.6       $244.0        $186.8
Commercial Finance........................................      78.3           58.8        217.6         181.3
Equipment Finance.........................................      19.1            9.0         52.6          27.6
Capital Finance...........................................      25.8           24.4         78.6          55.3
                                                              ------         ------       ------        ------
Total Segments............................................     207.3          163.8        592.8         451.0
Corporate, including certain charges......................     (23.4)         (16.0)       (43.0)        (39.3)
                                                              ------         ------       ------        ------
Total ....................................................    $183.9         $147.8       $549.8        $411.7
                                                              ======         ======       ======        ======
Return on AEA
Specialty Finance.........................................      2.31%          2.34%        2.38%         2.04%
Commercial Finance........................................      3.74%          2.94%        3.54%         3.14%
Equipment Finance.........................................      1.11%          0.53%        1.02%         0.53%
Capital Finance...........................................      1.12%          1.11%        1.15%         0.88%
Total Segments............................................      2.13%          1.83%        2.09%         1.71%
Corporate, including certain charges......................     (0.25)%        (0.19)%      (0.17)%       (0.17)%
Total ....................................................      1.88%          1.64%        1.92%         1.54%



                                       33


      Results by segment were as follows:

      o     Specialty  Finance   profitability   improvement   reflected  strong
            earnings in the international and home equity units.

      o     Commercial   Finance  earnings  remained  strong,   benefiting  from
            continued high returns in both the factoring and asset-based lending
            businesses. The current year results also benefited from last year's
            factoring   acquisitions.   Current   year   profitability   on  the
            communications   and  media  portfolio   (transferred  from  Capital
            Finance) included higher levels of syndication activity.

      o     Equipment   Finance   returns,   while  still   below   management's
            expectations,  increased  from  the  prior  year,  reflecting  lower
            charge-offs,   lower  funding  costs  and  higher  equipment  gains.
            Profitability  improvement was broad-based  across business lines in
            both the U.S. and Canada.

      o     Capital Finance nine-month  earnings reflected improved rail rentals
            and  second  quarter   syndication  gains  in  the  project  finance
            portfolio done largely for risk management purposes. Aerospace lease
            margins and profitability was dampened by a $14.8 million additional
            depreciation charge during the second quarter to reduce the carrying
            value  of  certain  older  leased  aircraft,  which  are  no  longer
            manufactured, to estimated fair value.

      For all periods shown,  Corporate includes unallocated corporate operating
expenses and the results of the venture  capital  business  including  gains and
losses on venture capital  investments (losses of $0.5 million and $12.9 million
after tax for the quarters ended  September 30, 2004 and 2003 and losses of $5.4
million and $35.0 million after tax for the nine months ended September 30, 2004
and 2003). For the nine months ended September 30, 2004, Corporate also includes
the gain on the early redemption of debt ($25.5 million after tax).


                                       34


Financing and Leasing Assets

      The  managed  assets  of  our  business  segments  and  the  corresponding
strategic business units are presented in the following table ($ in millions):



                                                                         September 30,   December 31,    Percentage
                                                                              2004           2003          Change
                                                                         ------------    -----------     ---------
                                                                                                    
Specialty Finance Segment
Commercial
   Finance receivables.................................................    $ 8,166.3      $ 7,150.0          14.2%
   Operating lease equipment, net......................................      1,057.0          959.5          10.2%
   Finance receivables held for sale...................................      1,447.9          548.1         164.2%
                                                                           ---------      ---------
   Owned assets........................................................     10,671.2        8,657.6          23.3%
   Finance receivables securitized and managed by CIT..................      3,251.1        3,915.4        (17.0)%
                                                                           ---------      ---------
   Managed assets......................................................     13,922.3       12,573.0          10.7%
                                                                           ---------      ---------
Consumer
   Finance receivables -- home equity..................................      3,996.4        2,513.1          59.0%
   Finance receivables -- other........................................        840.2          997.7         (15.8)%
   Finance receivables held for sale...................................        209.0          150.0          39.3%
                                                                           ---------      ---------
   Owned assets........................................................      5,045.6        3,660.8          37.8%
   Home equity finance receivables securitized and
     managed by CIT....................................................      1,352.6        1,867.6         (27.6)%
   Other finance receivables securitized and managed by CIT............        466.5          642.5         (27.4)%
                                                                           ---------      ---------
   Managed assets......................................................      6,864.7        6,170.9          11.2%
                                                                           ---------      ---------
Commercial Finance Segment
Commercial Services
   Finance receivables.................................................      6,764.0        6,325.8           6.9%
Business Credit
   Finance receivables.................................................      5,699.6        5,247.1           8.6%
                                                                           ---------      ---------
   Owned assets........................................................     12,463.6       11,572.9           7.7%
                                                                           ---------      ---------
Equipment Finance Segment
   Finance receivables ................................................      6,343.2        6,317.9           0.4%
   Operating lease equipment, net......................................        401.0          419.6          (4.4)%
   Finance receivables held for sale...................................        100.4          220.2         (54.4)%
                                                                           ---------      ---------
   Owned assets........................................................      6,844.6        6,957.7          (1.6)%
   Finance receivables securitized and managed by CIT..................      2,924.7        3,226.2          (9.3)%
                                                                           ---------      ---------
   Managed assets......................................................      9,769.3       10,183.9          (4.1)%
                                                                           ---------      ---------
Capital Finance Segment
   Finance receivables.................................................      2,733.1        2,748.6          (0.6)%
   Operating lease equipment, net......................................      6,474.9        6,236.4           3.8%
                                                                           ---------      ---------
   Owned assets........................................................      9,208.0        8,985.0           2.5%
                                                                           ---------      ---------
Other -- Equity Investments............................................        186.2          249.9         (25.5)%
                                                                           ---------      ---------
Total
   Finance receivables.................................................    $34,542.8      $31,300.2          10.4%
   Operating lease equipment, net......................................      7,932.9        7,615.5           4.2%
   Finance receivables held for sale...................................      1,757.3          918.3          91.4%
                                                                           ---------      ---------
   Financing and leasing assets excluding equity investments...........     44,233.0       39,834.0          11.0%
   Equity investments (included in other assets).......................        186.2          249.9         (25.5)%
                                                                           ---------      ---------
     Owned assets......................................................     44,419.2       40,083.9          10.8%
   Finance receivables securitized and managed by CIT..................      7,994.9        9,651.7         (17.2)%
                                                                           ---------      ---------
     Managed assets....................................................    $52,414.1      $49,735.6           5.4%
                                                                           =========      =========



                                       35


      The increase in owned assets from 2003 was driven by: the combination of a
strong  mortgage  refinancing  market  and  bulk  receivable  purchases  in  the
Specialty  Finance home equity  portfolio;  strategic  acquisitions in Specialty
Finance-commercial  including a European vendor leasing  business and technology
leasing  business;  two factoring  acquisitions  in Commercial  Services in late
2003;  and  deliveries of aerospace  assets in Capital  Finance.  The decline in
receivables  securitized  reflects  our return to  funding  home  equity  growth
on-balance sheet and a lower level of commercial equipment securitizations.

      The  following  table  presents  new  business  volume  by  segment  ($ in
millions):



                                                                 Quarters Ended                 Nine Months Ended
                                                                  September 30,                   September 30,
                                                            ------------------------        -------------------------
                                                              2004           2003             2004            2003
                                                            ---------      ---------        ---------       ---------
                                                                                                
Specialty Finance.......................................    $3,823.4       $3,445.0          $10,677.6      $ 9,455.3
Commercial Finance......................................       671.8          726.0            2,117.4        2,111.8
Equipment Finance.......................................     1,115.1          898.0            3,086.4        2,584.4
Capital Finance........................................        357.2          334.0            1,007.3        1,100.0
                                                            --------       --------          ---------      ---------
  Total new business volume.............................    $5,967.5       $5,403.0          $16,888.7      $15,251.5
                                                            ========       ========          =========      =========


      New origination volume for the quarter and nine months ended September 30,
2004  included  stronger  volume  from our  Specialty  Finance  vendor  finance,
international and home equity units, as well as improved demand for financing in
Equipment Finance.

      Home equity new business volume in Specialty  Finance was $1.2 billion and
$3.0 billion for the quarter and nine months of 2004,  up 54% and 13% from 2003.
Volume  was  particularly  strong in the third  quarter,  as the  interest  rate
environment remained relatively low, and that resulted in strong production from
our broker  origination  channel.  Softness  in the home  equity  securitization
markets  afforded us the  opportunity  for bulk portfolio  purchases  during the
third quarter.

      The table below  summarizes  the targeted  non-strategic  business  lines.
During the third quarter,  we sold  virtually all of the remaining  recreational
marine and  recreational  vehicle  receivables,  following  the prior  quarter's
decision to pursue a more rapid  liquidation of these  portfolios.  In addition,
during 2001 we ceased making new venture  capital  investments  beyond  existing
commitments,  and during the first  quarter of 2004 we entered into an agreement
to  sell  our  direct  investment   portfolio.   We  will  consider   additional
opportunities for more rapid  liquidation of non-strategic  assets to the extent
available. See "Losses on Venture Capital Investments" for more information.  ($
in millions)

                                                   September 30,   December 31,
                                                       2004           2003
                                                   ------------    -----------
Portfolio
Manufactured housing............................       $576           $584
Franchise finance...............................         59            102
Owner-operator trucking.........................         38             91
Recreational marine.............................          1             86
Recreational vehicle............................          1             58
Wholesale inventory finance.....................         --              2
                                                       ----           ----
 Total on-balance sheet
   financing and leasing assets.................       $675           $923
                                                       ====           ====


                                       36


Concentrations

Ten Largest Accounts

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented 5.0% of our total financing and leasing assets at September 30, 2004
(the largest account being less than 1.0%) and 5.2% at December 31, 2003.

Leveraged Leases

      As of September 30, 2004, net investments in leveraged leases totaled $1.3
billion,  or 3.7% of finance  receivables,  with the major components being: (i)
$553.2 million in commercial aerospace transactions, including $219.9 million of
tax-optimization  leveraged  leases (which  generally  have  increased  risk for
lessors in relation to conventional lease structures due to additional  leverage
in the  transactions);  (ii)  $331.7  million of project  finance  transactions,
primarily  in the power and utility  sector;  and (iii)  $232.3  million in rail
transactions.

Joint Venture Relationships

      Our strategic relationships with industry-leading  equipment vendors are a
significant origination channel for our financing and leasing activities.  These
vendor alliances include traditional vendor finance programs, joint ventures and
profit sharing structures. Our vendor programs with Dell, Snap-on and Avaya Inc.
are among our largest  alliances.  On September 8, 2004,  CIT and Dell agreed to
extend and modify the terms of the relationship.  The new agreements provide CIT
with the right to purchase a percentage  of DFS's  finance  receivables  through
January 2010 and Dell also has the option to purchase  CIT's 30% interest in DFS
in February  2008.  The joint venture  agreement with Snap-on runs until January
2006.  The Avaya  agreement,  which  relates  to profit  sharing on a CIT direct
origination program, extends through September 2006.

      At September 30, 2004, our financing and leasing assets included  $3,723.8
million,  $1,107.5  million and $700.8 million related to the Dell,  Snap-on and
Avaya  programs,  respectively.  These amounts  include  receivables  originated
directly by CIT as well as receivables  purchased  from joint venture  entities.
Securitized  assets included $2,018.5 million,  $67.1 million and $590.3 million
from the Dell,  Snap-on and Avaya origination  sources,  respectively.  The Dell
amounts  include  $1,287.8  million in  financing  and  leasing  assets and $7.2
million in securitized  assets  originated by CIT in Canada and other  countries
outside of the U.S.

      A significant reduction in origination volumes from any of these alliances
could have a material impact on our asset and net income levels.  For additional
information  regarding  certain of our joint venture  activities,  see Note 8 --
Certain Relationships and Related Transactions.

Home Equity Portfolio

      The Specialty  Finance home equity portfolio  totaled $4.2 billion (owned)
and $5.6 billion (managed) at September 30, 2004, representing 9.9% and 10.6% of
owned and managed assets, respectively.  The average loan size approximated $109
thousand. The top 5 state concentrations (California,  Texas, Ohio, Pennsylvania
and North  Carolina)  represented  an aggregate 44% of the managed  portfolio at
September 30, 2004.  Our home equity loan  portfolio is 68%  fixed-rate  and 86%
first mortgages with an average  loan-to-value  of 76% and an average FICO score
of 637.  Managed  delinquencies  (sixty  days or more)  were  3.91% and 4.22% at
September 30, 2004 and September 30, 2003, while  charge-offs on a managed basis
for the  nine-months  ended September 30, 2004 and September 2003 were 1.04% and
0.96%.


                                       37


Geographic Composition

      The following table summarizes  significant state  concentrations  greater
than 5.0% and foreign  concentrations  in excess of 1.0% of our owned  financing
and leasing  portfolio  assets.  For each period  presented,  our managed  asset
geographic  composition  did not  differ  significantly  from  our  owned  asset
geographic  composition.   During  the  third  quarter,  the  state  of  Florida
experienced significant  weather-related damage. Our geographic concentration in
Florida is  approximately  4.0% and we do not expect  resulting  weather-related
losses to be significant.

                                                  September 30,   December 31,
                                                      2004            2003
                                                  -------------   ------------
State
   California....................................     10.2%            10.2%
   Texas.........................................      8.1%             7.7%
   New York......................................      7.1%             7.4%
   All other states..............................     53.6%            54.0%
                                                      ----             ----
Total U.S........................................     79.0%            79.3%
                                                      ====             ====
Country
   Canada........................................      4.9%             5.1%
   England.......................................      3.6%             2.8%
   France........................................      1.4%             1.1%
   Australia.....................................      1.2%             1.3%
   Mexico........................................      1.2%             1.0%
   Germany.......................................      1.2%             1.0%
   China.........................................      1.0%             0.9%
   All other countries...........................      6.5%             7.5%
                                                      ----             ----
Total Outside U.S................................     21.0%            20.7%
                                                      ====             ====

Industry Composition

      The following  discussions  provide  information  with respect to selected
industry compositions.

Commercial Aerospace

      Our commercial aerospace  portfolio,  which includes financing and leasing
transactions with commercial  airlines and regional carriers,  is managed in our
Capital Finance segment.

      At September  30, 2004,  our  commercial  airlines  portfolio  consists of
financing and leasing assets with an average age of approximately 6 years (based
on a  dollar  value  weighted  average).  The  portfolio  was  comprised  of  89
customers,  with the majority placed with major airlines  around the world.  The
portfolio at December 31, 2003  consisted of 84  customers,  and aircraft with a
weighted  average age of  approximately  6 years.  The  commercial  aircraft all
comply with stage III noise regulations.


                                       38


The  following  table  summarizes  the  composition  of the  commercial  airline
portfolio ($ in millions):



                                                          September 30, 2004            December 31, 2003
                                                       ------------------------     -------------------------
                                                           Net        Number of         Net         Number of
                                                       Investment      Planes       Investment       Planes
                                                       ----------    ----------     ----------     ----------
                                                                                            
By Geography:
   Europe.........................................      $2,175.1           72        $1,991.0           65
   North America(1)...............................         926.9           62         1,029.7           72
   Asia Pacific...................................       1,129.3           43         1,013.6           40
   Latin America..................................         618.8           25           612.7           28
   Africa/Middle East.............................          55.1            3            69.1            4
                                                        --------          ---        --------          ---
Total.............................................      $4,905.2          205        $4,716.1          209
                                                        ========          ===        ========          ===

By Manufacturer:
   Boeing.........................................     $ 2,540.4          132        $2,581.7          140
   Airbus.........................................       2,329.5           64         2,114.6           57
   Other..........................................          35.3            9            19.8           12
                                                        --------          ---        --------          ---
Total.............................................      $4,905.2          205        $4,716.1          209
                                                        ========          ===        ========          ===

By Body Type(2):
   Narrow.........................................      $3,657.1          161        $3,415.7          159
   Intermediate...................................         848.8           18           877.0           18
   Wide...........................................         364.0           17           403.6           20
   Other..........................................          35.3            9            19.8           12
                                                        --------          ---        --------          ---
Total.............................................      $4,905.2          205        $4,716.1          209
                                                        ========          ===        ========          ===

By Product:
   Operating Lease................................      $4,113.6          160        $4,011.7          159
   Leverage Lease (Other).........................         333.3           12           232.5           12
   Leverage Lease (Tax optimized).................         219.9            9           217.9            9
   Capital Lease..................................         142.0            6           135.6            7
   Loan...........................................          96.4           18           118.4           22
                                                        --------          ---        --------          ---
Total.............................................      $4,905.2          205        $4,716.1          209
                                                        ========          ===        ========          ===


--------------------------------------------------------------------------------
(1)   Comprised of net  investments in the U.S. and Canada of $744.2 million (56
      aircraft)  and $182.7  million (6  aircraft) at  September  30, 2004,  and
      $822.7  million (66 aircraft) and $207.0  million (6 aircraft) at December
      31, 2003.

(2)   Narrow body are single  aisle  design and consist  primarily of Boeing 737
      and 757 series and Airbus  A320  series  aircraft.  Intermediate  body are
      smaller twin aisle  design and consist  primarily of Boeing 767 series and
      Airbus A330  series  aircraft.  Wide body are large twin aisle  design and
      consist  primarily of Boeing 747 and 777 series and McDonnell Douglas DC10
      series aircraft.

      The top five commercial  aerospace  exposures  totaled $1,064.7 million at
September  30,  2004,  the  largest  of which was $288.4  million.  All top five
exposures  are to  carriers  outside  of the U.S.,  and  three  are to  European
carriers.  The largest  exposure  to a U.S.  carrier at  September  30, 2004 was
$132.0 million.  Of the 205 aircraft,  three are off-lease and covered by signed
letters of intent.  Future revenues and aircraft values could be impacted by the
actions of the carriers,  management's  actions with respect to re-marketing the
aircraft, airline industry performance and aircraft utilization.

      The regional  aircraft  portfolio at  September  30, 2004  consists of 127
planes  with a net  investment  of $351.9  million,  up from  $291.6  million at
December 31,  2003.  The carriers  are  primarily  located in North  America and
Europe.  Operating leases account for about 38% of the portfolio,  with the rest
capital leases or loans.

      The following is a list of our exposure to bankrupt aerospace carriers and
the current status of the related aircraft at September 30, 2004:

      o     UAL Corp. -- United Airlines leases 4 CIT-owned narrow body aircraft
            (2  Boeing  757  aircraft  and 2  Boeing  737  aircraft)  with a net
            investment of $82.8 million.  Additionally, we hold Senior A tranche
            Enhanced  Equipment Trust  Certificates  ("EETCs")  issued by United
            Airlines, which are debt instruments


                                       39



            collateralized  by  aircraft  operated by the  airline,  with a fair
            value of $42.5  million.  In  connection  with the United  Airlines'
            filing  under  Chapter  11, as of  September  30,  2004,  we have an
            outstanding  balance  of $53.1  million  (with a  commitment  of $75
            million)  relating to a  debtor-in-possession  facility.  During the
            third  quarter,  as  co-arranger  with  three  other  lenders,   CIT
            committed  to $250 million of an  aggregate  $1.0 billion  facility,
            which is secured by unencumbered  aircraft,  among other collateral.
            CIT  syndicated  its  exposure  down to $75  million,  with  further
            reduction to $50 million expected to close in the fourth quarter.

      o     Air Canada -- Our net investment in aircraft is approximately  $47.5
            million, relating to one CIT-owned Boeing 767 aircraft.

      o     Avianca  Airlines -- Avianca is a lessee of one MD 80  aircraft  and
            one Boeing 757, with a combined net investment of $30.9 million.

      o     US  Airways  -- On  September  11,  2004,  US  Airways  Group,  Inc.
            announced that it had filed for  reorganization  under Chapter 11 of
            the  U.S.  Bankruptcy  Code.  Under  existing  agreements,  CIT  has
            operating  leases  where US Airways  is the  lessee of two  737-300,
            CIT-owned aircraft, for a total net investment of $13.6 million.

      Our aerospace  assets  include both operating  leases and capital  leases.
Management  monitors economic conditions  affecting equipment values,  trends in
equipment values, and periodically  obtains third party appraisals of commercial
aerospace  equipment,  which  include  projected  rental  rates.  We adjust  the
depreciation  schedules of commercial aerospace equipment on operating leases or
residual values  underlying  capital leases when required.  Aerospace assets are
reviewed for  impairment  annually,  or more often when events or  circumstances
warrant.   An  aerospace   asset  is  defined  as  impaired  when  the  expected
undiscounted  cash flow over its expected  remaining  life is less than its book
value. Both historical information and current economic trends are factored into
the  assumptions and analyses used when  determining  the expected  undiscounted
cash flow. Included among these assumptions are the following:

      o     Lease terms

      o     Remaining life of the asset

      o     Lease rates supplied by independent appraisers

      o     Remarketing prospects

      o     Maintenance costs

      An  impairment  loss is  recognized  if  circumstances  indicate  that the
carrying  amount of the asset may not be recoverable.  Depreciation  expense for
the nine months ended  September 30, 2004  included a $14.8  million  impairment
charge taken in the second quarter to reduce  certain  older,  out of production
aircraft to estimated fair value. The additional  depreciation expense primarily
related to aircraft with a single lessee with upcoming  lease  terminations  and
for which market rental rates have recently declined.  Therefore,  the projected
cash flows no longer supported the  corresponding  carrying value,  resulting in
the additional depreciation charge.

      Commercial airline equipment utilization is high, with only three aircraft
off-lease  (with a book value of $30.5  million) at September  30,  2004,  which
demonstrates our ability to place aircraft.  However,  current placements are at
compressed rental rates,  which reflects current market  conditions.  Generally,
leases are being  written for terms  between  three and five  years.  Within the
regional  aircraft  portfolio  at  September  30,  2004,  there were 12 aircraft
off-lease with a total book value of approximately  $41.6 million.  See table in
"Risk Management" section for additional  information  regarding  commitments to
purchase additional aircraft.

Other Assets

      Other assets  totaled $2.5 billion at September  30, 2004 and $3.3 billion
at December  31, 2003.  The decline in other  assets is  primarily  due to lower
receivables from derivative counterparties in 2004.

      Other assets  primarily  consisted of the following at September 30, 2004:
investments  in and  receivables  from  non-consolidated  subsidiaries  of  $0.7
billion,  deposits on  commercial  aerospace  flight  equipment of $0.4 billion,


                                       40


accrued interest and receivables from derivative counterparties of $0.3 billion,
direct and private fund equity investments of $0.2 billion,  prepaid expenses of
$0.1 billion and repossessed assets and off-lease equipment of $0.1 billion. The
remaining balance includes furniture and fixtures, miscellaneous receivables and
other assets.

Risk Management

      Our risk management process is described in more detail in our 2003 Annual
Report on Form 10-K. Our processes remain  substantially the same as outlined in
our 2003 Form 10-K.

      Interest Rate Risk Management -- We monitor our interest rate  sensitivity
on a regular  basis by  analyzing  the impact of interest  rate changes upon the
financial  performance  of the business.  We also  consider  factors such as the
strength  of  the  economy,   customer   prepayment   behavior  and   re-pricing
characteristics of our assets and liabilities.

      We evaluate and monitor various risk metrics:

      o     Value at Risk (VAR), which measures the net economic value of assets
            by assessing the duration of assets and liabilities.

      Our asset portfolio is generally comprised of loans and leases of short to
intermediate  term.  As such,  the duration of our asset  portfolio is generally
less than three years.  We target to closely match the duration of our liability
portfolio  with that of our asset  portfolio.  As of  September  30,  2004,  our
liability  portfolio  duration  was  slightly  longer  than our asset  portfolio
duration.

      o     Margin at Risk (MAR), which measures the impact of changing interest
            rates upon interest income over the subsequent twelve months.

      At the date that interest rate sensitivity is modeled, net interest income
is  derived  considering  the  current  level of  interest-sensitive  assets and
related run-off (including both contractual  repayment and historical prepayment
experience),  the current level of  interest-sensitive  liabilities  and related
maturities, and the current level of derivatives. Market interest rates are then
raised 100 basis points  instantaneously  and paralleled across the entire yield
curve, and a "rate shocked" simulation is run.

      An immediate  hypothetical 100 basis point parallel  increase in the yield
curve on October 1, 2004 modeled  against  interest  rate  sensitive  assets and
liabilities  as shown in the table below would reduce net income by an estimated
$15 million  after-tax over the next twelve months. A corresponding  decrease in
the yield curve would cause an increase in net income of a like amount. Although
management  believes that this measure provides an estimate of our interest rate
sensitivity,   there  are  certain  limitations  inherent  in  this  sensitivity
analysis,  as it is  unlikely  that rate  movements  would be  instantaneous  or
parallel,  nor would our assets and debt reprice immediately.  Additionally,  it
does not consider any potential remedial actions that management could take such
as the  pre-funding of liabilities  and other business  developments  consistent
with an  increasing  rate  environment  that may affect net income,  for example
asset  growth  and  changes to our  liability  durations.  Further,  it does not
account for  potential  changes in the credit  quality,  size,  composition  and
prepayment  characteristics of the balance sheet. Accordingly,  no assurance can
be given that actual  results  would not differ  materially  from the  estimated
outcomes of our  simulations.  Such  simulations  do not represent  management's
current view of future market interest rate movements.

      The following table  summarizes the composition of our interest  sensitive
assets (including  operating leases) and liabilities  (excluding  equity) before
and after derivatives:



                                                                     Before Swaps                         After Swaps
                                                             -----------------------------        -------------------------------
                                                             Fixed rate      Floating rate        Fixed rate        Floating rate
                                                             ----------      -------------        ----------        -------------
                                                                                                            
                    September 30, 2004
Assets....................................................       57%              43%                57%                43%
Liabilities...............................................       60%              40%                50%                50%

                     December 31, 2003
Assets....................................................       57%              43%                57%                43%
Liabilities...............................................       63%              37%                49%                51%



                                       41


      Total  interest  sensitive  assets were $40.8 billion and $36.7 billion at
September  30,  2004 and  December  31,  2003,  while total  interest  sensitive
liabilities  were $35.3  billion  and $31.5  billion at  September  30, 2004 and
December 31,  2003.  Certain  December  31, 2003  amounts have been  adjusted to
conform to the current period presentation.

      Liquidity  Risk  Management -- Liquidity  risk refers to the risk of being
unable to meet potential cash outflows  promptly and  cost-effectively.  Factors
that could  cause such a risk to arise  might be a  disruption  of a  securities
market or other source of funds. We actively manage and mitigate  liquidity risk
by maintaining diversified sources of funding and committed alternate sources of
funding,  and we maintain and periodically  review a contingency funding plan to
be  implemented  in the  event of any form of  market  disruption.  The  primary
funding sources are commercial  paper (U.S.,  Canada and  Australia),  long-term
debt (U.S. and International) and asset-backed securities (U.S. and Canada).

      Outstanding  commercial  paper  totaled $4.6 billion at September 30, 2004
and $4.2 billion at December 31, 2003. Our targeted U.S. program size remains at
$5.0  billion  with  modest  foreign  programs  aggregating  $500  million to be
maintained in Canada and Australia. Our goal is to maintain committed bank lines
in excess of aggregate  outstanding  commercial  paper.  We have  aggregate bank
facilities of $6.3 billion with $4.2 billion in multi-year facilities.

      We maintain  registration  statements  with the  Securities  and  Exchange
Commission  ("SEC") covering debt securities that we may sell in the future.  At
September  30,  2004,  we had $0.5 billion of  registered,  but  unissued,  debt
securities  available  under  a  shelf  registration  statement.  Subsequent  to
September 30, 2004, we registered and now have  available a $15 billion  program
under which we may issue debt  securities and other capital  market  securities.
Term-debt issued during 2004 totaled $9.6 billion: $5.8 billion in variable-rate
medium-term notes and $3.8 billion in fixed-rate notes.

      To further  strengthen  our funding  capabilities,  we maintain  committed
asset-backed facilities and shelf registration  statements,  which cover a range
of assets from equipment to consumer home equity  receivables and trade accounts
receivable.  While  these  are  predominantly  in the  U.S.,  we  also  maintain
facilities  for Canadian  domiciled  assets.  As of September  30, 2004,  we had
approximately  $4.4  billion  of  availability  in  our  committed  asset-backed
facilities and $2.4 billion of registered,  but unissued,  securities  available
under  public  shelf  registration   statements  relating  to  our  asset-backed
securitization program.

      Our  committed  asset-backed  commercial  paper  programs in the U.S.  and
Canada  provide a substantial  source of alternate  liquidity.  We also maintain
committed bank lines of credit to provide  backstop  support of commercial paper
borrowings  and  local  bank  lines to  support  our  international  operations.
Additional  sources of liquidity  are loan and lease  payments  from  customers,
whole-loan asset sales and loan syndications.

      We also  target and  monitor  certain  liquidity  metrics to ensure both a
balanced  liability  profile and adequate  alternate  liquidity  availability as
outlined in the following table:



                                                                                         September 30,          December 31,
Liquidity Measurement                                            Current Target              2004                  2003
---------------------                                            --------------          -------------          ------------
                                                                                                           
Commercial paper to total debt.............................      Maximum of 15%               12%                   13%
Short-term debt to total debt..............................      Maximum of 45%               35%                   36%
Bank lines to commercial paper.............................      Minimum of 100%             141%                  149%
Aggregate alternate liquidity* to short-term debt..........      Minimum of 75%              101%                   93%


--------------------------------------------------------------------------------
*     Aggregate   alternative  liquidity  includes  available  bank  facilities,
      asset-backed conduit facilities and cash.

      Our credit  ratings are an important  factor in meeting our margin targets
as better  ratings  generally  correlate to lower cost of funds (see Net Finance
Margin, interest expense discussion).  The following credit ratings have been in
place since September 30, 2002:



                                                                     Short-Term            Long-Term              Outlook
                                                                     ----------            ---------              -------
                                                                                          
Moody's..........................................................        P-1                   A2                  Stable
Standard & Poor's................................................        A-1                    A                  Stable
Fitch............................................................        F1                     A                  Stable



                                       42


      The credit ratings previously stated are not a recommendation to buy, sell
or hold securities and may be subject to revision or withdrawal by the assigning
rating organization.  Each rating should be evaluated independently of any other
rating.

      We have certain covenants contained in our legal documents that govern our
funding sources.  The most  significant  covenant in CIT's indentures and credit
agreements is a negative pledge  provision,  which limits granting or permitting
liens on our assets,  but provides for  exceptions for certain  ordinary  course
liens needed to operate our business.  In addition,  our credit  agreements also
contain a minimum net worth requirement of $4.0 billion.

      The following tables summarize various contractual  obligations,  selected
contractual  cash receipts and contractual  commitments as of September 30, 2004
($ in millions):



                                                                      Payments and Collections by Period(3)
                                              ----------------------------------------------------------------------------------
                                                             Remaining
                                                Total           2004         2005            2006          2007          2008(3)
                                              ---------      ---------     --------        --------     ---------      ---------
                                                                                                     
Commercial Paper ..........................   $ 4,496.5      $ 4,496.5     $     --        $     --     $      --      $      --
Variable-rate term debt ...................    11,507.7        1,117.4      3,331.3         3,667.2       2,551.0          840.8
Fixed-rate term debt ......................    21,022.2        1,723.0      4,444.6         2,729.2       3,448.0        8,677.4
Preferred capital security ................       254.2             --           --              --            --          254.2
Lease rental expense ......................       149.6           12.9         45.4            35.0          27.3           29.0
                                              ---------      ---------     --------        --------     ---------      ---------
   Total contractual obligations ..........    37,430.2        7,349.8      7,821.3         6,431.4       6,026.3        9,801.4
                                              ---------      ---------     --------        --------     ---------      ---------
Finance receivables(1) ....................    34,542.8        8,148.1      5,618.2         4,656.9       3,266.4       12,853.2
Operating lease rental income .............     2,817.6          270.9        908.6           624.1         366.0          648.0
Finance receivables held for sale(2) ......     1,757.3        1,757.3           --              --            --             --
Cash -- current balance ...................     2,160.1        2,160.1           --              --            --             --
Retained interest in securitizations
 and other investments ....................     1,188.4          174.5        451.6           264.8         167.1          130.4
                                              ---------      ---------     --------        --------     ---------      ---------
   Total projected cash availability ......    42,466.2       12,510.9      6,978.4         5,545.8       3,799.5       13,631.6
                                              ---------      ---------     --------        --------     ---------      ---------
Net projected cash inflow (outflow) .......   $ 5,036.0      $ 5,161.1     $ (842.9)       $ (885.6)    $(2,226.8)     $ 3,830.2
                                              =========      =========     ========        ========     =========      =========


--------------------------------------------------------------------------------
(1)   Based upon contractual cash flows; amount could differ due to prepayments,
      extensions of credit, charge-offs and other factors.

(2)   Based upon management's intent to sell rather than contractual  maturities
      of underlying  assets.

(3)   Projected  proceeds from the sale of operating lease  equipment,  interest
      revenue from finance  receivables,  debt interest  expense and other items
      are excluded.  Obligations  relating to  postretirement  programs are also
      excluded.



                                                                          Commitment Expiration by Period
                                              ----------------------------------------------------------------------------------
                                                             Remaining
                                                  Total         2004          2005           2006          2007          2008+
                                              ---------      ---------     --------        --------     ---------      ---------
                                                                                                     
Credit extensions .......................     $ 7,414.0       $1,010.4     $  624.2        $1,114.8      $  794.0       $3,870.6
Aircraft purchases ......................       2,447.0          279.0        906.0         1,002.0         260.0             --
Letters of credit .......................       1,273.2        1,037.1        232.8             3.3            --             --
Sale-leaseback payments .................         457.8             --         28.5            28.5          28.5          372.3
Manufacturer purchase commitments .......         280.9          280.9           --              --            --             --
Venture capital commitments .............          97.0            3.4          0.5              --           3.1           90.0
Guarantees ..............................         125.2          112.9           --              --          10.5            1.8
Acceptances .............................          25.0           25.0           --              --            --             --
                                              ---------       --------     --------        --------      --------       --------
Total contractual commitments ...........     $12,120.1       $2,748.7     $1,792.0        $2,148.6      $1,096.1       $4,334.7
                                              =========       ========     ========        ========      ========       ========


Internal Controls

      The  Internal  Controls   Committee  is  responsible  for  monitoring  and
improving  internal  controls and overseeing the internal  controls  attestation
mandated by Section 404 of the Sarbanes-Oxley Act of 2002 ("SARBOX"),  for which
the  implementation  year is  2004.  The  committee,  which  is  chaired  by the
Controller,  includes the CFO,  the Director of Internal  Audit and other senior
executives in finance,  legal, risk management and information  technology.  The
documentation  phase of the SARBOX project is complete and we are concluding the
testing and remediation phases. Our management self-assessment is targeted to be
completed during the fourth quarter of 2004.


                                       43


Off-Balance Sheet Arrangements

Securitization Program

      We fund asset  originations  on our  balance  sheet by  accessing  various
sectors of the capital  markets,  including the term debt and  commercial  paper
markets.  In an effort to broaden  funding  sources  and  provide an  additional
source of liquidity, we use an array of securitization programs,  including both
asset-backed commercial paper and term structures, to access both the public and
private asset-backed  securitization markets. Current products in these programs
include  receivables  and leases  secured by equipment as well as consumer loans
secured by  residential  real  estate.  The  following  tables  summarizes  data
relating to our securitization balance and activity ($ in millions):



                                                                                           September 30,
                                                                                     ------------------------
                                                                                      2004            2003
                                                                                     --------       ---------
                                                                                              
Securitized Assets:
Specialty Finance -- commercial...................................................   $3,251.1       $ 3,876.8
Specialty Finance -- consumer.....................................................    1,819.1         2,759.7
Equipment Finance.................................................................    2,924.7         3,504.5
                                                                                     --------       ---------
Total securitized assets..........................................................   $7,994.9       $10,141.0
                                                                                     ========       =========
Securitized assets as a % of managed assets.......................................       15.3%           20.6%
                                                                                     ========       =========





                                                          Quarters Ended                Nine Months Ended
                                                           September 30,                   September 30,
                                                       ----------------------        -----------------------
                                                        2004           2003            2004           2003
                                                       ------        --------        --------       --------
                                                                                        
Volume Securitized:
Specialty Finance -- commercial.................       $458.4        $  936.0        $1,897.2       $2,546.3
Specialty Finance -- consumer...................           --              --              --          489.2
Equipment Finance...............................        325.4           381.5           970.2        1,171.9
                                                       ------        --------        --------       --------
Total volume securitized........................       $783.8        $1,317.5        $2,867.4       $4,207.4
                                                       ======        ========        ========       ========



      Under our typical asset-backed securitization, we sell a "pool" of secured
loans  or  leases  to  a   special-purpose   entity,   typically  a  trust.  The
special-purpose  entity,  in turn,  issues  certificates  and/or  notes that are
collateralized  by the pool and entitle the holders  thereof to  participate  in
certain pool cash flows. We retain the servicing of the  securitized  contracts,
for which we earn a servicing  fee. We also  participate  in certain  "residual"
cash flows (cash flows after  payment of principal  and interest to  certificate
and/or note holders, servicing fees and other credit-related disbursements).  At
the date of securitization, we estimate the "residual" cash flows to be received
over the life of the  securitization,  record  the  present  value of these cash
flows as a retained  interest  in the  securitization  (retained  interests  can
include bonds issued by the  special-purpose  entity,  cash reserve  accounts on
deposit  in  the  special-purpose  entity  or  interest  only  receivables)  and
typically recognize a gain.

      In estimating residual cash flows and the value of the retained interests,
we make a variety  of  financial  assumptions,  including  pool  credit  losses,
prepayment  speeds and discount rates.  These  assumptions are supported by both
our historical  experience  and  anticipated  trends  relative to the particular
products securitized.  Subsequent to recording the retained interests, we review
them quarterly for impairment  based on estimated fair value.  These reviews are
performed  on a  disaggregated  basis.  Fair  values of retained  interests  are
estimated   utilizing  current  pool   demographics,   actual   note/certificate
outstandings,  current and  anticipated  credit  losses,  prepayment  speeds and
discount rates.

      The key assumptions  used in measuring the retained  interests at the date
of securitization for transactions completed during 2004 were as follows:



                                                                                         Commercial Equipment
                                                                                       -----------------------
                                                                                       Specialty     Equipment
                                                                                        Finance       Finance
                                                                                       ---------     ---------
                                                                                                 
Weighted average prepayment speed................................................        49.4%         12.1%
Weighted average expected credit losses..........................................        0.51%         0.80%
Weighted average discount rate...................................................        6.48%         9.00%
Weighted average life (in years).................................................        1.22          1.92



                                       44


      Key  assumptions  used in  calculating  the  fair  value  of the  retained
interests in  securitized  assets by product type at September  30, 2004 were as
follows:



                                                       Commercial Equipment                 Consumer
                                                   ---------------------------   ------------------------------
                                                                                  Home Equity and  Recreational
                                                      Specialty     Equipment      Manufactured      Vehicles
                                                       Finance       Finance          Housing        and Boat
                                                   --------------   ----------   ----------------  ------------
                                                                                            
Weighted average prepayment speed..............         29.1%         12.1%             26.9%           20.3%
Weighted average expected credit losses........         1.28%         1.57%             1.36%           1.90%
Weighted average discount rate.................         7.64%         9.58%            13.08%          14.48%
Weighted average life (in years)...............         1.06          1.30              3.11            2.72


      The Specialty Finance -- commercial securitized assets include receivables
originated to consumers through DFS.

Securitization and Joint Venture Activities

      We utilize  special  purpose  entities  ("SPEs") and joint ventures in the
normal  course of business to execute  securitization  transactions  and conduct
business in key vendor relationships.

      Securitization  Transactions  -- SPEs  are  used to  achieve  "true  sale"
requirements for these transactions in accordance with SFAS No. 140, "Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and   Extinguishment   of
Liabilities." Pools of assets are originated or acquired and sold to SPEs, which
in turn  issue  debt  securities  to  investors  solely  backed by asset  pools.
Accordingly,  CIT has no legal  obligations to repay the securities in the event
of a default by the SPE. CIT retains the servicing  rights and  participates  in
certain  cash flows of the pools.  The present  value of expected net cash flows
that  exceeds the  estimated  cost of servicing is recorded in other assets as a
"retained  interest." Assets securitized are shown in our managed assets and our
capitalization  ratios  on a managed  basis.  Under the  recently  issued  rules
relating to consolidation and SPEs, non-qualifying  securitization entities have
to be  consolidated.  We  believe  that  all of our  existing  asset-backed  SPE
structures  meet the definition of a qualifying  special purpose entity ("QSPE")
as defined by SFAS No. 140 and therefore will continue to qualify as off-balance
sheet transactions.  As part of these related activities,  CIT entered into $2.3
billion in notional  amount of hedge  transactions to protect the related trusts
against  interest  rate risk.  CIT is insulated  from this risk by entering into
offsetting  swap  transactions  with  third  parties  totaling  $2.3  billion in
notional amount at September 30, 2004.

      Joint Ventures -- We utilize joint  ventures  organized  through  distinct
legal entities to conduct  financing  activities with certain  strategic  vendor
partners.  Receivables are originated by the joint venture and purchased by CIT.
The vendor partner and CIT jointly own these distinct legal entities,  and there
is no third-party debt involved.  These arrangements are accounted for using the
equity  method,  with  profits  and losses  distributed  according  to the joint
venture  agreement.  See disclosure in Item 1. Financial  Statements,  Note 8 --
Certain Relationships and Related Transactions.

Capitalization

      The following table presents  information  regarding our capital structure
($ in millions):



                                                                                    September 30,  December 31,
                                                                                        2004           2003
                                                                                    ------------   ------------
                                                                                               
Commercial paper.................................................................    $ 4,496.5       $ 4,173.9
Term debt........................................................................     32,529.9        29,239.2
Preferred Capital Securities.....................................................        254.2           255.5
Stockholders' equity(1)..........................................................      5,882.3         5,427.8
                                                                                     ---------       ---------
Total capitalization.............................................................     43,162.9        39,096.4
Goodwill and other intangible assets.............................................       (594.4)         (487.7)
                                                                                     ---------       ---------
Total tangible capitalization....................................................    $42,568.5       $38,608.7
                                                                                     =========       =========
Tangible stockholders' equity(1) and Preferred Capital Securities to
  managed assets.................................................................        10.57%          10.45%
Tangible stockholders' equity(1) and Preferred Capital Securities................         6.38x           6.14x


--------------------------------------------------------------------------------
(1)   Stockholders'  equity  excludes  the impact of the  accounting  change for
      derivative financial  instruments  described in Note 7 to the Consolidated
      Financial  Statements and certain  unrealized  gains or losses on retained
      interests and investments, as these amounts are not necessarily indicative
      of amounts that will be realized. See "Non-GAAP Financial Measurements."


                                       45


      The European vendor finance  acquisition  increased  goodwill and acquired
intangibles by  approximately  $80 million and treasury  stock  increased to $81
million.

      The preferred capital  securities are 7.70% Preferred  Capital  Securities
issued in 1997 by CIT Capital Trust I, a  wholly-owned  subsidiary.  CIT Capital
Trust I invested the proceeds of that issue in Junior Subordinated Debentures of
CIT having  identical  rates and payment  dates.  Consistent  with rating agency
measurements,  preferred  capital  securities are included in tangible equity in
our leverage  ratios.  See  "Non-GAAP  Financial  Measurements"  for  additional
information.

      See "Liquidity  Risk  Management"  for  discussion of risks  impacting our
liquidity and capitalization.

Critical Accounting Estimates

The  preparation  of  financial  statements  in  conformity  with GAAP  requires
management  to use  judgment in making  estimates  and  assumptions  that affect
reported amounts of assets and  liabilities,  the reported amounts of income and
expense during the reporting period and the disclosure of contingent  assets and
liabilities  at the date of the  financial  statements.  We consider  accounting
estimates  relating to the  following to be critical in applying our  accounting
policies:

      o     Investments

      o     Charge-off of Finance Receivables

      o     Impaired Loans

      o     Reserve for Credit Losses

      o     Retained Interests in Securitizations

      o     Lease Residual Values

      o     Goodwill and Intangibles

      o     Income Tax Asset and Liability Accounts

      There have been no significant  changes to the methodologies and processes
used in developing  estimates  relating to these items from what is described in
our 2003 Annual Report on Form 10-K.

Statistical Data

      The following table presents components of net income as a percent of AEA,
along with other selected financial data ($ in millions):

                                                          Nine Months Ended
                                                            September 30,
                                                       -----------------------
                                                          2004         2003
                                                       ---------    ---------
Finance income.....................................         9.73%       10.51%
Interest expense...................................         3.20%        3.84%
                                                       ---------    ---------
  Net finance income...............................         6.53%        6.67%
Depreciation on operating lease equipment..........         2.50%        3.02%
                                                       ---------    ---------
  Net finance margin...............................         4.03%        3.65%
Provision for credit losses........................         0.74%        1.07%
                                                       ---------    ---------
Net finance margin after provision
   for credit losses...............................         3.29%        2.58%
Other revenue......................................         2.36%        2.63%
Gain (loss) on venture capital investments.........         0.03%       (0.11)%
                                                       ---------    ---------
Operating margin...................................         5.68%        5.10%
Salaries and general operating expenses............         2.67%        2.54%
Gain on redemption of debt.........................         0.14%          --
                                                       ---------    ---------
  Income before provision for income taxes.........         3.15%        2.56%
Provision for income taxes.........................        (1.23)%      (1.00)%
Minority interest, after tax.......................           --           --
Dividends on preferred capital
   securities, after tax...........................           --        (0.02)%
                                                       ---------    ---------
  Net income.......................................         1.92%        1.54%
                                                       =========    =========
Average Earning Assets.............................    $38,119.0    $35,559.0
                                                       =========    =========


                                       46


Non-GAAP Financial Measurements

      The SEC adopted  Regulation G, which  applies to any public  disclosure or
release of material  information that includes a non-GAAP financial measure. The
accompanying  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations and Quantitative  and Qualitative  Disclosure about Market
Risk contain certain  non-GAAP  financial  measures.  The SEC defines a non-GAAP
financial  measure as a numerical  measure of a company's  historical  or future
financial performance,  financial position, or cash flows that excludes amounts,
or is subject to adjustments that have the effect of excluding amounts, that are
included in the most directly  comparable  measure  calculated  and presented in
accordance  with GAAP in the  financial  statements or includes  amounts,  or is
subject to  adjustments  that have the  effect of  including  amounts,  that are
excluded from the most directly comparable measure so calculated and presented.

      Non-GAAP  financial measures disclosed in this report are meant to provide
additional  information and insight relative to historical operating results and
financial position of the business,  are used by management in its analysis and,
in certain cases, to provide  financial  information that is presented to rating
agencies and other users of  financial  information.  These  measures are not in
accordance  with,  or a  substitute  for,  GAAP  and  may be  different  from or
inconsistent with non-GAAP financial measures used by other companies.

      Selected  non-GAAP  disclosures  are presented and reconciled in the table
below ($ in millions):



                                                                                       September 30,           December 31,
                                                                                            2004                   2003
                                                                                        ------------           ------------
                                                                                                          
Managed assets(1)
Finance receivables ..................................................................     $34,542.8            $31,300.2
Operating lease equipment, net .......................................................       7,932.9              7,615.5
Finance receivables held for sale ....................................................       1,757.3                918.3
Equity and venture capital investments (included in other assets) ....................         186.2                249.9
                                                                                           ---------            ---------
Total financing and leasing portfolio assets .........................................      44,419.2             40,083.9
Securitized assets ...................................................................       7,994.9              9,651.7
                                                                                           ---------            ---------
Managed Assets .......................................................................     $52,414.1            $49,735.6
                                                                                           =========            =========
Earning assets(2)
Total financing and leasing portfolio assets .........................................     $44,419.2            $40,083.9
Credit balances of factoring clients .................................................      (3,929.9)            (3,894.6)
                                                                                           ---------            ---------
Earning assets .......................................................................     $40,489.3            $36,189.3
                                                                                           =========            =========
Tangible equity(3)
Total equity .........................................................................     $ 5,837.0            $ 5,394.2
Other comprehensive loss relating to derivative financial instruments ................          52.5                 41.3
Unrealized gain on securitization investments ........................................          (7.2)                (7.7)
Goodwill and intangible assets .......................................................        (594.4)              (487.7)
                                                                                           ---------            ---------
Tangible common equity ...............................................................       5,287.9              4,940.1
Preferred capital securities .........................................................         254.2                255.5
                                                                                           ---------            ---------
Tangible equity ......................................................................     $ 5,542.1            $ 5,195.6
                                                                                           =========            =========
Debt, net of overnight deposits(4)
Total Debt ...........................................................................     $37,280.6            $33,668.6
Overnight deposits ...................................................................      (1,651.7)            (1,529.4)
Preferred capital securities .........................................................        (254.2)              (255.5)
                                                                                           ---------            ---------
Debt, net of overnight deposits ......................................................     $35,374.7            $31,883.7
                                                                                           =========            =========
Earnings per share, excluding certain items(5)
GAAP Earnings per share ..............................................................     $    0.86            $    0.72
Gain on debt redemption ..............................................................            --                (0.14)
                                                                                           ---------            ---------
Adjusted earnings per share ..........................................................     $    0.86            $    0.58
                                                                                           =========            =========


--------------------------------------------------------------------------------
(1)   Managed  assets  are  utilized  in  certain  credit  and  expense  ratios.
      Securitized  assets are  included  in managed  assets  because CIT retains
      certain  credit risk and the  servicing  related to assets that are funded
      through securitizations.

(2)   Earning  assets are  utilized  in certain  revenue  and  earnings  ratios.
      Earning assets are net of credit balances of factoring  clients.  This net
      amount,  which  corresponds  to amounts  funded,  is a basis for  revenues
      earned, such as finance income and factoring commissions.

(3)   Tangible equity is utilized in leverage ratios, and is consistent with our
      presentation to rating agencies. Other comprehensive losses and unrealized
      gains  on  securitization  investments  (both  included  in  the  separate
      component of equity) are excluded from the  calculation,  as these amounts
      are not necessarily indicative of amounts that will be realized.

(4)   Debt, net of overnight  deposits,  is utilized in certain leverage ratios.
      Overnight deposits are excluded from these calculations,  as these amounts
      are  retained  by the  Company  to  repay  debt.  Overnight  deposits  are
      reflected in both debt and cash and cash equivalents.

(5)   The EPS related to the items listed are shown separately, as the items are
      not indicative of our on-going operations.


                                       47


Forward-Looking Statements

      Certain  statements   contained  in  this  document  are  "forward-looking
statements" within the meaning of the U.S. Private Securities  Litigation Reform
Act of 1995. All statements  contained herein that are not clearly historical in
nature are  forward-looking  and the words  "anticipate,"  "believe,"  "expect,"
"estimate"  and  similar   expressions   are  generally   intended  to  identify
forward-looking  statements. Any forward-looking statements contained herein, in
press releases,  written statements or other documents filed with the Securities
and Exchange  Commission or in communications and discussions with investors and
analysts in the normal  course of business  through  meetings,  webcasts,  phone
calls and conference calls, concerning our operations,  economic performance and
financial  condition are subject to known and unknown risks,  uncertainties  and
contingencies.  Forward-looking  statements  are included,  for example,  in the
discussions about:

      o     our liquidity risk management,

      o     our credit risk management,

      o     our asset/liability risk management,

      o     our funding, borrowing costs and net finance margin,

      o     our capital, leverage and credit ratings,

      o     our operational and legal risks,

      o     our growth rates,

      o     our commitments to extend credit or purchase equipment, and

      o     how we may be affected by legal proceedings.

      All  forward-looking  statements involve risks and uncertainties,  many of
which are beyond our control,  which may cause actual  results,  performance  or
achievements  to differ  materially  from  anticipated  results,  performance or
achievements.  Also,  forward-looking  statements  are based  upon  management's
estimates  of  fair  values  and of  future  costs,  using  currently  available
information.   Therefore,  actual  results  may  differ  materially  from  those
expressed  or  implied  in those  statements.  Factors  that  could  cause  such
differences include, but are not limited to:

      o     risks of economic slowdown, downturn or recession,

      o     industry cycles and trends,

      o     risks  inherent  in changes  in market  interest  rates and  quality
            spreads,

      o     funding opportunities and borrowing costs,

      o     changes in funding markets,  including  commercial  paper, term debt
            and the asset-backed securitization markets,

      o     uncertainties  associated with risk  management,  including  credit,
            prepayment, asset/liability, interest rate and currency risks,

      o     adequacy of reserves for credit losses,

      o     risks  associated  with  the  value  and  recoverability  of  leased
            equipment and lease residual values,

      o     changes  in  laws  or   regulations   governing   our  business  and
            operations,

      o     changes in competitive factors, and

      o     future   acquisitions   and  dispositions  of  businesses  or  asset
            portfolios.


                                       48


Item 4.  Controls and Procedures

      As of the end of the period covered by this report,  the Company evaluated
the  effectiveness  of the design and operation of its  disclosure  controls and
procedures.  The Company's  disclosure  controls and  procedures are designed to
ensure that the information  that the Company must disclose in its reports filed
under the  Securities  Exchange Act is  communicated  and  processed in a timely
manner.  Jeffrey M. Peek,  President and Chief Executive Officer,  and Joseph M.
Leone,  Vice  Chairman  and  Chief  Financial  Officer,   participated  in  this
evaluation.

      Based on this evaluation,  Messrs.  Peek and Leone concluded that,  during
the last  fiscal  quarter  covered  by this  report,  the  Company's  disclosure
controls and procedures were effective, except as noted below. Since the date of
the evaluation  described above, there have not been any significant  changes in
the Company's  internal  controls or in other  factors that could  significantly
affect those controls.

      In  connection  with the June 2001  acquisition  by Tyco,  our  income tax
compliance,  reporting and planning function was transferred to Tyco.  Following
our 2002 IPO, we classified  our tax reporting as a "reportable  condition",  as
defined by standards  established by the American  Institute of Certified Public
Accountants.

      As previously reported,  we have made substantial progress with respect to
the  reportable  condition  by hiring and  training  personnel,  rebuilding  tax
reporting systems,  preparing amendments to prior period U.S. Federal income tax
returns,  and  implementing  processes  and controls  with respect to income tax
reporting and compliance.

      During the quarter  ended  September 30, 2004, we continued to develop the
processes  and data to  complete  the  analysis  of our  income  tax  asset  and
liability   accounts,   including  the  refinement  of  and   reconciliation  to
transactional level detail of book to tax differences. In conjunction with these
efforts,  we incorporated the effects of filing our 2003 U.S. Federal income tax
return and based  thereon,  made  adjustments to the December 31, 2003 tax basis
balance sheet. We also identified additional amendments relating to prior period
income  tax  returns.  Work is  continuing  to  validate  income  tax  asset and
liability accounts.

      In  addition,  we prepared the initial  documentation  relating to our tax
processes and internal controls over related  financial  reporting in connection
with our Sarbanes-Oxley  section 404 initiative,  and performed initial tests of
key  controls.  The results of these tests and our work  indicated  that further
improvements are required with respect to tax reporting processes and controls.

      We are continuing to focus significant effort and resources in this regard
with our objective  being to remediate  the income tax  reporting  processes and
controls in connection with our December 31, 2004 financial reporting.


                                       49


                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

      On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities  Act of 1933,  was filed in the United States  District Court for
the  Southern  District of New York  against  CIT,  its former  Chief  Executive
Officer and its Chief Financial Officer. The lawsuit contained  allegations that
the registration  statement and prospectus prepared and filed in connection with
CIT's 2002 initial public offering ("IPO") were materially false and misleading,
principally  with  respect to the  adequacy of CIT's  telecommunications-related
loan loss  reserves at the time.  The lawsuit  purported to have been brought on
behalf of all those who  purchased  CIT common stock in or traceable to the IPO,
and sought,  among other relief,  unspecified  damages or  rescission  for those
alleged class members who still hold CIT stock and unspecified damages for other
alleged class members.  On June 25, 2003, by order of the United States District
Court, the lawsuit was consolidated with five other substantially similar suits,
all of which  had been  filed  after  April 10,  2003 and one of which  named as
defendants some of the  underwriters in the IPO and certain former  directors of
CIT.  Glickenhaus & Co., a privately held  investment  firm, has been named lead
plaintiff in the consolidated action.

      On September  16, 2003, an amended and  consolidated  complaint was filed.
That  complaint  contains  substantially  the same  allegations  as the original
complaints.  In addition to the  foregoing,  two similar  suits were  brought by
certain  shareholders  on behalf of CIT  against CIT and some of its present and
former directors under Delaware corporate law.

      On  September  9,  2004,  Exquisite  Caterers  v.  Popular  Leasing et al.
("Exquisite Caterers"),  a putative class action, was filed against 13 financial
institutions,  including CIT, who had acquired  equipment  leases  ("NorVergence
Leases") from NorVergence,  Inc., a reseller of telecommunications  and Internet
services to businesses.  The Exquisite  Caterers  lawsuit is pending in the U.S.
District  Court for the  District of New Jersey.  Exquisite  Caterers  based its
complaint on allegations that NorVergence misrepresented the capabilities of the
equipment  leased  to its  customers  and  overcharged  for the  equipment.  The
complaint  asserts  that the  NorVergence  Leases  are  unenforceable  and seeks
rescission,  punitive damages,  treble damages and attorneys' fees. In addition,
putative class action suits in Florida and Texas and several  individual  suits,
all based upon the same core allegations and seeking the same relief,  have been
filed by NorVergence customers against CIT and the other financial institutions.

      On July 14, 2004,  the U.S.  Bankruptcy  Court ordered the  liquidation of
NorVergence  under Chapter 7 of the Bankruptcy  Code.  Since then, the Attorneys
General  of  Florida,  New  Jersey,  New  York,  Illinois  and  Texas  commenced
investigations of NorVergence and the financial institutions, including CIT, who
purchased  NorVergence Leases. CIT has cooperated with the Attorneys General and
agreed to refrain from collection  activities  related to the NorVergence Leases
in each of these States pending the outcome of the investigations.

      In addition,  there are various legal proceedings  against CIT, which have
arisen in the  ordinary  course of  business.  While the  outcomes  of the above
mentioned and ordinary course legal  proceedings and the related  activities are
not certain, based on present assessments, management does not believe that they
will have a material adverse effect on the financial condition of CIT.


                                       50


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

      The following  table details the  repurchase  activity of CIT common stock
during the September 2004 quarter:



                                                                                       Total Number of
                                                                                       Shares Purchased       Maximum Number
                                                             Total                        as Part of        of Shares that May
                                                           Number of      Average         Publically         Yet Be Purchased
                                                             Shares     Price Paid      Announced Plans        Under the Plans
                                                           Purchased     per Share        or Programs           or Programs
                                                           ---------     ---------     ----------------      ---------------
                                                                                                
Balance at June 30, 2004 ............................       896,730       $36.40                                2,060,000
                                                          ---------
        July 1 - July 31, 2004 ......................       420,000       $36.69            420,000             1,640,000
        August 1 - August 31, 2004 ..................       880,000       $35.60            880,000               760,000
        September 1 - September 30, 2004 ............       486,500       $36.96            486,500               273,500
                                                          ---------
        Total Purchases .............................     1,786,500
                                                          ---------
Reissuances(1) ......................................      (460,974)
                                                          ---------
Balance at September 30, 2004 .......................     2,222,256
                                                          =========


----------
(1)   Includes the issuance of shares of our common stock upon exercise of stock
      options and the vesting of restricted stock.


      On October 20, 2004, our Board of Directors approved a continuation of the
common stock  repurchase  program to acquire up to an  additional  three million
shares of our  outstanding  common stock in  conjunction  with  employee  equity
compensation  programs.  These are in addition to the shares  remaining from the
previously  approved  program on April 21,  2004.  The  program  authorizes  the
company to purchase  shares on the open market from time to time over a two-year
period  beginning  October 21,  2004.  The  repurchased  common stock is held as
treasury  shares and may be used for the issuance of shares under CIT's employee
stock plans.  Acquisitions  under the share repurchase program will be made from
time to time at prevailing  prices as permitted by applicable  laws, and subject
to market  conditions and other factors.  The program may be discontinued at any
time and is not expected to have a significant impact on our capitalization.

Item 6.  Exhibits and Reports on Form 8-K

    (a) Exhibits

      3.1   Second  Restated   Certificate  of   Incorporation  of  the  Company
            (incorporated  by  reference to Form 10-Q filed by CIT on August 12,
            2003).

      3.2   Amended  and  Restated  By-laws  of  the  Company  (incorporated  by
            reference to Form 10-Q filed by CIT on August 12, 2003).

      4.1   Indenture  dated as of August 26,  2002 by and among CIT Group Inc.,
            Bank One Trust  Company,  N.A.,  as Trustee and Bank One NA,  London
            Branch, as London Paying Agent and London Calculation Agent, for the
            issuance   of   unsecured   and   unsubordinated   debt   securities
            (incorporated by reference to Exhibit 4.18 to Form 10-K filed by CIT
            on February 26, 2003).

      10.1  Amendment  to  Employment  Agreement by and among CIT Group Inc. and
            Jeffrey M. Peek dated as of July 22, 2004.

      10.2  Employment  agreement  by and  among CIT Group  Inc.  and  Thomas B.
            Hallman dated as of August 1, 2004.

      10.3  Employment agreement by and among CIT Group Inc. and Joseph M. Leone
            dated as of August 1, 2004.

      10.4  Employment  agreement  by and among CIT Group Inc.  and  Lawrence A.
            Marsiello dated as of August 1, 2004.

      10.5  Employment  agreement by and among CIT Group Inc.  and  Frederick E.
            Wolfert dated as of August 1, 2004.



                                       51


      10.6  2004 Extension and Funding Agreement dated September 8, 2004, by and
            among Dell  Financial  Services L.P.,  Dell Credit  Company  L.L.C.,
            DFS-SPV L.P., DFS-GP,  Inc., Dell Inc., Dell Gen. P. Corp., Dell DFS
            Corporation,  CIT Group Inc., CIT Financial USA, Inc., CIT DCC Inc.,
            CIT DFS Inc., CIT Communications Finance Corporation, and CIT Credit
            Group USA Inc.  (incorporated  by reference to Form 8-K filed by CIT
            on September 9, 2004).

      12.1  CIT Group Inc.  and  Subsidiaries  Computation  of Earnings to Fixed
            Charges.

      31.1  Certification  of Jeffrey  M. Peek  pursuant  to Section  302 of the
            Sarbanes-Oxley Act of 2002.

      31.2  Certification  of Joseph M. Leone  pursuant  to  Section  302 of the
            Sarbanes-Oxley Act of 2002.

      32.1  Certification of Jeffrey M. Peek pursuant to 18 U.S.C. Section 1350,
            as adopted  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
            2002.

      32.2  Certification of Joseph M. Leone pursuant to 18 U.S.C. Section 1350,
            as adopted  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
            2002.

    (b) Reports on Form 8-K

            Current  Report on Form 8-K filed July 22, 2004,  reporting (i) that
            CIT declared a dividend of $0.13 per share,  payable August 30, 2004
            to  stockholders  of record on  August 13 2004,  (ii) the  financial
            results of CIT as of and for the  quarter  ended  June 30,  2004 and
            (iii) the election of Jeffrey M. Peek as CEO of the Company.

            Current  Report on Form 8-K filed  August 17,  2004,  reporting  the
            election  of  Frederick  E.  Wolfert  as Vice  Chairman,  Commercial
            Finance.

            Current  Report on Form 8-K filed  September 9, 2004,  reporting the
            extension and  modification  of the Dell  Financial  Services  joint
            venture.

            Current Report on Form 8-K filed  September 14, 2004,  reporting the
            Company's current financing relationship with US Airways Group Inc.

            Current Report on Form 8-K filed  September 21, 2004,  reporting the
            Company's  Financial  results for prior  periods  revised to reflect
            CIT's new segment reporting.


                                       52


                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                  CIT GROUP INC.

                                  By:            /s/ Joseph M. Leone
                                      -----------------------------------------
                                                   Joseph M. Leone
                                      Vice Chairman and Chief Financial Officer

                                  By:           /s/ William J. Taylor
                                      -----------------------------------------
                                                  William J. Taylor
                                        Executive Vice President, Controller
                                          and Principal Accounting Officer

November 9, 2004